The California Public Utilities Commission is imposing large penalties on Community Choice Aggregators when the CCAs cannot satisfy strict requirements demonstrating they have enough power reserves, known as resource adequacy to serve their customers. The fines go back two years. Meanwhile, a wide range of factors are preventing CCAs from building the resources they need to satisfy the requirement in a constrained RA market.

Of the 25 operating CCAs, seven are believed to have already paid fines ranging from $124,000 to over $1,000,000. The fines date to 2022. Based on a 2023 CPUC decision, (see D.23-06-029) CCAs are not allowed to expand their service territories if they have not satisfied the penalties. But Ava Community Services, formally East Bay Community Energy, was allowed to expand its service territory to Stockton once it paid its fine.

 The California Community Choice Association (CalCCA) is charging the CPUC with overreaching its authority among other charges. CalCCA was created in 2016 to represent the interests of operational CCA providers of renewable energy to their local jurisdictions at the California Legislature and regulatory agencies.

Does the CPUC Have Jurisdiction over the CCAs?

CCAs were created in 2002 – the first rolled out in 2010 – and are an entity of the local jurisdictions in which they were formed, usually through a joint powers authority mechanism.

In its application for rehearing of the 2023 CPUC decision CalCCA argued that the CPUC has no jurisdiction over the actions of local government bodies such as the CCAs (R.21-10-002). The CPUC countered in its decision denying the rehearing saying “the legislature deferred to our expertise in resource adequacy and granted us considerable discretion to determine what actions are necessary to accomplish the stated goals” among other arguments (D.23-12-038).

CalCCA filed a petition for Writ of Mandate with California’s First Appellate District Court of Appeal in in October 2023 and refiled it again in January 2024. Greg Klatt, a California energy attorney, said “It’s already an uphill battle to get courts to overturn CPUC decisions – they are very deferential to the CPUC … the key here is to charge that the CCAs are entities of local governments,” not the CPUC. “If the court does rule in favor of CCAs, it will be based on their being a local government agency,” Klatt added.

CalCCA did not respond to several phone calls and emails seeking comment on this issue and on the constrained RA market. However, it produced an analysis of the constrained RA market, entitled “Ratepayers Left Standing in a Game of Musical Chairs” and can be found on its website, www.cal-cca.org.

Reserves are Constrained

While the state’s three major utilities have plenty of reserves to satisfy the rule, CCAs are new entities and have to develop new power resources. At the same time a wide range of factors like extreme weather events, declining hydro resources, delays in permitting, interconnection and supply chain challenges are holding back power contracts CCAs have signed which would help satisfy the resource adequacy requirement.

Other factors delaying project development, according to CalCCA, include constraints on importing resources from other regions into California, and the CPUC revising capacity values leading to reduced reliance on wind and solar resources meeting RA requirements. All have contributed to resource instability, which CalCCA explained in its website paper referred to above.

AVA was forced to delay adding the City of Stockton to its service territory, under CPUC rules, until it paid $879,000 in penalties dating from 2022. Now that the penalties are paid, the CPUC has approved the addition which will happen in April 2025, according to Karen Lee, power resources manager for Ava. 

Procurement Strategies Impacted

Lee agreed with CalCCA and said there are additional factors that impact Ava’s procurement strategy which can delay its ability to develop the resources to satisfy its RA requirements. She pointed to California’s renewable procurement goals under SB 350, Integrated Resource Planning and associated procurement orders, plus Ava’s customers demanding renewable energy.

For example, Lee said a city in Ava’s service territory may elect to increase renewable energy supplies to its customers to 100%. This will “likely impact the volume of renewable energy we seek in the next request for offers or solicitation” and possibly affect “an Integrated Resource Plan procurement order focused on long lead time resources [which have] catalyzed Ava’s procurement” of those resouces. This will affect costs either positive or negative, Lee said in an email.

Klatt, the energy attorney, agrees. “The State and the PUC have enacted policies that created the problems CCAs energy service companies and utilities (LSEs) are having in accessing resources to satisfy the RA requirement, he said.

The Clean Energy Alliance, a CCA headquartered in Carlsbad serving seven San Diego County cities, is experiencing similar problems. It has paid $616,627 in penalties in 2023, according to CPUC records.  Andy Stern CEA’s chief financial officer told the Board of Directors at an April 25 Board of Directors meeting, RA prices have skyrocketed in summer months to $70 to $80 from $20.00 a few years ago. “Very onerous prices are out of control,” he said.

Continuing, Stern said at the Board meeting, supply chain disruptions following the COVID epidemic have not yet picked up, contributing to the capacity shortage.  Furthermore, renewable projects are not accounted fully as resources, as fossil fuel plants are, as pointed out by CalCCA above.

Resource Adequacy an Anachronism?

Resource adequacy, created in 2004, requires all utilities, CCAs and energy service companies to procure capacity to be made available to the California Independent System Operator when it is needed, for example, in a heat wave or other environmental catastrophes when power demand is stressed.

The CPUC is updating the rule, a draft of which became available May 17 for comment (R.23.10.11).  The Commission could have voted on it on as early as June 20 but did not.  It proposes a slice-of-day methodology in which an LSE’s RA is calculated hourly rather than monthly or yearly as it is today to become effective in 2025. Stern explained, in CEA’s Board meeting, the reason for the change was to come up with a more accurate alignment of resources with resource needs. He cited energy storage as an example.  The CPUC draft suggests if it is counted in an LSE’s resource adequacy it would need to show excess energy.

The draft decision said the CPUC’s Energy Division will host office hours and trainings prior to the 2025 year-ahead filing deadline to assist CCAs and other LSEs with using the slice-of-day template.  Several stakeholders familiar with it have commented the draft slice-of-day method is extremely complex.