CPUC Workshop - 2020-02-03
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California Public Utilities Commission
Follow its sittingsSpeaker 2
The LLCs in the IOU service territories are allocated the capacity benefits which are applied toward meeting the LLC's resource adequacy requirements. Outage replacement costs associated with the IOU's management of resources are also netted from the contract costs. Local capacity benefits. An annual allocation based on the system peak load ratios and final year ahead local forecast is how they are allocated annually and then once a year we do a local true up based on the revised peak load forecasts. The system capacity benefits of CAM are done on an annual allocation based on the monthly system load ratio in the final year ahead load forecast.
And then there are quarterly allocations based on the revised monthly system load forecasts. And we get into the allocation accounting process. In D1406.05O the commission adopted a capacity allocation accounting mechanism which allowed CAM resources to be accounted for in the CAISO markets and systems. For non IOUs, non IO LLCs, the CPUC provides a capacity credit based on the peak load ratio. For IOUs the CPUC provides the IOUs with both a negative capacity value or debit that increases the IOUs RA obligation.
It's equal to the amount of the capacity credits that are provided to the non IOU LCs serving load at each of the TAC areas. In exchange for the higher capacity requirement, the IOU gets to show the CAM resource on their RA plan. And now we go into the purpose of this workshop. This is from the decision, you probably read the decision, but I do want to point out that even though the decision says that the opt out date is February 15, every fifteenth is a Saturday, we're not holding you to that. We would normally hold you to Monday, but Monday is a holiday.
Instead the opt out date is now February 18, a Tuesday. Right, so the commission, this is a reading from the decision, will then require the relevant investment on utilities procure on behalf of the CCA or ESP, and have the cost of any such procurement allocated to the customers of the CCA or ESP on a non bypassable basis based on the cost allocation mechanism, and not the procurement charge indifference amount mechanism. Commission staff shall convene a workshop or working group to discuss the particulars of this cost allocation mechanism. Here we are. And the resulting cost allocation mechanism shall address both the instances where the CCAs and ESPs elect to not self provide the capacity of the front end, and a situation where CCAs and ESPs elect to self provide capacity but fail to meet their obligations.
Very good. I'd ask if there are any questions. I don't expect there are any, that was pretty dry. Most of you know CAM I think. Are there any questions online?
No? That's great. We move on to the IOU presentation.
Speaker 3
Thank you everybody. Maybe we can do some quick introductions before we get started here. So I'm Andrea Clatterbuck from PG and E.
Speaker 3
Great, thank you. Here we can dive right in. So really quickly today here the IOUs, you know, wanted to really go over kind of the goal of what our presentation is all about, give some background. I think Eric just did a good job too of queuing up some of these issues, and also talk about the scope of what we plan to speak to you about today, and then go over some of the principles that the IOUs would like to put forward as we sort of think about the design of this modified CAM, and then actually go over a proposal what might the framework look like to implement this and then entertain any questions and talk about next steps. So whenever you know you have a lot of LSEs together we think it's always good to throw this blurb up there.
I'm not an attorney but I believe we have some on the phone today so if you have any questions about this but you know really making sure that we're not speaking about any commercially sensitive issues around bidding forecasts some of our future strategies around procurement etc and then making sure that we're not agreeing to any regulatory changes without you know the due process and then that we don't have any kind of quid pro quos going on today. So unless there are any questions, yeah, we can move on. So again, know, we want to want to show you our proposal for how we'll actually allocate any costs for this modified CAM methodology specifically to LSCs that proactively opt out or are later found to not be able to fulfill their procurement obligations. I think again Eric went over some of this but just a reminder to make sure we're on the same page, you know collectively per the decision, LSCs are to procure 3,300 megawatts of incremental capacity to meet the identified reliability needs. These resources are sort of staggered in which time they'll come online.
50% has to be online by 08/01/2021, 75% by August '20 '22, and then all of the resources online by 08/01/2023. And we already talked about this it sounds like February 15 is amended to the nineteenth eighteenth sorry thank you in which CCAs and ESPs must notify the Commission if they are actually going to be opting out and then again at a future date if LSEs are found to not be able to meet their procurement needs as they had identified at the beginning then the IOUs will do that on their behalf and allocate the modified CAM. Okay. And I think Eric pulled some of this language too, but again, just to level set, make sure we're all on the same page looking at the guidance that we've been giving. Again, IOUs will be the backstop and costs will be allocated through a non bypassable charge.
The decision was pretty explicit about this not being through the PCIA and rather through this modified CAM. IOUs will be able to recover full costs associated with any procurement done on behalf of others and just yeah different ways of saying we will be compensated and then again for compliance purposes that February date and then we will have, annual checks on May 1 of each year going forward through 2023. Okay. Again I think Eric, it's good we're aligned. We didn't, see the slides or anything beforehand but you know what the IOUs really think of it is in scope for this conversation is the allocation of costs and benefits again for the LSEs that either proactively opt out or later found to not be able to fulfill their obligations.
We'll go over, some kind of thinking around how cost and benefit allocation will change with customer migration. We have more movement as we all know than we used to have. We also want to get in a little bit to some IOU billing considerations just because as many people in this room probably know once you tweak one thing there's other issues that might come up so we wanted to share some of those considerations with you all and then really talk about procedurally you know what happens next and maybe getting some guidance from the commission on that. And then what we think of as kind of out of scope today, I know that there's probably a lot of questions about how the the IOUs will actually fulfill the procurement obligations and what our strategies are there but we think that can be tabled, you know, for future advice letters in other regulatory venues, not today. Eric again touched on this a little bit.
There's lots of issues in the RA world around the central procurement entity, other areas, so tabling those for now even though we all know that they're out there. And then also the discussion of the allocation of any grid resiliency costs. We think that you know today we can just limit it to the procurement on behalf of opt out or deficient LSEs just because we don't have that much time today. So my last slide here is on kind of the IOU guiding principles as we queued up our proposal. So first and foremost we want to make sure that you know any costs are not shifting to bundled service customers due to other LSEs opting out or being in that non performance category, what we're kind of calling deficient in this case.
I think there's a lot of statutory language around that. We also want to make sure that costs follow bundled service customers that later depart for other LSCs. Again, there's a lot of statutory language around that. Similarly, I guess cost should not shift to LSCs or their existing customers if those LSCs elect to self procure and then later successfully do that. That doesn't seem fair to them either.
And the fourth one there, we want to make sure that this methodology from a structural basis does not make it more or less attractive for LSEs to actually do their self procurement. We think that this is again, you know, consistent with statutory language. We don't want to penalize those LLCs but we also don't want to make it look better than doing their own procurement. And last but not least, know this is a little different than the status quo but we do want to make sure that to the extent that this could be simple as we get to implementation you know I think that would be the preferred way to go. Great.
Maybe I'll move on to the framework now. I guess maybe I can stop there before we actually get into the proposals. Are there any questions? And again we'll allow time at the end as well. Okay, do you want to trade with me and I'll
Speaker 4
So the Modify CAM proposal on the framework side, we think of there are multiple components. The first is the procurement cost bucketing of the customers, you will. What customers are applicable for these costs? The IOUs current bundle customers, the opt out and the deficient LSEs for the, which are the unbundled customers. The procurement costs which are the total contract costs net of any of the revenues that are associated with the contracts.
The additional costs that are, may be required for recovery, administrative costs and debt equivalents for the IOUs that take on the additional cost for the opt out and deficiency of the LLCs. The benefits allocation, we think this is very crucial. The very much like the current CAM for the allocation of the ARIA attributes, Something that probably is not very similar to current CAM because there are not contracts that are associated with this of RPS and as well as other GHG aspects the contract that may be signed. One of the final considerations for the procurement cost of, for customer migration for IOU, no customers that migrate to other CCAs and ESPs as well, and making sure that that is, those customers are effectively tracked for the cost to be allocated in the future.
Speaker 4
I was hoping to maybe go through, if you have a question I guess on the framework, I was hoping to maybe go through the separate approaches.
Speaker 7
Mary Lynch with Constellation. When you say the opt out customers, you mean the customers of the LSC at the time they made the election or around that time. It's not like after the fact when delivery starts, it's gonna be the customers upfront. Is that correct?
Speaker 1
So Mary, I don't think the decision was that clear, and that's one of the things that needs to be determined as we create this mechanism. I don't think we have a specific proposal. Oh, you
Speaker 1
Okay. I would say like a natural cutoff might be the opt out date. However, in my view it wasn't that clear in the decision of when the customers of record would be sort of determined.
Speaker 4
Alright. And you can see that in the two approaches that we have laid out Okay. In the following
Speaker 7
maybe I should wait till the end then. That's probably better. But then my only other question on this one is do you get debt equivalents now in CAM? Whatever those charges are, are they are they included in CAM charges now?
Speaker 1
Okay. Please let me know if you can't hear me. So we're gonna present two approaches today. The two approaches are really based on, say, a combination of IOU preferences as well as logistics and what we think is sort of feasible implementation. And so SCE has a preference what we're calling approach A, and I believe PG and E is also supporting approach A, but I think we might have slight nuances in some of the details here.
So there's two aspects of approach A that I'd like to highlight. I know there's a lot on the slide, so I'll try to walk you guys through slowly and I will be happy to take questions afterwards, Mary. But the first is, how are we gonna bucket customers or how are gonna vintage customers for this procurement? And the second really has to do with how do we deal with customer migration, RA allocation and cost allocation. And I put those in one because they're related.
So with regards to the procurement bucket, what we are proposing is that we would put all of the bundled service and opt out procurement or customers into a single vintage. And so all customers of, well, you know, bundled service and opt out LSCs essentially would be treated equitably. It'd be a single vintage in modified CAM and the cost would be allocated to their customers in a similar manner as the existing CAM mechanism. With regards to what I'll say a backstop or deficient LSE, down the road a LSE doesn't perform and IOUs are ordered to backstop that LSE, that presents some challenges for the mechanism. And the reason is if we have, what we propose is we'd like to have some flexibility in how to deal with that procurement.
So if down the road, if the procurement is of similar cost as the original procurement, we'd like the flexibility to put them into the original vintage. If the costs are higher because they're done in a rushed fashion or for for any other reason, we'd like to reserve the right to put them in a separate deficient LLC vintage. One of the challenges with the backstop procurement is the possibility of partial backstop. So if we have a LLC that is elected to self provide and then they only end up self providing for say 50% of their requirement, that's gonna break the proportional nature with how the mandate was sort of allocated. So you know, if those familiar with the CAM mechanism, uses a 12 coincident peak, you know, rate allocation and design essentially.
But the mandate went out based on proportionate peak load. And if we start having partial backstop, you're gonna break that proportion. And so if we're gonna allow for that, then it probably requires separate vintages to be created for backstop LSEs. And that will get quite complex and could create some administrative challenges. So I just wanna highlight that for all parties.
We don't have a solution. Obviously we'd prefer to do it all or nothing when it comes to backstop because it just keeps the mechanism simpler. But that's a consideration we'll have to think about as we think about the final design. So going to the actual mechanism. First I wanna say is our intention is to design a rate mechanism that would be a customer charge and it would follow the customers as they migrate from LSE to LSE.
So not only from bundled service to non LSE or non IOU LSEs, but also between ESPs and ESPs as well as CCA to ESPs. And one of the challenges that we were thinking about when we were thinking about the design of this is how
Speaker 1
you gonna allocate the RA attributes in this world of customer migration? So for example, if an ESP customer was an opt out LLC and then migrated back to a CCA that self provided, we have this challenge of if the costs are gonna follow that customer to their new load serving entity, how are we gonna go about actually allocating the RA benefit to those customers? And so while, you know, we believe if the commission and others thought that following like the traditional CAM mechanism was appropriate and wanted to go through the challenge of how do you do that vintage RA allocation. You know, we're willing to consider that. What we're proposing is a simpler approach on how to deal with that.
Sasha, Josh.
Speaker 9
Yes. Sasha, Energy Division. I'm forgetting your colleague from PG Andrea and E's mentioned that you're trying to keep indifference between self procuring and having an IOU procuring and then CAM. But if the IOU procures and then CAMs, and then you lose the customer, then that charge follows the customer out. If you self procure and you lose a customer, would it be correct that that's if you don't have an exit fee that you're stuck paying for that or not?
How would that work?
Speaker 9
So then it wouldn't be indifferent. I mean, one, you're taking on risks self procuring there that you don't have if you choose to come. Is that correct?
Speaker 1
That's one of the challenges of designing this mechanism. I think that IOUs had different views, but I know I don't wanna speak for San Diego, PG And E, but I think there was concerns of whether the opt out mechanism was too good to pass out, pass up. That being said, I think from SCE's perspective, we're less focused on that. We just wanna make sure that there are sort of fair allocation of costs across the different vintages and we prefer that customers would not have to take like LLC specific risk. So we wanted a mechanism that deals with the customer migration, that if you didn't have like an LLC leave the market fail down the road that it would put a lot of cost back on remaining customers in the pool.
Okay.
Speaker 3
Thanks. Maybe I'll just add too, if an LLC is self procuring, they might take on that risk themselves. So it's a little little challenging to parse out, I agree.
Speaker 1
Okay. So moving on to the specific mechanism, like I said, if commission staff was up to the challenge of how to allocate the RA out in this world of custom migration, we would support that. We're putting forward a simplified version that we think would be easier to sort of manage year to year. So the basic idea is this. We are going to fix the RA attribute allocation to the LLCs that specifically receive the mandate in the procurement decision.
And so if for example, LCA was mandated 10 megawatts, they're gonna be allocated a fixed 10 megawatt RA allocation. However, in order to receive that RA allocation, they'll be required to pay the IOU directly, the market price benchmark for that RA. So we're gonna leverage the PCIA market price benchmark. And those revenues would come into the balancing account and offset the costs that ultimately need to be recovered from customers. And so the idea is where CAM currently is essentially total contract costs less energy revenue.
We would modify it slightly in this proposal to be total contract costs minus energy revenue, minus the RA value or revenue that we receive from LSEs. And so it becomes a little a step closer to the PCIA, but not the full PCIA. And it would be a net charge that's net of the value of RA. And then the idea would be that that net charge will follow the customers as they migrate. But the LSE that was mandated the procurement would remain responsible for procuring the RA from the IOU at the market price benchmark.
If the LC failed to pay, then the IOU could either retain that RA credit and pay the market price benchmark or the IOU could opt to auction off the RA at that time. So that's the, I would say the basic concept and the idea is to really simplify how we're allocating the RA benefit, but still keeping customers indifferent because they're receiving the value of that RA. Going back to the rest of the slide, you know, in terms of additional cost recover, I think all the IUs maybe have slightly different views based on what's the cost of setting up this mechanism in the billing system and otherwise administrating. I think SCE's perspective is we'd likely just to seek cost recovery in a similar fashion as we do currently in CAM. However, in certain instances it might be very costly to set up the billing mechanisms and IUs might seek recover those costs ultimately from customers that are in this procurement vintage.
Jamie?
Speaker 10
Just clarifying question. Jamie Gannon, Energy Division. So you say that the LSE would be provided the option of taking the RA benefit based on the amount that it was allocated in the procurement decision, but that wouldn't be applicable to load, bundled load that's included but then migrates. So let's just say that you know like San Diego for example loses half its load to the city of San Diego. The city of San Diego be allowed to procure that on a one time basis, right?
Speaker 1
So for future departure from bundled service, I think you'd offer the RA to the departing load. And the IUs have slightly different views on this. I think that I'll be clear. If I say it was at the option, that's sort of what the way SCE was thinking about it. I think PG and E has a view that it should be a mandatory allocation.
So when you have a load departure, that new LLC would take their share of the RA. And that would be a mandatory obligation of that LLC. So finally, just to sort of wrap this up, as I said, the intention is a rate design in which the net cost, net of the RA value would follow the customers. There is some operational complexity here with tracking the vintage of customers and as they move around from LLC to LLC, that might require some systems implementation and certainly some systems investment on the part of the IOUs to make sure that we can do that appropriately. Also, it's gonna include some systems upgrades to our billing systems.
But that is sort of ultimately what we're trying to achieve with the proposal. Just before we go on to the next approach, is there any questions?
Speaker 11
Sumaira here for Arm. And so the costs are gonna follow the customers, so I'm not understanding why the RA can't follow the customers too.
Speaker 1
So that's a possibility and that'd be cam like and that would be obviously fit the mandate. I think the challenge is if you have let's say one customer from LCA leaves and goes to a new goes to an LSE, let's say, that self provided. And now that ESP that self provided or CCA that self provided, they might only have one, two, three, a handful of customers that are tagged with this vintage. So the question is how do we do the forecasting and allocation of RA in the RA process in the year ahead? So it's just gonna create a lot of complication of, for example, CCA that has elected to self provide is gonna have to provide a forecast for what a handful of customers that might have come back to their service load would be so that energy division could then do the allocations in the RA process.
And so that's okay. I just think that that's What could end up happening is then we have the backstop deficient LCs and then we have new vintages that could, you know, depending if that happened in '21, '22 or '23, we could end up in a situation where we have multiple vintages of modified CAM. And then we're having to track a lot of customers and figure out how we're gonna allocate RA out to all these different parties. And so, I mean that is one possibility. I think we're saying, hey, there's a simpler approach which is if we charge the net cost net of the RA value, we could sort of avoid that sort of forecasting complexity.
Speaker 11
So would the the IOU also pay into the art, so all the LSE's would pay the net or a market price benchmark and that will reduce the cost for the customers. So the LLC retains the RA. Okay, I mean I guess I could also see it doing the other way, but you'll get tiny numbers basically. It's sort of like the what they've done with CRRs at the IOU, at the ISO where they have tiny little numbers are keeping track of. So I can see that downside to that.
Okay.
Speaker 10
So that makes a lot of sense. So if you were to go the RA allocation of the benefit approach, you would have to have many vintages of forecast that would then have to be shared by each LSE to the commission for them to allocate the RA capacity benefits of the vintage portfolios, various portfolios, right? And so I guess I'm just trying to kind of understand that in relation to the portfolio optimization working group three in PCIA and what's being proposed there because there is a mandatory allocation of RA benefits that where the LSE takes those you know as a mandate. So what forecast approach is being proposed in that proceeding or in that working group.
Speaker 1
Yeah. No. Thanks, Jamie. In working group three, it is mandatory allocation and it would account for the ventaging of customers in that RA allocation. I think our concern is that we're sort of adding vintage ing on vintage ing.
And then the possibility that this one procurement becomes not one vintage, but two vintages or three vintages or four vintages. We could have another modified CAM type procurement down the road. That's so it's just sort of, it's getting very complicated. The one aspect of the PCIA, would say it's a bigger issue today, think, just in terms of size of procurement that's in the PCIA portfolio. And I think local RA in general has several issues tied to it just in terms of, you know, who controls or owns the assets.
Way some of these load pockets are small, which I think makes the local RA quite challenging deal with. And so there's a lot of sensitivities of various load serving entities about how local attributes are managed. This is a little bit different. We have sort of an opportunity to you know, create something new and and so we're putting something forward that would be a little bit simpler approach.
Speaker 10
Okay. Thanks for that. So there is going to be like a mandatory allocation that you talked about in my last question regarding when load migrates, and so at that point that mandatory allocation, is that then logged with the commission or the local regulatory authority and like in terms of we'll know that that LSE gets that credit for forever? Or I mean the contract life of the resource, and do we have to manage and account for that, you know, allocation even though it won't be revised to reflect the new load forecast, we still have to manage.
Speaker 1
Yeah, so I think it's relatively simpler to track departure from the bundled load because we'll have a certain, you know, we'll have a certain RA that we're retaining as part of this mechanism that we have to pay for. And then we'll have a remaining bundled service sort of peak load obligation and the new entities will have their own RA obligations that come into the RA forecast. So I think deciding on a one time basis, like how to split up that RA should be a relatively simple process. It's a little bit different than trying to do it between lots of different load serving entities.
Speaker 10
But you're not physically giving them the asset, you're just giving them a credit. You're gonna still show the asset on your portfolio or in your plan.
Speaker 12
Scott Olson with Direct Energy. Just to follow-up on that. So cam like showing, so the entity that receives the allocation would have the ability to trade it, sell it, anything like that.
Speaker 1
If We haven't thought of what secondary trading market would look like or whether it was possible. That's not part of our proposal.
Speaker 12
It's it's not part meaning you don't envision it to ever happen or you just haven't considered that to be an option?
Speaker 1
If if part you know, we've talked about it as part of the PCIA working group three.
Speaker 1
If parties could work out the schematics of how that would work, and the commission ultimately was amenable to it, I don't think we're opposed to it. It's just not something that we're proposing. Okay. Because we can't ultimately, we're not gonna be able to manage what happens post the Camelight showing.
Speaker 12
And then do you envision them to be three year allocations, ten year allocations? I know that the decision gave some flexibility on the types of resources as long as it wasn't in the baseline.
Speaker 1
Yeah. Know, I don't wanna talk specifically about our procurement strategy. Think following the guidance that we were provided in the decision.
Speaker 7
I'm Mary Lynn with Constellation. I'm not quite sure I'm following yet the mandatory payment by LSCs and then credits to the customers. But I think others get it. So I'll ask them about that. What I just wanted to clarify is, is it correct that a customer, a non IOU customer who's already in a vintage for PCIA purposes, this and any of the other types of vintages that you might have envisioned, those will all be separate vintages.
So they'll have a PCIA vintage that they'll pay that cost for, a vintage that'll be called something else. And all this will show up on their bills just various charges that
Speaker 1
We'll layered talk about the billing system implementation in a few slides. But, you know, at least the way SCE is envisioning this is a rider existing CAM charge in the delivery rates. So a little bit different than the existing CRS or PCIe charge. So we'll go in those details in a few slides, but yes, this would be a new procurement and a new you know, I'm using vintage because it's a term we're familiar with, but you can call it modified cam twenty twenty.
Speaker 1
Ultimately, yes, but likely this will be done as a rider to an existing charge. Know like might
Speaker 7
Okay, well we can talk about that later then because I think it should be separately spelled out so customers can really see what the impacts of all these different things are. Thanks.
Speaker 6
Dina Macken, Energy Division. If the costs are following the customer, my question is, does this mean all the way down to the residential customer if individual residential customers are moving or is it some larger size customer that we're tracking individual customers? How are you dealing with really small customers like small commercial and residential?
Speaker 1
Yeah. I mean, most of the customer migration that we're talking about is either, know, let's say new CCA formation, DA expansion, or it's DA customers moving from provider to provider. You know, there's limited, I think, migration today, you know, on the residential level. I mean, they could leave with a CCA. They could theoretically come back to bundled service.
The movement to date has been fairly limited. I think there's a question of handle how to handle the residential customers, whether if they came back to IOU service, would they be re vintage for modified CAM purposes or not? Honestly I don't I don't have a good answer for that. Other IOUs might have a view. But today it's not, you know, residential customers don't really move between non IOU service provider and non IOU service provider.
Speaker 3
Yeah. I agree with Josh that we haven't really like charted this out yet, but I think we would think of it similar to kind of how PCA vintage ing works today just for consistency. It's a good question. We'll take that as a note.
Speaker 6
Because it seems like the step up from residential is then you're talking about small commercial and since small commercial is potentially eligible to migrate if direct access was further opened, then we definitely would have more complex vintage ing and probably need some kind of threshold for tracking customers.
Speaker 1
Yeah. I mean the intention is if we had DA expansion that we're gonna follow the customers. So if there's DA expansion, they're leaving bundled service, then they would retain that vintage or cost responsibility. If the customers were at a CCA that self provided and and and left, they wouldn't have that vintage. So so they wouldn't be opted in into that vintage.
So I I think this is the same general issue of how do we track customers, and there's a little bit of systems development work that would need to be done in order for us to ensure that we're sort of appropriately able to track vintage customers. But but I don't envision it's different for residential and commercial. I think if if they're at an LLC that you know, opts not to self provide, then their customers will be put in the same pool with everybody else, and those customers are the ones that will bear cost responsibility, You know through the life of the procurement.
Speaker 6
Okay. So you don't necessarily need to track individual customers, just quantity of movement? Load. Okay.
Speaker 8
Donna Barry from PG and E. I just wanted to maybe clarify that load movement happens in the three groups that we are potentially procuring for. So for load that departs bundled service, it's going to be vintage based on it's going to have a vintage PCIA. So the same population that pays vintage PCIA will now also pay the modified CAM charge. And as described in Josh's slide, it's calculated for on a pooled basis for procurement done for bundled and opt out.
So there's a single rate and that would apply for customers that depart bundled service. We would apply the same rate to them as a cam rider. Now if you're talking about customers that we have procured for that have opted out and they now have departures to to DA service, that is more complicated. And the solution that Josh was offering here was to deal with procurement done on behalf of another LSE. You've got cost obligations that were originally charged to the customer.
The customer has departed that LSE. So the solution was to have the LSE pay for or kick in his fair share of that procurement cost and any residual would follow the customer. And it does become more complicated because the customers really CCA customer that probably has gone DA. And I think the population there is what we're saying is large commercial industrial probably not the residential. And then there's a third category the deficient or people that were non performing and we've done partial procurement for.
And again I think we would have a separate pool of resources, separate charge for those, for that group. And then again following those customers as they depart their existing CCA, it becomes more complicated. Again, SCE has offered a proposal here to try and accommodate that. So as you know we need to be more precise when we're talking about customer departures. Which group are we considering for bundled service customers that depart?
The tracking and charging out is pretty easy. We know that population.
Speaker 4
So the approach B which San Diego is preferring in this proposal, are basically two procurement buckets if you will. The IOU bundle customers has a one set of procurement which is what was required by the decision and then the other is a bucket for the opt out, any additional deficiencies for LSEs that opted in to self provide at a later time but is underperforming. We find that this makes life a little bit easier in the sense of effectively you're only really tracking one vintage of customers which is just really the current set of bundle customers. It's also very similar to or follows the idea of particularly for the opt out, the IOUs acting as a backstop for the LSCs that are opting out or are deficient over time. The total cost still stays the same with regards to the total contract, net cost of revenues, net of revenues allocated to the specific customers and so particularly for the, because you have two different sort of different costs of the customers of procurement itself, you'll have the very specific costs associated with that for the customers.
There's not much difference with regards to the additional cost for administration as well as other costs to be recovered. The benefits allocation for the RA is similar to the existing CAM and so the ISO sorry not the ISO, the IOUs will assume the RA obligations for the of the LLC load for the amount that's procured. So the current debits and credits that go on. RPS and GHG goes follows with Regis as well as any pursuant CEC rules for the power content label. The customer migration, and so this is why I said it's a little bit easier in the sense of for the bundle customers the cost will follow the bundle customers as they leave.
So for what we, for the current set of bundle customers as they establish vintages to go into the future, That is, we can track that those customers or that load for those vintages and for that total cost to be allocated out. But for the backstop procurement costs, they're fixed with regards to the opt out LSEs to the extent that an LSE that had a, let's say 50 megawatt requirement obligation in the decision, that 50 megawatt procurement is always allocated and the cost associated with that LSE is always allocated for the term of the contract. And then if, well we won't talk, we talked about bundle customer, sorry, unbundled customers from LSCs that migrate back into bundled customer service for the IOUs. They then take on the cost of the bundled rate for the customers. Any questions?
Speaker 14
Hi Noah. John Leslie for Shell Energy. With this two bucket approach, did you consider whether there ought to be three buckets, that is to divide between the opt out and the deficient? I mean, the commission mentioned in the decision that the cost to the utility for opt out may be very different from the last minute procurement that they do for deficient.
Speaker 14
And essentially, you'd be charging the customers of an LLC that opted out the additional costs associated with the, you know, premiums for for deficient procurement. So, I mean, would a subcategory of your proposal be a three bucket proposal?
Speaker 4
Yeah, think that's possible. I think as Josh alluded to before on the approach A, I think we should be given some flexibility on trying to figure out where to bucketize if you will the customers or the procurement because we don't really know what it's gonna look like yet in the future. But I, because you know, the assumption, potentially the assumption is if you will, the last minute procurement in some future time may be higher, but it could also be lower. So we don't really know exactly what it would look like.
Speaker 14
And then Josh, one question for you with respect to your proposal, and maybe I just missed it, but were you planning to allocate the RPS
Speaker 1
benefits? Yeah. I think the plan would be to allocate RPS through Regis like Noah's suggesting. And in terms of like GHG allocations that we'd follow the existing CDC protocols. So in in that regard I think our our proposals are similar.
Speaker 7
Mary Lynch with Constellation. So in the two buckets, how do you decide which resources that you procure go into which bucket?
Speaker 4
So the IO, there's a slide in a little bit but effectively, so once the IOU receives the offers, we know the, our our requirement in this in this bucket approach. So the when we do, if you will, the least cost best fit analysis stuff, we you know, it's the top 10, the top 10 goes to the bucket one and then the incremental goes into the bucket two.
Speaker 7
So does that mean by definition that the higher cost stuff is always going to the opt out?
Speaker 7
Okay. And then I didn't I wasn't you said that you expect those costs for that bucket to go directly to the LSE. And and so there's no tracking of customers. The LSE who who opted out for 50 megawatts is going to be paying for 50 megawatts of of that bucket portfolio for the term of those contracts. Okay?
And and they can't can they do anything with that? So if load migrates, are they able to ask you if they work it out with the other ESP that you start allocating it to someone else who needs it?
Speaker 4
So as Josh said, we don't have a, we're not proposing what happens to the products after they're allocated. That's outside of the mechanism to allocate the cost, right? So if parties have an idea and a proposal I think we'd be open to that or maybe, you know, certainly I think the Commission would be open to that, but generally speaking, if the, I think there are other mechanisms that are outside of this that could potentially work between an LSE and an IOU.
Speaker 7
Okay. But there is no in your model, there is no allocation to customers? Because I just somewhere on there you referred to customers instead of LSEs, but there's no tracking of customers, no nothing in this approach B, right?
Speaker 4
Right. So the costs are allocated to the customer's base through the delivery distribution rates, but the attributes themselves are allocated to the LSEs for the purposes of the RA showings, the RPS and so on.
Speaker 7
Okay. So then now I'm confused again because I thought you just told me that the LLC was going to be paying the cost of that contract for its life.
Speaker 1
Mary, I think it comes to the customers, the then current customers of the LLC. So if it was, for example, LCA had opted out and San Diego procures on their behalf for 10 megawatts, no matter who their customers are over that period, those customers are gonna be the ones that are gonna pay those costs, as if that LLC had procured on its
Speaker 7
And isn't that the same as your model? Where you're gonna take you're gonna create
Speaker 1
we want to follow the customers as they move from LLC to LLC. So it's not Yeah. 10 megawatts of cost to LSEA, it's all the costs allocated to all the customers that are So in the
Speaker 7
so in your approach, it's not the original customers, it's whoever the ESP is serving. Right.
Speaker 4
Right. Very similar to if the LSE were to have opted in to self procure. Certainly without sort of, if you will, at this point, the flexibility of being able to optimize its own portfolio as its customers are migrating. Okay.
Speaker 14
You know, just to push back a little bit on what I think you said, that the first bucket for your bundled procurement customers would be the that would be the procurement you did first, and then you do the procurement for the opt out customers. You're gonna know who the opt out customers are in two weeks. I mean, LSCs have to make that determination then. I'm not sure that there's a justification for having a different cost associated with the procurement that you do for your bundled customers on the one hand and the procurement you do for your opt out. I understand the difference for the deficient LSCs, not for the opt out.
Yeah, You're so gonna know that now.
Speaker 4
I I But here's I guess here's my thought process. What I know now is that I have to procure in San Diego roughly about two ninety three megawatts. I know that potential opt out is about 43 or 44 megawatts. The question is whether for the IOU who is ordered to procure two ninety three megawatts and its customers of x amount of dollars, when there is opt out the incremental amount effectively raises the full cost, right, for if you were to peanut butter it. Is that, does that create any difference or does that create a difference?
If we're trying to keep the indifference principle, if I'm raising our bundle customer costs due to opt out, is that fair to the bundle customers? If the, as opposed, you know, if the LSCs themselves effectively opted in, their cost structure would be still different than what that would be paid by the bundle customers. I question that, right?
Speaker 14
$2.93. Some of the $2.93 probably procured before this decision was issued.
Speaker 4
Right? Except that the decision told SDG and E for the bundle customer to procure two ninety three megawatts.
Speaker 14
I understand that. Some of that procurement you probably did before the decision came out.
Speaker 14
You know, some resources you may be able to assign to that incremental procurement because it's not on the baseline list. Well, in any event, I I guess I assume, maybe incorrectly, that the whole idea of this opt out process was to give the utilities sufficient notice that the procurement that they do that has to be online and in place over the course of a three year phase in period would apply both to the opt out customers and to the procurement customers. And so I'm struggling with this idea that there should be a separate resources ought to be distinguished between your bundled procurement and the opt out customers.
Speaker 4
Yeah, know. I think that's a good conversation to have or in discussion, right, because you know the question of the term backstop for the IOUs to be in that role for LSCs that opt out. Whether or not you would consider opting out meaning to be opting in to you know working with the IOU. I would say it's a different definition.
Speaker 3
Maybe I'll just add to beyond the kind of procurement costs, I think as the opt out pool of customers potentially changes that could also result in bundle customer cost shift to the extent that the opt out pool kind of gets smaller due to load migration. I'm not sure that's helpful, but Well,
Speaker 14
it raises another interesting issue. If an LSC opts out as of February 15, and it has a load of 100, And then, two years down the road, its load is 50. I think the utility still has to purchase the 100, right? Even though LSC's load has gone down.
Speaker 12
I'm gonna add to the dizziness. So if you are procuring a resource that has both RA and RPS attributes, and you both talk in both proposals, the RPS would be allocated. I assume that resource would be more expensive because of the RPS adder than just an RA only resource? And if so, why should the LSE that you're procuring for have to pay for that when this has nothing to do with RPS procurement at all? Does that make sense?
Guess I'm confused why RPS is involved at all in this discussion. This is RA only,
Speaker 12
an LSE that says yes procure for me and you say, oh by the way I bought you some RPS, I go, I didn't want the RPS, why'd you buy that for me, why am I paying for that?
Speaker 4
Right, understood. So I'm gonna go back to what's out of scope on with regards to what the IOUs are procuring and, but you know if you think about least cost best fit effectively if that's the next incremental most best resource, then that's a reason. But you could separate the transaction and
Speaker 12
if say it was a renewable resource, you could buy just the RA attributes without buying the RPS attributes.
Speaker 1
integrally tied, right, if you have a hybrid resource. That the storage assets benefiting from the ITC of the solar project. So let me say that breakdown is not that clear. I mean, we're procuring according to the guidance provided in the decision, is essentially an all source procurement. I don't know what the outcome is gonna be, but we're gonna make a selection based on what we think is the least cost best fit of meeting the need.
And so I don't know what the outcome was B, we just wanted to design a mechanism that was robust enough to handle the possible outcomes. And so if that's a possible outcome, then we want to know what we're supposed to do with those attributes when if they if and when they do show up. Okay. Thanks.
Speaker 11
Sumaira for ARM. So as I understand your model, Noah, the LLC that opts out gets, say it let's pick a 100. So the LLC opts out for a 100. The you're you procure for that LLC. The LLC's customers move, some of them, but you're still billing that or not billing that, billing the LLC's customers whoever they may be at the time.
So time moves on years from now, ten years, you're still billing whoever the customers of that LLC are. I'm not sure how that if they lose a bunch of load, how does that work actually? Because you're billing say say they lose 90% of their load, they have 10% of their load left, but you're still billing them for the that's how it's gonna be? They're still paying for the 100 even though there's 10 people left or whatever? Okay.
And then the other part I didn't really wasn't clear on was if bundled customers migrate to a non utility, you say the costs follow those customers.
Speaker 11
But it's that's not true. So how does that work? So that seems to be totally different from the rest of your model because you're not following the customers with costs except
Speaker 4
Right. And so this is the part where it's very similar to existing CAM in the sense that as customers migrate, the cost because they're currently a bundle customers, the cost of that procurement is going to follow that customer to the LLC that they go to.
Speaker 11
So conceptually how will this work? It would be say a you 10 megawatt industrial customer migrates to an ESP for direct access and that 10 megawatt customer would have a whatever you want to call it the bundled customer charge
Speaker 11
CAM charge plus the that same customer would have if that was an LLC had opted out would have that charge also. So there'd be two charges.
Speaker 4
It's not a double payment because it's not a double payment because the current CAM or rather these procurement costs are not within that current CAM bucket of costs. And so that customer would not get, you know, that current CAM for this. That customer would get the modified CAM portion of these costs. So it's not a double payment.
Speaker 4
That is the LSE opt out. Pardon? Wait, sorry. They don't get charged for the LSE opt out. Sorry.
Speaker 11
They become part of the LEC's existing customers and you charge the existing customers whoever they may be at the time for that modified CAM charge for opting out. At the same time they're paying Yes. Utilities modified CAM charge as well.
Speaker 4
So both statements are correct because the LLC that opted out procured, I don't know, 50 megawatts let's say. Okay. And for its set of customers at that time to which that customer that will migrate in the future was not a customer of that LSE.
Speaker 11
Yes, but they paid for the IRP procurement as part of the IOU, So why should they also pay for the LSE opt out? It's all part of the same procurement. 3,300 megawatts
Speaker 4
Right, and so they will they will get a portion of the costs that are associated with their effectively specific need because they their that customer gets has a requirement for part of that 3,300.
Speaker 11
Yeah, so we'll see the LSE had a part of the in the IOU. Let's say the IOU had a 100 and the LSE had 50 of the procurement. I'm just picking numbers out of the air. And so this, let's make it a smaller customer, one megawatt customer moves from the utility to the to the say it's an ESP who opted out, so now they're paying the LSE opt out charge, which was part of the 3,300, say it was a 150 total, so they had to pay part of that 50, but they're also paying part of the 100 so they're like a double charge for being a same customer. That's why I'm seeing it.
I'm So if they're paying both charges Are
Speaker 4
through At the end of the day, as the customer moves, they will they will pay for, yes, you're correct, in the rates for the original opt out for that LLC which effectively because the customer base grows for that LLC, it lowers that rate for that opt out. And then, but then they have the
Speaker 11
Well you don't know that though, they could replace the customer. Understood.
Speaker 4
Yeah. But at the end of the day, for that customer that moves, essentially you can think of it as they still have a, you know, we're still procuring, we've procured for a whole total But of 150
Speaker 11
they, you procured for another customer for the LSC who opted out, And now, so this I'm still I'm still seeing it as a double charge.
Speaker 1
that one. Okay. Well, think I mean to be honest it depends on what that LLC does with the costs that are allocated to them. And I mean, to be fair to Noah, I don't think these sorts of issues are avoidable if we're in this modified CAM world. So even what we're proposing that would follow customers if if a customer moved from someone that opted out to let's say someone that self provided and that charge is still following them, you know, what is what is their new LLC gonna do?
Are they gonna seek to recover their own procurement costs from that customer? I don't think that can be avoided in this situation where we have customer migration and we have this sort of opt in opt out world. So I think we're just trying to design the mechanism to best fit the problem, Which is how do we how do we provide the LSE autonomy?
Speaker 17
Cindy Lee from the Public Advocates Office. So for the LSE that either opts out or is deficient, happens if they for some reason lose all of their customers and so you are not able to charge their customers for the RA that you have to procure on their behalf?
Speaker 4
Yeah, so that's probably one of the segments that hasn't, we haven't worked on yet. But I think you know there's need, there needs to be fair cost allocation when that happens. Hopefully that doesn't happen.
Speaker 18
I don't know. Is this on? Yeah, I guess it is. Yeah, I'm now totally confused. Sarita Sarwate Parclika.
I can understand that at the beginning, you know, customers say depart for an LSE that you you would have the cost of the procurement charge, you know, you have to charge somebody, you know, the departing customer. But I don't understand why you keep doing it forever is what I understood. I mean, can it not be trued up at the end of the year and then you start over again?
Speaker 4
I'm not sure I'm following the question. The cost of the procurement should last until the end of the contract.
Speaker 4
Yeah, it doesn't go on forever because then you would potentially be over collecting once the contract is over.
Speaker 18
So they will have to pay for the contract term and then they will have to pay for which is what I guess Sue was getting at. They will have to pay for any self procurement in addition to that that their LLC does.
Speaker 7
Lynch with Constellation, a question for you, Josh. Does does your model for same that's here where there's the incremental, the opt out customers are getting the incrementally higher priced procurement?
Speaker 1
No. What we're proposing is that bundled service and opt outs are treated as a single vintage and one pool.
Speaker 4
I'm gonna move on to the example for this. Donna were you gonna talk about it or?
Speaker 8
So this is a fairly simple example. This actually shows a blended rate for the bundled customers in future departures from bundled customer service as well as the opt out LSCs. And basically on the left hand side we have a bucket of resources and this really is illustrative calculation for the proposal that SCE made where you have a blended rate for both bundled and opt out LSEs. So on the right hand side we simply have a stack of resources and they're stacked based on price and the lowest price are at the top, the highest price are at the bottom. So we calculate the cost in the matrix to the right of the contract stack.
We calculate the cost for each of the contracts and sum that up. And then we in this example we didn't assume any dispatch, it's simply the capacity cost of the contract and then we imputed some estimate of ancillary service revenues and that's in the fourth column to the right in the approach A matrix. And then as Josh had alluded to, rather than just as a way to minimize I guess the obligation of the LSEs for some portion of the payment for the contracts. They would we would have a credit associated with the market price benchmark times the obligation, the megawatt obligation of the LSEs and that would include the bundled LSEs as well as the opt out LSEs. So it partially offsets the net costs that would be allocated to the customers.
So it becomes a little closer to PCIA but again we're really still talking about contracts for resource adequacy. So you end up in this example with a net capacity cost of $52,517,000 and the total capacity procured in this instance, in this example is nine forty megawatts. The average cost with the netting of the market price benchmark is $56 per KW year. The load that's paying this particular net charge is approximately 50,000 gigawatt hours, fifty fifty thousand four hundred, and the net rate is a tenth of a cent.
Speaker 1
Donna, that reminds me. Just want to jump in here. For those of you familiar with the existing CAM mechanism, you know that we use sort of an optimized hypothetical revenue. I think it's referred to as like the JPP methodology. I think all of the IOUs are proposing in this case for a modified CAM that we just go ahead and move to actual CAISO revenues, sort of like the PCIA, the way the PCIA works today.
So I just I didn't mention that detail before but I wanted to plug that in case I wasn't clear.
Speaker 8
Yeah and I think that's good to mention because some folks may not be familiar but we do have an outdated methodology for imputing ISO revenues associated with the CAM mechanism which came out of a 2007 decision and it was prior to MRTU implementation. So one of the things that we had proposed as part of the PCIA balancing account overhaul is that we are also going to be updating our CAM mechanism to move to actual ISO revenues as opposed to imputed. Again I think you know there's a little lag in terms of doing a calculation update for the CAM, so we're going to align those with actual ISO revenues. In this modified CAM that's the way we're modeling it as well.
Speaker 4
Yeah and for those on the, for tracking, on the cost side it looks, you know, there's a number for $56 per kilowatt year and if you are looking at what's offered if you will, it starts at $89 and goes up to $125 so if you feel like there's a disconnect in a sense, it's only because of the fact that there's a the LLC payment of $40 per kilowatt year is offsetting the total cost as from an LLC specific payment. Just if you're trying to track the math here.
Speaker 8
And again this yeah, it aligns with Josh's example and SCE's thinking for this modification to the existing CAM net cost calculation was to try and solve the problem of following customers with the cost. So you know, gives up the LSE is going to be contributing a payment to the megawatts that were procured on its behalf and the net cost would be what would follow customers as they depart opt out LSEs. In this example, this model is more what IOU what PG and E in San Diego had advocated where we have a separate bucket for bundled customers. On the left hand side we have the same resource stack and same costs. We've just bucketed it into two categories, one for bundled and one for the opt out LSEs.
So the end the the other modification here is that we do not have the LSE payment. So basically we have you know a rate calculation for bundled customers that is what you know closer to 2 tenths of a cent for their modified CAM. This would follow customers as they depart our service and move to CCAs or DA. And again this will be the same population that currently pay the vintage PCIA. It'll be a modified cam, or modified cam rate that would be a rider to the existing cam.
We would bill it through our distribution. Our existing cam is consolidated with our distribution charges. This modified CAM would be a rider on customers, bundled customers and vintage customers as they depart. For bucket two, these as Noah had alluded to, these costs are assigned directly to the LSE and then the netting of the ISO revenues would be the same net costs. We'd get you know the tune In this example we have two forty megawatts allocated and the LSE's in this case the load was estimated to be about 14,400 gigawatt hours and their rate is just slightly higher than the bundled customer rate.
And again I think the composition of the opt out LSE's load in combination with what their procurement assignment is will determine what their average rate is. Here it's slightly higher, not surprising. They're getting some of the higher cost contracts. But one thing to think about is basically we've put a ring fence around the procurement that would go to these LSCs. It will stay with these LSCs.
If their load changes, say they lose half of their load, then their rate would effectively go up. You know I think the obligation of the LSC's that choose to opt out and how they pursue you know cost recovery from customers that depart their service is part of this conversation as well. You know again the idea was that there would be charges following the customer. It didn't necessarily indicate it would always be IOUs obligation to pursue that cost recovery. I think in this case the rate that we would charge the LSE may go up if they have departures and then I think it's on that LSE to pursue cost recovery for their portion of the CAM.
So we have one more? Nope. Okay. So are there any questions on the calculation examples?
Speaker 19
Victoria Mendez, San Jose Clean Energy. I just wanted to comment on the proposal B from SDG and E. From what I'm looking at right now I'm kind of leaning in agreement with the gentleman from Shell Energy who mentioned it does not really seem right to be putting the bundled and the opt out LSC's in separate buckets. I understand kind of the theoretical argument that like if you are now taking more higher priced contracts from what's in your RFO and then that gets peanut buttered out theoretically could raise price on the cost for the bundled customers. However I kind of think it seems like you don't know that you would have gotten the same results in the kind of the counterfactual world where those LSEs had gone out to self procure.
Like essentially I'm saying you don't really know if those LSEs had gone out to self procure themselves that they would not have secured a couple of those lower priced contracts themselves since this is a system need. Also I think that it may not actually make LSEs indifferent between trying to procure on their own and opting out since if they know that they would essentially be getting paying for the higher price contracts in your RFO.
Speaker 4
So thanks for that. So I think I you know I think the question then is if the IOU has to go into this the eleventh and twelfth or fourteenth bucket right of resource offers. It essentially by, it essentially raises the cost of the entire procurement to which you're peanut buttering it onto everyone is is just my point.
Speaker 19
I get that I guess I'm just kind of saying like there's no real counterfactual that you're comparing it to, to say that
Speaker 4
I'm only comparing it against everything above 10. I'm not comparing like Right. I'm not comparing against something that I don't know, you're right.
Speaker 19
Yeah but you're assuming that all those contracts are like available to you and would not have been you're basically assuming that none of the lower price contracts would have been taken but like
Speaker 4
I'm sorry the fact that we have these offers means that they they bid into the RFO, right?
Speaker 19
Right but say like one of the LSE had self procured and released their own RFO and that had been into their RFO instead. Yeah, that's kind of just what I
Speaker 7
Mary Lynch with Constellation, and I just want to support those comments and John's as well. I don't think there was anything in the order that envisioned an inherent competitive advantage to the IRUs because someone chooses to opt out. And setting up the structure so that you end up with the lower cost portfolio. I don't think that was envisioned in the order. I guess it's probably not prohibited, but I don't think it was contemplated as a feature of the decision making and opting out.
But the question that I had was we've talked a lot about customer migration and this is more in your model Josh, where the costs are falling on customers. We talked about this a little bit before, but for purposes of this discussion, what happens if customers leave? Leave the state. The businesses, you know, go out of business and they leave.
Speaker 1
Yeah. I mean, that happens today in the PCIA. We certainly don't track those customers when they leave the state. And so, you know, and that
Speaker 7
is But you are tracking this in a separate vintage. So if they leave it's noticeable. I mean
Speaker 1
Yeah. That's I mean, certain amount of customers are gonna leave the state and that will could make the pool a little bit smaller. We think that that is less of a risk on customers that are paying this than the risk of whether or not you had a LSE lose all its customers or leave the market or otherwise fail. Because then you have a lot of customers all at once that you're trying to you have to basically now you say, what do we do with those costs? And so having customers trickle out of the state is probably manageable.
Having like a major LLC fail puts a lot of cost back on the rest of customers because then you got to decide what you want to do with those
Speaker 7
So the plan is just to keep charging the customers in the vintage as it shrinks, if it shrinks. Just same same universe of customers, one's just gone. You're not planning on putting those costs somewhere else, just they all stay in that vintage.
Speaker 1
I mean, as of today, that's the plan. If you had a situation where 50% of the pool, you know, disappeared somehow, then I guess that that's a different policy question of whether or not you'd say, no, we wanna take those costs and put them back in the cam. I just don't see that as a realistic possibility. I do see a realistic possibility that you could have an LLC leave a market or or fail or lose a lot of customers and then which case you could have a, you know, a much bigger cost allocation question.
Speaker 7
No. I I that one LLC leaving is different than customers leaving. Just wondered what the plan was for your vintage. And your plan is to just keep charging the vintage.
Speaker 1
Commercial customer leaves the state or closes business, there's no plan to take their share and re socialize it today. Yeah.
Speaker 11
Sumair for Arm. I'm not getting mad at all about the LSC leaving because you're sending the cost with the customers. It doesn't matter if the LLC leaves or fails or
Speaker 1
No. No. You're right. You're right. We're saying is we're trying to balance the two approaches, which I think both have merits.
One approach is we make it look more like self procurement. We make it maybe administratively easier to to put into place by charging just that specific LSE's customers. Or do you do this model of following customers as they migrate, Which is inherently more complex, at least from a tracking exercise. One of the things to consider is what's the risk to the remaining customers in the pool. So if we follow customers when they migrate, I think the pool stays approximately the same size and you have a greater number of customers that are sort of bearing the cost responsibility.
If you're charging just the LSE specific customers, then you're kind of running the risk that an LSE will lose lots of load or fail. Then you have to decide what you're gonna do with those costs. So they get re socialized to other parties. Did they get re socialized among the opt out pool? You know, we don't know the answer today, but it's just like there's you're balancing, you know, there's a balancing act here between ease of administrate, you know, ease of implementation administration and, you know, dealing with the customer migration.
Speaker 11
If you get customers that move into the state, are they gonna be charged that charge? Or is only the existing customers out in whatever date is picked?
Speaker 1
To be honest, I haven't considered that matter if they moved into bundled service then they would. Yeah. Be vintage as a bundled service customer. I mean, I'd probably try to follow the existing sort of rules and implementation in the PCIA.
Speaker 8
Yeah, so this is Donna. So existing rate making, we don't differentiate between load growth and new customers for rate making purposes. Know, we have one forecast for bundled is some combination of the two. And so to the degree there's load growth including new customers that would be part of the denominator.
Speaker 11
It seems somewhat inconsistent though because if an ESP gets a customer that moves from out of state, say it moved in want to get, say direct access cap is lifted in the next five years sometime, and somebody moves into the state wants direct access right away, yet they're going to be charged that charge. But a bundled customer, I guess you're saying bundled customers also be charged the charge.
Speaker 1
Yeah. I mean, I think I think that's historically how it's been dealt with. It's how it would be dealt with in CAM because CAM's responsible for everybody. Is one of those sort of wrinkles of how do you implement modified CAM and I probably look more to the PCIA and how it's implemented and what past practice has been. But Donna and Rob Thomas from SE is back here, probably speak more of this.
I'm not the expert on this aspect.
Speaker 11
But in your model, if an ESP customer came from out of state and was direct access right away, they wouldn't pay the charge because your charge is following the customer.
Speaker 20
mean, Donna stated it pretty well in that the the new customer would just be well, maybe she does wanna hear the answer now. Yeah. I'd say, yeah, Donna stated it pretty simply. I mean, if it's a new customer coming on to the system, whether they're coming from out of state or just a brand new customer, they would be treated exactly the way that current customers are treated with the CAM charge, with the existing CAM charge. They would pay whatever it is that the bundled customer would pay.
And if in Edison's proposal, because the opt out customers and bundled customers are the same vintage, they would have that same incremental charge.
Speaker 1
And part of part of the thesis, right, is when you have the forecast that the ultimate demand date was based on, does include projections for load growth. It's not specific about where it comes from. Some of it could come from out of state. Some of it comes from facility expansions. Some of it comes from just normal load growth.
It's offset by efficiency and other matters. So all these are incorporated into the overall forecast. And so it's always been viewed as, you know, when you have that load growth that the charges should should apply to that growth because they were sort of included in the original forecast. Even if it's We're not forecasting a specific customer to come to the market, but we are using econometric models, right, that that make up the forecasts ultimately.
Speaker 3
Okay. Maybe we'll I know we're probably up on time here, nearing it, so we'll just really quickly go into some IOU billing system considerations just to kind of put reality cap on some of this conversation. So everything discussed here today I think would require, you know, potentially significant updates to the the three IOU billing systems. As I believe has been discussed in other venues, SDG and E and SCE are currently undergoing upgrades to their billing systems. And, you know, this would potentially not actually be able to be implemented in the near future.
And so IOUs may, think through some interim solutions, potentially billing LSEs directly before we can actually put these into rates. And, I think that that's about all. Yeah. Lots lots of changes that need to be considered. Anything else specific you guys want to add?
Speaker 1
Yeah. I mean, I don't want be held to this, but I think we it's our belief that we couldn't implement this till at least 2022. And so that likely means a one year delay in billing as it relates to this procurement. And thus either we'll accrue those costs on the balance sheet and recover them later or you know, we're considering alternative ways to recover those costs depending on size. So as we mentioned, whether or not we could bill LLCs directly.
But we're still working through the implementation details.
Speaker 3
PG and is in a similar situation. I think 2022 at the earliest is what we're currently thinking. It's something PG and E is definitely looking into I think it will ultimately depend on what is adopted.
Speaker 8
Yeah and I think the timeline at a minimum would be oneonetwenty two and if you just think about the timing of this proceeding getting a decision at the fourth quarter of this year, right now our billing system has a full queue of already approved and quite frankly late implementation of existing modifications and so they could begin work get a decision in this proceeding. You would begin working on the functional design for the IT billing system. They told us it would take ten months. So you're already you would be into the 2021. So oneonetwenty two implementation is reasonable.
The SCE model where we're following the departures from other LSEs and billing a net cost calculation. We talked briefly with our billing system, billing team, and we think it could be done. You know, again, we need to explore that a little bit more. Our model as described by Noah was where we would have billing the existing LSE's customers base no matter what it was, know, and not really following the departures from that LSE. So they cost out and gave us a timeline for the proposal B as opposed to proposal A.
And it's more complicated when we've got multiple departures of multiple LSCs. And again, all this can be simplified if all LSEs do their own procurement. No opt outs, no deficiencies, it becomes a lot simpler.
Speaker 3
So PG and is trying to figure out yeah which trying to balance what's fair and equitable versus what's administratively challenging to implement.
Speaker 4
And for San Diego on the approach B, we're probably looking at Q4 to Q1 into 2022 but for the approach where we if we're needing to track the customers and vintages, what I heard they've we've learned a lot from the PCIA, vintage ing sort of implementation if you will. We're looking at potentially 2023
Speaker 20
For SCE, I I don't think it would make a difference. It would still be 2022. Approach a and approach b, just basically, we would have to identify customer attributes slightly differently, but essentially, we would just use key structure that would identify attributes. And then once those attributes are identified, they'd be associated with the relevant customers and they'd be tracked that way. But as far as timing, it would still be the same.
Speaker 13
Yeah. This is Doug Carpet from Peninsula Clean Energy. Thanks so much for preparing all this until obviously mulling over a lot of these pieces. But one of the things I'm kind of struggling with, and it's not sure quite who can speak to this, my understanding is that under the terms of the decision, the actual order is for procuring IRP procurement track specific capacity. And it's not necessarily for RA for your own use for RA showings.
It's capacity that's for that. That can be offered later into the market. It's not for RPS. It's not for GHG free energy. And so it seems one of the problems with both of these approaches is that what you actually end up charging the opt out LSEs for is a good deal more than what is actually ordered in that procurement because you are, as an LSE, opting out LSE, you are required to take the RA.
That's not actually we're not ordered to do. We're required then to take the RPS that, again, that also is not part of that. And so I'm wondering if maybe some of the netting might go further than just netting out the CISO revenues, but also sell off the locals, sell off the flex, sell off the system, sell off the RPS. And then whatever marginal, that's the actual cost of the capacity. Like capacity as capacity as a separate product from RA.
Because like system RA we don't have a 2023 showing right now, but we are required to get capacity for somebody to make that showing down the line. And the other piece of it too that's actually kind of interesting here, this notion of on a totally separate so maybe we should talk about that first and then I can ask my second question. And hopefully that made sense to you. Josh is used to listening to me. Not make sense, so
Speaker 1
Thanks, Doug. That's helpful. I will take that into consideration. In terms of, you know, I don't wanna get over overblown on the RPS and other aspects. I mean, folks are gonna be procuring what they see as the least cost best fit way to meet the need.
And so, you know, we're casting a wide net in terms of what's possible and you guys can, you know, you guys can go see our solicitation materials. They were put out last fall. But, you know, we're ultimately trying to select what's the best fit, you know, for the procurement need and, you know, at the least cost best fit. So that's what I'll hand you. We didn't want to get, what you're suggesting sounds a lot like moving 100% to like a PCIA approach, which we also didn't think that the decision really was calling for.
Speaker 3
And I guess I'll add, you know, anything that we procure will go through the tier three advice letter per the decision. And so, you know, we're open for feedback at that Okay.
Speaker 13
Yeah, I think this is more has more to do with the, like the calculation of the actual charges and what gets netted against those charges. And I think it may be more needs to get netted than just what is currently netted here. The other actually the other piece of it that may be a little bit accidental is this notion of I think it's on this slide here, billing directly to LSEs. Because one of the other considerations, oh yeah, in the interim, IOUs may request billing to the LSEs directly. One of the attractive pieces of that that may be under consideration is that then that ends up on generation charges, which in terms of competitive dynamics, one of the problems with the delivery charge non bypassable piece is that you create a that creates a market distortion in terms of competitive dynamic between self procuring LSEs that necessarily have their capacity in their generation charges and opting out LSEs that then will be able to put that on the delivery side and then they start saying, our generation charges are cheaper.
It's like, well, yes, because there's this stuff that's not included. So again, something to mull over there.
Speaker 4
So just a real quick, with regards to charging the LSEs directly and showing up on the sort of the commodity side of the bill, you know, whether or not that is pursuant to the decision itself because the decision did talk about non bypassable charges.
Speaker 3
It said yeah to customers I think specifically because yeah we had thought about that too. Yeah, so next steps I think we alluded to this a little bit. It sounds like there'll be a proposal put forward and then comments on that for what Eric went over earlier. And then again, the opt out date is coming up shortly, mid February.
Speaker 6
One follow-up question. Could we go back to the slides that show the kind of the calculation in the county? Yeah, these. So thanks. And this is Dina Mackin again from Energy Division.
So I this is really helpful. I appreciate this slide clarifying how it's calculated. What I'm curious about is then once you have this, some kind of illustrative calculation that shows what accounting structure might look like departing customers and the customer movement. Like, what is this specific, like, how do we actually account for those changes?
Speaker 1
Yeah. So Let us think about how to clarify that, Dina. But I mean, the key the key aspect is how much load is in that second to the right column. And so I think what we're suggesting in approach a is that we wanna follow customers and that the amount of load in that in that second to the last column will stay roughly the same. And so that keeps the charge at a similar level.
Speaker 6
That makes sense to me, but I'm kind of I'm trying to imagine what it looks like to to track the accounting of customer movement. And so like, if we were to show like 40 some odd LSCs, whether we've got here a vintage where each LSC has some upward and downward movement in their load that is then tracked as just a plus and minus of load change. And whether that all equals up to the load, like because I'd love to see how that all gets calculated out so we can see, like, how we're tracking load changes.
Speaker 1
Yeah. And I think of it personally if you're if you're gonna go with this methodology. It's not about just like plus or minus the load. It's it's customers being flagged as being part of that vintage. And so, you know, the utilities would say, you know, pull meter data from our systems for every customer that has flag a, and you'd pull out like their annual load data into one bucket.
It wouldn't be like we're just sort of adding and subtracting as we go along. It's The intention is to follow, you know, that pull the load from those specific customers that are responsible.
Speaker 6
So that goes back to my question previously. If we're talking about pulling load data for each individual customer, I could foresee that being feasible with above 500 kilowatt customers. But if we are seeing major load changes in small commercial even, like forget residential, I I want to know about the feasibility of pulling load data and tracking it for individual customers when we're talking about thousands, hundreds of thousands of customers that might be changing.
Speaker 8
So I think the load that we're talking about is LSE specific load and bundled load and of course we have our own potential departure. So it's our current bundled customers future departures from bundled load which we know based on the vintage ing that's done for PCIe. We know that population. We know what LSE they have gone to. And then the other group of customers paying this single rate would be LSE specific.
So the LSE in an annual era forecast we get load forecasts for each LSE and that's the group of customers you're going to charge. So you know it's as Josh was saying, it's a constant, it's the LSE's that chose to opt out, it's their customers even if those customers have departed.
Speaker 6
Okay that makes sense to me but that sounds like something different than what he's saying. I thought he was saying we're tracking the individual customers as opposed to the LSC load.
Speaker 8
They're identified initially based on the LSE's that opt out. They may ultimately depart to ESP for DA service but they're a modified CAM customer for purposes of billing. I mean that's the common attribute. People use the term vintage ing a little bit here which I think is confusing but basically what we've identified is a modified CAM customer group, a snapshot in time and that group can change LSE's over time.
Speaker 3
You'd have to create some sort of flag in the billing system to do that. That's what we're
Speaker 8
looking It's effectively a new attribute for a new customer group, modified CAM customer group.
Speaker 1
Yeah. And, Dina, I mean, we share your concern. That's why we're saying there's there's some upfront systems implementation costs here.
Speaker 1
With making sure that we have the systems that have the ability to do this.
Speaker 6
So but you guys would you guys feel like you can do it, and you and it will be the IOUs that do this tracking.
Speaker 1
So I I don't know, Rob, if you have a a different view because I don't wanna get out ahead of us. But
Speaker 20
So in order to to bill the customers, they'll they'll have to be identified first. So they'll have to be identified as a bundled customer, an opt out, or a self serve type customer. So they'll have a flag or a tag, I call it a key, that'll identify that characteristic. And then after that, you can put a time flag on there as well if you want to add vintage ink. But so all of these customers and all this will have to be built anew, but all of these customers will have these various characteristics or flags associated with them.
Once you have those flags, then you can query, you know, the billing system to then get usage, get load, and so forth like that to do the allocations. Did that answer the question?
Speaker 6
I think so. Yeah. In your proposals, it would be great if you guys could illustrate this a little more so that we understand.
Speaker 1
Yeah. Mean, we'll work on how to illustrate that. Like I said, it will require some some systems updates and implementation costs in order to do it. I I kind of think of it as like, you know, PCIA, if they had a CCA customer who departed in '18 and then later goes to DAA expansion, theoretically, would retain that 2018 customer vintage. You know, this is a similar challenge if you will.
But you're right. If you have further DA expansion, you know, it's bringing in a whole new customer class that probably turns over a lot more than the larger C and I customer class. It'll present its own tracking challenges.
Speaker 7
Very much with Constellation. I just wanted to know one other thing that occurs to me with this complexity is there needs to be some sort of customer education that goes on here. I mean, you know, the February 15 date is going to come and we're going to have to make an election or eighteenth date is going to come and we're going to have to make an election that's really going to impact customers for a long time. And I don't know that they're vastly I know that CLIQ is here and DAC sort of has some peripheral coverage here through ARM and all that. But I'm just worried that customers decisions are going to be made for them by these elections that are going to color what they get to do for years to come in terms of choices.
And I think that I know we're going to spend some time thinking about how we communicate to our customers what our decision is. And I'm worried that we don't have time anymore to even get feedback from them. Not that we can take that feedback really into account because we have to make an all or nothing decision. So I just think I'm just kind of really worried about how customers are going to come to a real understanding of how this is impacting the choices that they have.
Speaker 2
So I'd recommend a five minute stretch break while we prepare for EBCE's presentation.
Speaker 1
By adminmonitor.com. We'll begin momentarily. Thank you for your patience. The feed for this streaming event brought to you by admin
Speaker 16
Thank you. I'm so excited that this is gonna be such an exciting program. Alright. So my presentation really focuses on a couple areas. The first we haven't really talked about yet today which is when does the backstop get triggered and how do you think about that for LSEs that do not elect or that elect to take their own obligation but then somehow the resources aren't showing up or they're in some way deficient.
And then I wanted to also cover some considerations for the cost recovery piece as well. So just a little bit of background and this is really in the context of trying to think about that timeline about when do you decide that an LSE is not meeting its obligations. And so I just wanted to point out CCA procurement is often fairly timely and more efficient which means that oftentimes we are doing our contracting a little bit more close to our online date than sometimes the utilities have been able to do historically. And that's just the nature of our organizations. So not a criticism, just a reality and an important consideration when we think about timing.
So this next chart kind of illustrates how we think about our procurement timeline. The top line level shows planning and what it shows is that you know in our current year we might be looking long term up to four years out. At the far right side you see that's the compliance year when we're doing our RA showing and when the resources actually have to be online and running. And then what you see in the next green bar is procurement. It shows when we're buying what.
So four plus years out we're doing some limited procurement. Two to three years out we're doing RFOs and transactions for long term contracts. One to two years out we're primarily focused on position management and responding to system failures and then of course in the year of need we're doing year ahead and monthly RA procurement, but at that point it's definitely too late for large scale new procurement. And then in terms of the backstop trigger, that's the red line at the bottom, our position here is four plus years out, there should be no backstop for an LLC who's elected to do their own procurement, it's not appropriate. Two to three years out, still not quite the time frame at this stage if an LLC is struggling it might be able to enter into joint procurement with other LSEs.
It's something that CCAs have been experimenting with different models and it's been fairly effective in shorter time frames. One and a half years is when you start to see that if projects aren't coming online as expected, contracts aren't signed, that might be a time where you want to start being concerned about triggering a backstop. And then finally of course if you wait too long it's too late to do any backstop procurement on behalf of any entity and at that point you're really looking at the RA penalty process. So just to give you an example of what an average development timeline might look like for an entity like EBCE, we would go to market in year T. We can shortlist about a month after we go to market.
We can negotiate over a couple months and we can execute an agreement in as little as four months. And then we can be online in as little as eighteen months past the date we went to market. So this whole process can move fairly rapidly. We'd say T plus twenty four months is more optimal than eighteen but in times of constrained timelines it can be done in a shorter period of time. The next thing I wanted to cover here was just an illustration of how we can actually manage our positions via trading and wanted to kind of bring this up for thought about what do we do when certain LSEs have procured maybe more than their share pursuant to the decision and other LSEs have procured less but maybe not significantly less.
How can you trade positions in order to ensure that every LSE is procured to the extent it's needed? So this is just a simple example that you can go to the market and you can seek secondary transactions in order to get the amount that you're required. Sorry I'm battling a cold here. Here's another example, similar model but here certain entities have looked at using a joint procurement entity to do procurement on behalf of multiple LSEs and so in this instance the joint procurement entity might be doing the procurement, allocating that out to the LSEs and to the extent that they don't have what they need, they might be able to or they have too much, they can go back to that joint procurement entity who can then reallocate and manage folks' positions. There's a couple different ways we think about managing long term contracts.
One, you can do sleeves. This is where an initial buyer would resell to a secondary party. Presumably they would factor in any applicable credit support that they're providing and that would be priced into the resale. Another is just if we have a ten year contract for a new resource and say for example we have more than we need in certain years, can we sell off portions of that ten year supply and have those portions count towards another buyer's ten year requirement? We think the answer is yes, it should count as long as we have that underlying contract for the ten years.
This is essentially, I think the point here is that as long as our overall need is met then LSE's themselves can transact among themselves to determine the payment structures to ensure that whoever is short has what they need and whoever is long is able to monetize that. And so this is an important consideration of what kinds of activities we need to be enabling before we get to the point of any backstop procurement for an entity that might be short. So backstop procurement, we believe it's only really appropriate when the procurement on behalf of is agreed to by all the parties in advance. So you know if I decide I don't want to do my procurement and I opt out of that then I'm agreeing. But I've not agreed to it, I'm trying to do it myself, then all opportunities should exist for me to do that myself.
It's not appropriate to do a backstop procurement if the need is uncertain or ill defined. So one of the things I think we've been talking about is can we determine what the need is at the given point in time of the decision and what the rules are around counting and ensure that there's no backtracking against those rules as we continue to procure and build. And then the other thing to think about is what happens if several LSEs or one LSE is short but on balance enough other LSEs are long that there's no system shortage. In that instance we also don't think backstop procurement is appropriate because it's just going to be an additional cost to our customers and it's more efficient to manage those excesses and deficiencies through secondary market transactions. So I did want to talk through cost recovery mechanisms and I think here we don't have a detailed proposal like the IOUs at this time, but we wanted to just raise some issues for thought and consideration.
So again, in instances where there's an overall system excess, we don't think that the backstop should be triggered and so there's no cost recovery mechanism needed. If the overall system and an individual LSE has a deficit and backstop procurement is triggered, then there's a couple important considerations. And this goes to what Doug Karpa briefly mentioned. Costs need to be recovered from deficient LSCs through the generation rates. This is because if you're recovering in generation or if you are recovering in a distribution rate, it has an anti competitive rate effect.
We compete with utilities on the generation rate component, and this is what our customers look at when they're looking at their bills. And so if these costs are moved to the distribution side of the bill for certain customers, then you can no longer compare those generation rates. It becomes very hard for customers to understand the value proposition that's being offered to them. There's all these tangential issues, for example the Karen Farrah discount for customers is on the T and D side of the bill. So does this mean that a customer who does its, sorry, an LSE who does its own procurement and bills customers through Genside that their care customers get less of a discount?
So we think this is a big issue that needs to be discussed today. We also think that the simplest would just be on behalf of procurement where the cost goes directly to the LSE. Similar to what's being worked on PCIA Working Group three. And you just allocate the cost to the LSE, you allocate the benefits to the LSE on the generation side of the bill. The issue about what you do with load shifting between LSEs is really a different question.
Shouldn't be conflated with how to charge for the on behalf of procurement. Just wanted to flag of course there could be load migration issues. This is a separate issue. We're going to need to address instances where customers move through LSEs as was discussed today. But it doesn't need to be part of the mechanism for charging for the on behalf of procurement.
Questions, thoughts, discussion?
Speaker 7
Just a couple. On the slide where you had people sharing costs, nothing prevents that now, right? Are you just wanting to make sure that as that joint authority moved things around among various LSEs that it would just continue to count towards a requirement? There's nothing that stops you from doing those transactions. Right?
Right. You don't need approval or anything like that.
Speaker 16
Okay. It's mostly a concern that if you say, well, one LSE is deficient at too early of a point in time, you haven't allowed the market time to do this kind of trading.
Speaker 7
Right. Okay. And then at the end when you say if somehow the system has ended up in excess there shouldn't be backstop. You mean there shouldn't be more procurement, but the deficient entity should still have to pay their share.
Speaker 16
So there are different ways to incentivize a deficient entity to trade with entities that might have a surplus, you don't need to do additional procurement on behalf of that deficient entity because the overall system need has been met and therefore that's just going to increase overall customer costs.
Speaker 7
Yeah, okay and I just wanted to make sure we weren't opening up a free rider situation where everyone just hopes it ends up long and but you want them to pay you just don't want there to be more excess procurement.
Speaker 20
It's Rob Thomas from Medicine. Yeah. I just wanted to clarify, so CAM costs today are recovered through the new system generation charge, which is delivery not distribution. And so what we proposed really is is another component that would be added to the delivery charges. So there wouldn't really be a change there in how CAM is recovered.
Because the NSGC charges are required to be recovered through energy allocated 12 CP, we have explored ways and maybe this is something you can explore as well is to apply it to an energy component that that you would assess.
Speaker 16
Okay. So I mean, I I deliver your distribution. The point is that it doesn't show up in our generation side of the bill the way the CAM is. And currently the CAM charges, my understanding is that the CAM charges are the same no matter which generation provider you have. So this would be a big shift in that non gen side of the bill is going to start to change by LSE, and given that these are properly generation charges, we think that from a competitive standpoint you need to you need to display those in the generation component of the bill.
So if that's something that you guys think you could work towards, we'd definitely be interested in exploring that with you.
Speaker 20
So, yeah. So I guess that's correct in that for the LSCs that procure their own CAM, yeah, they would have a different NSGC charge, correct?
Speaker 20
However well, we can explore, but I think we would still keep the charges in in CAM and treat it as if it were CAM.
Speaker 1
Just to clarify, we have considered whether or not it could be applied as a rider to the PCIA. Mhmm. I just think our current working model is that you would follow the existing CAM. So, you know, I I I hear your concern, I would, you know, ask parties to sort of weigh in and comment to the extent that we'll be able to comment on this workshop. But one aspect of our sort of, you know, two two paths of cost recovery mechanism is that if we're billing LSCs, for example, for the RA value or the market price benchmark, that would obviously come through their generation component.
So it would sort of end up splitting the cost in part through their generation rate and in part through the existing CAM charges.
Speaker 16
Okay. Well, that's that's good to understand. I mean, do think that moving towards a market price benchmark at a time when we're looking in PCIA at moving away from that and towards an allocation looks a little bit like going backwards perhaps but we'll continue to you know consider your proposal and comment.
Speaker 8
So Donna Berry, PG and E. So I just want to say that we considered both the options that you're suggesting. One, billing the LSE's directly. Unfortunately that's not what the decision ordered us to bill the LSE's customers so our proposal is compliant with that. There's also risks I think associated with having you know executing you know what effectively is a contract with the LSE to pay for procurement we're doing on their behalf.
So there's risk associated with non payment but also we did consider this as a rider to the VP CIA and again the decision made it clear it was not to be PCIA, This was not a PCIA charge it was a bonafide CAM charge and PCIA has a lot of baggage and when it has to be a right it would likely be a rider on an existing charge just for efficiency in billing. So you basically start to confuse this modified CAM if you're trying to bundle it with the VPCI being on the generation's charge being on the generation side of the bill. So again you know there were complications with that but we you know thought about that and it might be more efficient at least for the bundled and departing load procurement because it's the same population that's paying modified CAM.
Speaker 11
This is Sumaira for ARM. I believe the decision required the utilities to procure on if a LLC says they're gonna procure and then they don't. So I think utilities have to procure. Are you proposing a change to that or is this sort of your general philosophy of backstop or you want to change what the IRP procurement decision set?
Speaker 16
So I'm not suggesting changing the decision, I'm suggesting that when we decide the point in time that that gets triggered is important and we need to make sure that we have first exhausted the opportunity for the LSE to self procure. Which in our case can be within eighteen to twenty four months of delivery. And so we shouldn't be too quick to make a determination as to when that LSE has failed to procure and the utility should step in.
Speaker 11
So when you say triggered you mean the point at which someone decides you're deficient? Mhmm. Because otherwise it's February 18. Okay.
Speaker 15
Hi this is Sudine Kasazovic from Commissioner Randolph's office. Just one question about how this might connect to the IOUs earlier presentation which I understand if you're still digesting but specifically are surrounding the bucketing discussions and I think someone alluded to the idea of a need for bucket three under approach B for deficient LSCs and I was wondering how that connects to kind of the timeline slide you had earlier in your presentation.
Speaker 16
So I think you could certainly do a bucket and I think that goes to yes, at some point you decide, okay, LSE's not meeting its requirement and therefore at this point in time the utility is now responsible for X amount on behalf of that deficient or those deficient LSEs.
Speaker 12
Scott Olson with Direct Energy. Melissa, you made a point about if an LSE procures more than they need that other LSC should have the opportunity to purchase something from them in order to meet their requirement. Mhmm. Are you suggesting that they purchase an entire, say, ten year strip or maybe just portions of that LSC that's long, portions of their contract for just say a few years to meet whatever shortfall that individual LSE that short has?
Speaker 16
So I believe that as long as the original LSE has the ten year contract that that should be enough to satisfy that requirement since the point of the requirement was to get new build in California and that's what we're doing. So how they break that up and sell it to other LSE's at that point shouldn't matter for purposes of compliance.
Speaker 12
I think that's a great idea. I know this is something Jamie that has come up before you said you would be certainly curious on staff's view that if an individual LSE has to show a ten year contract or can they get portions of another LSE's ten year contract provided the original LSE has a ten year contract for compliance purposes? Don't have to answer now, but that's certainly I think it's a great idea.
Speaker 10
So this is Jamie, Energy Division. Yes, this question has been raised in several different forums and hopefully we'll have some answers for how this will work in the frequently asked questions fact sheet that'll come out and be posted on the IRP website hopefully shortly. But I definitely hear the efficiency arguments for it. One thing I think in my mind because I have a compliance brain and how would you kind of ensure compliance and track compliance when there is this other market taking place and and would these contracts with this other entity be for a ten year period or would the LSE have the flexibility to contract with them for maybe only two years? And is that really you know consistent with what the decision, the spirit of the decision was going towards by giving LSE the optionality to procure new generation.
Speaker 14
Hi Melissa, John Leslie for Shell Energy. Just to understand a little bit better the timing, the trigger point for deficiency, as I understand it, February 18 date is not a date for determining deficiency, it's a date for determining opt in or opt out.
Speaker 14
Then, when an IRP plan is filed, the first one being July 1, all LLCs have to demonstrate their progress toward meeting the obligation. But the first online date is August 2021, 50%, then 75% a year later, and 100%. So when are you thinking that an LSE would be deficient in if an LSE has opted in, at what point is an LSE deficient if it fails to show the resources that are needed to meet its specific number?
Speaker 16
I don't have the perfect answer, but I think what I'm trying to target around here is perhaps around eighteen months prior to the delivery date.
Speaker 14
Eighteen months prior to the so for example, months prior to the 08/01/2021 date.
Speaker 16
Right. So you'd have to back into that. Okay. Right. So that's right.
So let's see what progress we're making. Right? And that's for 50%. Right? And then we have a future delivery date and a future delivery date.
So let's continue to track how we're doing, but don't determine eighteen months beforehand for the 100% when only 50% is required in eighteen months. I don't think I worded that quite right, but I guess what I'm saying
Speaker 14
thing about resources that are online, I mean, you may have contracted for resources, but you won't know they're online until that date,
Speaker 16
Fair enough. But we shouldn't be determining too soon in advance that LSCs are deficient when they're on track.
Speaker 14
Right. And then just to respond to Jamie, Put Shell Energy in the camp of if someone has acquired a resource and has a ten year contract, then anyone that takes a piece of that contract is contributing to the viability of that resource long term, and the commission has achieved what it wants to achieve by getting a new resource in whatever amount it is, regardless of how it's divided up among different LSCs.
Speaker 15
Hi, Erica Brown, PG and E. Thank you for your presentation. I just a couple clarification questions on the mechanics. So I think the way we'd been reading the decision is that there'll be the February 18 date, is opting out of procurement, and that's pretty straightforward. And then I think May 1 is the first progress report, and I think we were seeing that as like a trigger where, like certainly if you had contracts signed, know, nobody knows if they'll come online, but if you had them signed, we would assume they would, and then there wouldn't be deficient procurement.
But are you saying that at that point,
Speaker 16
like what is it, what would the determination be at that point? Or are you pointing to a different date? I'm hoping to start a conversation about what is the appropriate time frame for this trigger, for any deficiency backstop procurement. I don't think it's really been set out yet, and so we have concerns about what is that point going to be. And so I'm just trying to lay out here, we can get stuff online in as little as eighteen months if necessary, so don't make that determination too early in the process.
Speaker 15
Okay, I definitely support CCAs doing their own procurement. I think the other part of the decision that's a little hang up for us is there's only one advice letter date for the IOUs to file, and that's 01/01/2021. And so that would be our procurement for all three tranches, which, I mean, you can debate whether that's ideal, that's what we're working with. And so for us, given our procurement timelines, I think the balance is we need to know as soon as possible that we're gonna be able to do it. Because it's not actually clear to us who has a compliance obligation, but if it is us that has the compliance obligation, we need to know as soon as possible.
And I'm not suggesting like if you have the contract signed, we would say we don't believe that they'll come online, but just if there weren't signed contracts.
Speaker 4
Erica, this is Noah San Diego. So I thought in the decision I talked about on May 1, the progress, the IRP reports are filed. At that point, if there is some type of deficiency, the commission will make a decision in Yeah. And so my sort of, at least my reading of it has been, sorry, in the 2021 and 2022 respective IRPs, we would have similar decisions made by the commission. And not that you would, IOUs would only be backstopping for whatever the commission deems to be deficient in 2020 for the next three years, and then you would just sort of layer it on afterwards.
Speaker 15
Yeah. We just weren't totally sure because there's only one advice letter date.
Speaker 4
Right. No. No. Understood. For what we have to figure now for this first iteration, think.
But that's open to staff. Just saying.
Speaker 10
Just so I understand the question. Is the confusion as you because the IOUs have been required to file this advice letter to show compliance with the procurement directives from the decision. Is the confusion that or are you thinking that this should include all the backstop procurement and the you know and the approval of that backstop procurement in this advice letter or whether or not that would be another advice letter that would be filed down the road.
Speaker 15
Yeah I think there's some confusion there. There was one date and I think it was filed the advice letters by this date, So we aren't sure if we start doing that.
Speaker 10
So I'm kind of getting a sense that parties would like more clarity at what point the Commission is going to determine compliance that will lead to backstop.
Speaker 15
Yeah, and I think I mean balancing the objective here is you know they want every opportunity to comply. We also need time to do the backstop. Right. Given our time.
Speaker 16
And that collective view, right? So at the point where you're ready to order backstop for any deficiencies, looking at well what is everybody else procured and is there an actual system deficiency?
Speaker 1
Thank you and definitely appreciate your concerns regarding timing of know, when backstop decisions will be made. I think we also need to consider, you know, the time it will take to do that backstop procurement, the time it will take to do get approvals for the backstop procurement, and the time, you know, and the time for the project to actually come into delivery. And so, I appreciate that, you know, you could deliver a project within eighteen months. It might be challenging to make a backstop decision at that point in time and have that backstop delivery in in time for that August 1 date in 2021, for example. So not opposed to what you're proposing, but I do think that there could be sort of it's reasonable to see that parties would have had been taking steps in order to secure that procurement over time.
So if you haven't ran a solicitation or something of that effect, you know, it probably would make sense to say, okay, this is it reasonable that you're gonna bring that procurement online? So I think I think we have to balance those concerns. I understand what you're saying.
Speaker 16
And we need to develop some standards around around what is reasonable.
Speaker 1
Yeah. So and in regards to this collective deficient, you know, collective new capacity need, It's not that I oppose it, but I am concerned about whether or not there's fair cost allocation amongst customers for for one. And you know, I'm concerned that you know, if parties did go long for for whatever reason, let's just say lumpiness of procurement, and and then other parties didn't, how are we gonna ensure that sort of there's a fair cost allocation to those other parties? I am concerned about this sort of free rider situation where you know parties know that people are gonna be a little bit long, so they're like, well we're not gonna procure because we know that there's gonna be some excess built.
Speaker 16
And we share that concern and that's why we think that LSEs need to be appropriately incentivized to not be short and to do any secondary market transactions might be necessary to ensure that their positions are filled.
Speaker 21
Hi, Judith Eakley from Energy Division. Just one little technical point. Often we have a commercial online day and we have a testing period and it's usually around sixty days. It's kind of been in my thing, so I want to make sure you build in that. And also there's sometimes problems with supply chain.
What's going on in China could be a possible problem with supply chain. I think that's why this looks pretty aggressive. So I just want to make sure that it's realistic.
Speaker 16
Understood. Our procurement shop put this slide together for me based on their experience.
Speaker 13
Doug from PCE, also participated in doing some thinking about this. I think the one question maybe for Jamie, I know on the FAQ that was at the back of the room today, there was some language about having LSEs making that would make showing based on, say, somebody's long procurement would have to be listed in the contract, but we wouldn't necessarily like PCE for example, I think we are likely to be not just long, but quite long on this particular requirement. So we may have a lot of extra, but we don't know who's going to be short and who's going be in the market at this point. So it would be a little unrealistic for us to be able to say like, oh yeah, we know that Shell or whoever is going to need this capacity that we have. So I don't know if you're how you're thinking about how we would show if we are, say we've got a 55 megawatt requirement and we actually end up with a 100 megawatts, we've that extra 45, thinking about like what sort of showing and documentation would be needed to say, yeah, that 45 is shown on behalf of these other folks that we don't collectively end up like way long, which is very expensive to do.
That makes sense? This is a documentation question about making it easy to sell, transact in this excess I'm
Speaker 10
not so I have to go back and read the document that was given to you. Just to be clear, does it say that the LSE has to be under a ten year contract with the other LSE that signed the generator? Is that what it says?
Speaker 13
Well it sounds like it actually the idea would be that the off taker in the secondary market would have to be listed in the primary contract with the generator.
Speaker 13
Which seems complicated to pull that off. And would have the if we were to do it that way, that would make it harder to do transactions and make it maybe less efficient to get to the
Speaker 10
Right, I think you know that the document is trying to staff's interpretation of the decision and the decision said all new generation resources have to be for ten year contracts and the procurement obligations were given to the LSE. So it was staff's attempt at drawing that connection between you know, the LSE is entering in a piece of this contract for ten years and so therefore it's listed on that contract. And so your question is then, do you have problems with the way that it is being described or interpreted?
Speaker 13
Yeah, little bit. Would I would so I think sort of on a contracting basis, I would think like we have our contract with generator X, and then then we have a second contract with some other LSE that's basically an assignment of that capacity. So that the other LSE contracts with us, we contract with the generator, but there's no direct contract between the generator and that LSE.
Speaker 10
Right. So you're just saying it's more efficient to like free up your excess procurement just by acting as like a third party contractor to different LSEs.
Speaker 10
Exactly. Can't respond saying Sure. Go ahead. Wish granted. Yeah.
I hear you. You know, we can talk internally about, you know, what our interpretation of the decision is and you know, I can't. Yeah.
Speaker 16
Yeah, I might add just because of the nature of you know the fact that you're doing a portfolio of projects and maybe some will be successful and some won't be successful, the ability to trade really does build in that kind of later stage flexibility to ensure that folks are in contract overall for the right amount.
Speaker 2
There are no more questions in the room. Are there any questions online? Nope, okay. So thank you very much for your presentation. And we turn now to just basic commentary.
If you have anything you want to add.
Speaker 5
Hi there. I'm Jeremy Wayne with Peninsula Clean Energy. And you've heard a couple of comments from my colleague Doug. He's really our lead on the IRP side.
Speaker 5
heavily engaged in RA space where we've also been considering how to set up a residual backstop type of market framework. And I think there are some parallels, strong parallels and some takeaways. And I think to the couple of points Melissa made, in our mind the clearest presentment of any kind of charges coming out of this procurement track would be for those costs to ultimately end up in generation rates. Whether it's LSEs acting on their own behalf or whether it's a pass through of residual procurement. Having generate to generate is the cleanest comparison of customers.
The best way we've found to get to that is to build directly to the LSE. And I understand if the decision that you all are working with here doesn't spell that out. But the other value add, I'd say, of having a direct to LSE charge that then they channel through their generation rates or if they're allocated too much they then go through bilateral negotiations to right size what their RAs going forward. The value add there is that there's no change to the billing systems needed whatsoever. And perhaps a modification to a decision could ultimately be a quicker route than a billing system overhaul that's also going to create additional costs.
So, you know, there's appetite, opportunity across the parties to consider maybe broadening the potential solutions we can be talking about here to an LLC direct charge. That might actually help to solve some of these issues. There's still the potential for free ridership and how to solve those issues that need to be sorted out, but I think that's feasible. Some of that we've noodled through in the RA context. We might be able to share some of our thoughts again there too of how we've tried to address load migration and free ridership and all that in a residual framework.
It's just residual one way or another, attributes, costs. I think a lot of the lessons translate regardless of what the actual product is or what the procurement obligation is.
Speaker 10
my question is, and you kind of addressed then maybe I didn't understand but if you did bill you know to the LSEs directly, how would you propose addressing cost allocation when it comes to larger mass load migration in the future and the associated costs with that. Would there have to be two mechanisms? Are you proposing maybe two mechanisms? An LSE, billed to the LSE for backstop, like the deficient amounts and then for opt in and load migration, another proposal? Because I think the decision did lay out that it would have to address both of those elements.
Speaker 5
Yeah. So, in the RA context and the central buyer context with the settlement, that's part of where the noodling out of cost responsibility or shares based on an ex post forecast versus an ex ante load base had to be teased out and that's where we landed on this ex ante at the end to account for any additional load migration going on between LSEs. And there's going to be some Each LLC will be able to try to anticipate where their load is going to land and leverage the bilateral market to try to right size to make sure that their costs are competitive with others. But there's, at the end of the day, you have a certain amount of load, you have certain amount of cost share. It can only be spread across so much load.
So that's the adder in your rates. And that being in your generates will influence how competitive or non competitive your generation rates are. In that case, you're thinking about a whole separate entity, kind of playing a of a clearinghouse sort of role and that's different here. So, I think there are some details that I haven't thought through all the way here. Trying to adapt what we're thinking about there to fit here as well.
But I think there are some ways to try to smooth that out. Think Evie might have a thought or two.
Speaker 10
Just again clarifying. So potentially having a or proposing a cost allocation mechanism that was proposed in the RA proceeding for residual central procurement that would address the load migration issues that and residual backstop issues potentially. Is that what you're leaning towards maybe?
Speaker 22
Okay, so Jamie, the way I understood your question is you've got two problems. You've got bundled customer migration which is one problem and then you have the question of the opt outs and how they're treated for migration purposes. I think what we're talking about is the latter and we're trying to do two things. One, make it simpler so you don't have to follow the customers all around and in that way it kind of follows what we did in the RACPE proposal. The other thing and I don't know that anyone's mentioned it is it avoids perverse incentives.
Right now the way we have it set up if it does follow the customer and there's a departing load charge that follows the customer, the incentive is to opt out, which I don't think what was intended, certainly not what the CCAs are planning to do, but if it's competitively advantageous to opt out because you get a departing load charge, that will tilt how people respond to the procurement track order. So it's both simplicity and incentives that we're after.
Speaker 22
the market, where you know the market sorts it out essentially. Because if an LLC is long because they lost load they have to do something about it right?
Speaker 1
Yeah, thanks. Josh Kopener from SCE. I mean I appreciate what you're saying because it's like how do we make this look like self procurement? But I think the challenge ultimately is those IOUs procuring on behalf of these LLC customers. And so if if the customers leave, we're still gonna be seeking cost recovery, and then from who?
So what I imagine is gonna happen is we're just gonna re socialize those costs on everybody in some form or fashion. And so that's why we think, you know, in this day and age where, you know, we are in a world of customer migration that designing the mechanism that deal with the customer migration makes sense. You know, I appreciate your concern Evelyn in terms of parties that self procuring basically they're taking on that contract risk. And so how do you balance the risks of you know, how you do that? But you know, when you think about direct LLC billing, then we're bringing in LLC credit exposure, and we're also bringing in this element where I'm not sure on what the basis for, like, example, the IOUs billing LLCs could be.
So if we were trying to follow costs and customer or follow customers and they migrated to new LLCs, I don't think it's possible or I don't know on what basis we could turn to the new LLC and ask them to sort of pay us for those costs. And so ultimate No, I I understand what I understand what you're saying, but I'm also concerned about sort of leaving caught, you know, we're procuring costs for a certain LLC, you know, that that could be that LLC could essentially disappear over time. And then we have this issue of what do we do with that stranded procurement. So this is my concern, and that's why I think that designing the mechanism to manage customer migration makes sense. Doing it upfront so that we're not dealing with these issues you know five years down the road when we have a problem.
Speaker 22
And we did deal with that question when we put together the RACPE settlement and kind of concluded that the way to do that was to socialize the credit risk, if you will, in the same way that the CAISO does with SCs. So that if there is a default, it basically spreads to everybody else.
Speaker 7
Josh, question for you. There's a lot of attractiveness to this idea of having it build out to the LAC and I hear your concern about LSEs if they go away, which really hasn't been a big problem. But if they do, that you're losing a lot of coverage of your exposure and a lot different than if just a customer And so I get the difference in exposure, but if we were to go for something like that, how would it work for when bundled customers leave? I mean for us if our customers migrate back to you or from CCA to ESP or ESP to ESP, under the build the LLC model, the LSCs have to manage that risk. That's their risk to cover.
But I think what we have to think through is if we go with that model, what happens if customers leave you? Because we'd kind of want you to have to manage that risk as well. And so I think we have to think about what make, is that a model that can work for all LLCs?
Speaker 1
Yeah, and I think thanks Mary. Obviously, we think the decision was pretty clear that it was non bypassable charge and it was not intended to be, you know, bypassed if people departed bundled service at a later date. You know, what I will say, this decision does provide LLC autonomy in that if parties want to self procure, they have the right to do so. And so, you know, from that perspective, I think it gives people a lot of flexibility. What we're talking about is a situation where parties have opted not to self procure and essentially have the IOUs act on behalf of their customers.
You know, in which case it just, you know, you know, we think designing the mechanism to handle load migration in a world where sort of that's, you know, that's the future that we sort of live in, you know, just makes sense to do that upfront because otherwise we'll likely have to make decisions about how to do that five or six years down the road when we run into challenges, know, when you do have a possibility of an LLC failure. So thank you.
Speaker 16
I appreciate what you have to say about the decision giving the LSE the right to self procure, but it's not a true right to self procure if the design is set up to disincentivize that self procurement. So that goes back to the concern about billing through a non gen rate is that actually gives LSE's the incentive to not self procure in order to keep their gen rates from looking artificially high compared to everybody else. And so completely agree that the right to self procure is key and that's why we're trying to ensure that the structure that is set up here enables that and doesn't disincentivize it.
Speaker 13
Yeah, Doug Carpet from PCE again. As I'm listening to all this and sort of think, I think I've got a lot more thinking to do in terms of trying to figure out what mechanism actually might work here. It seems to me that part of the issue is that we've got a bit of a sort of classic cost allocation problem of allocating cost based to those customers on whose behalf infrastructure was built, which also trades off against those who are currently using it. And those are usually different sets of people, right? Interstate is built for one set of people, but then it gets used by somebody else, and then later on this gets paid through gas taxes and that floats around.
And so I think one of the things I'm realizing is that the fact that the requirement is to the LSE and fixed means that if we stick entirely to that model, then we are gonna be in a world where say an LSE that has 50 megawatts today based on their current load, if their load goes up or goes down, their per customer chart allocation is going to go up or go down unless there is some mechanism, I think, to let it float and follow customers around, which maybe suggests that there's I don't know if there's any prospect of having those initial allocations in D1911.016 actually change over time, which maybe this is a huge ask that okay. I'm seeing shaking heads. Don't even go there. We're that. We're not gonna do that.
And I and I agree. I agree. I think that that that makes a good deal of sense. Well, will think more about this issue, but I do think there's a lot of merit to the idea of having some mechanism that it can float around. The other piece of it that I was thinking about the competitive dynamics of it, some of that comes to may come to bill presentment too, right?
That it may be a non bypassable charge, but then just gets listed up in that piece, and then customers look at it and say, oh, here's my PCE bill. It has my generation charge, it has this little non bypassable chunk in here, and those get added together. So I don't know if that's a solution. It's just like how we print it on paper.
Speaker 1
Josh Cabanero from SCE. Obviously, the bill placement, know, is a sensitive component, and we understand how it can make it challenging, you know, to make comparison between rates. I'm sure everyone here has heard it from the IOUs before. It's also hard for us to make modifications, especially to our legacy billing systems. And at least SCE's in the middle of installing a new billing system and a little bit of a system freeze until that point.
But, you know, as I mentioned before, we had considered whether or not you could do this as a rider to the PCIA, and I can't speak for sort of our billing team on this one, but would be interested in comments to understanding like how universal if that would be a preferable solution. I don't know if we can like technically do it, but it'd just be interesting hearing from parties in regards if that would be preferable to, for example, as a rider to the existing cam charge. So I'd be interested to get feedback on that. Can you
Speaker 10
remind me what were the barriers, I guess, or some of the drawbacks of going with the PCIA rider as opposed to a cam or distribution or delivery charge rider?
Speaker 1
Well, think part of it was, you know, our concern that people did not want this to be a new PCIA charge, and the decision was very clear that this was CAM, and I thought, you know, in part that was to sidestep the controversy related to the size of the PCIA and things of that matter. There's also things like PCIA rate cap, which we obviously would not want this to be a part of if it was to be a rider on the PCIA. So Rob could probably talk to some more technical challenges with the CRS or PCIe charge, but you know, I think it could be feasible.
Speaker 20
From from a technical perspective, you would just see another rider, you see a rider applied to a different rate component, so you could do that. However, I still don't understand how that would, you know, relieve the issue of the generation rate because the generation rate is either a UDC generation component or a separate LSE generation component, whereas the PCA shows up in the delivery portion of the bill. So I see how that would Yeah.
Speaker 10
I'm visualize trying this on a bill. So what the customer sees in their generation rate, if I was comparing rates between going with a CCA and an IOU or just comparing the rates, right? As a customer
Speaker 10
In the generation component of the bill, is the PCIA for the for the CCA Or
Speaker 20
So the the PCIA would show up they're generation related charges, but they show up as a delivery component. So you would have them as a as as as an extra charge.
Speaker 20
exploring for this particular component is that the customer would see a separate line item for this component over on the side. So a CCA customer would see the traditional utility distribution, transmission, and those types of charges, then they would see the PCIA bond and so forth like that. And separately on the side they would see what we call the fast lane, believe. They would see a line item that would say there is, you know, these incremental CAM charges that are X dollars. So they would be identified separately from a generation component or a PCIA component.
Speaker 10
Currently, if I look at my bill it says, you know, system generation balancing account charges are aggregated with distribution charges, right?
Speaker 20
Correct. And in the center line in the center for the Edison bill, in the center portion of the bill you'll see the delivery charges that are all combined and you'll see an average rate associated with it. But on the side of the bill is where you'll see those separate components identified uniquely as a line item.
Speaker 10
Maybe it would be helpful if Melissa or one of you guys could speak to how you like envision seeing this potential backstop charge in a way that would incentivize, you know, provide the incentives you're seeking.
Speaker 16
So our proposal is to charge the LSE and by doing so that LSE then wraps those charges into their generation component of the bill. So when I charge my customers for the procurement that I do, it goes directly into my gen charge. You know an LSE that opts out, if they get billed by the utility they can then pass those charges through and then you're looking at comparable generation charges. Otherwise myGen charges will always look higher on a bill. It's very confusing to customers.
It's already confusing enough with PCIA.
Speaker 10
Got it. So it sounds like there's I don't know if there's a potential medium or middle ground of getting I mean the decision was specific on having a non bypassable charge. And questionably does that mean billed to the LSE so that you know there's some questions there but it doesn't sound like there's any other way of getting it into the generation component unless you're billing the LSE directly and a rider whether it be a PCIA rider or a CAM rider is not going to be able to do that.
Speaker 8
Yeah I think you just right now have to acknowledge that if you want to do a rate comparison between LSCs, right now you have to include PCIA when you're looking at a bundled customers generation rate compared to a CCA's generation rate. On the CCA side you have to include the PCIA to do that comparison. So it doesn't matter if it's another VPCIA rider or a modified CAM rider, that for bill comparison needs to be brought into the equation. So you have bundle customer, generate and then when you're looking at the CCA you have to say, are my customers also paying a modified cam? Are they paying a PCI?
Bring those two in then you can compare. Now it gets more complicated I think when you're trying to compare between CCAs right? Is it always apparent to somebody external that the customers from CCAA are paying a modified cam? I'm not sure there's that level of transparency so it does get more complicated because it is a gen charge and it's a differentiated gen charge not charged to everyone so if you want to do generation rate comparison you're gonna have to bring it in to the comparison and depending on who you're comparing it could be less transparent than people prefer.
Speaker 13
Doug Carpet from PCE again. Just realizing a follow-up to what I was saying earlier about the problem of having the allocations fixed in time so that each LSE is responsible in perpetuity for that chunk. And as Melissa has already pointed out, and I guess I'm finally catching up with Melissa here, the problem of course being that if you allow opt out LSEs to have their cost responsibility float as customers move around, but the self procuring ones don't do that. That is not indifferent between opting in and opting out because there is more risk in one case than the other. Unless there is a mechanism for the opt the self procuring LSEs to get cost recovery from then like if they lose customers and their load goes somewhere else, then if there can be some sort of mechanism to have a financial flow back so that there's that equilibration as load moves around happens not just in one pool, but across all of the LSEs.
And I'm not saying I have an answer to that, but I think that's the fundamental problem about the differential in risk if following if load changes where money goes with how the cost allocation works. Anyway, just wanted to follow-up on that.
Speaker 7
Constellation, I want to be sure I understood what you were just saying before about how it'd work. I get that for CCA customer or a DA customer they have to take their PCA vintage plus the modified CAM and that's what they compare to the utility gen rate. Plus their market, plus the price of power, right. And compare that to the generate. But did you also say that the rate associated with the modified cam for bundled customers is going to be in your generate?
Will a customer, Noah is shaking his head but we can come back to that, but does that mean that a customer will have everything on its bill to compare? That they will be able to see?
Speaker 8
So our proposal is that the modified CAM would be broken out on page two of the bill. Again the revenue will be rolled up into distribution so it'll be billed through distribution but it'll be identified as a modified cam on the back of the bill. So I mean it gets complex for customers that are you know to compare. It's not in the gen rate, it's a separate charge and it's billed through distribution. So you have to have somebody knowledgeable to help people do that rate comparison.
It's just not as transparent as it could be or as people would like it to be.
Speaker 7
And so I think that comes back to the idea of customer education. Knowing what's going on here and what their choices are and what choices are being made for them and which ones they get to make or not make. And that just really concerns me with February 18 deadline because I don't, I just have not been able to think through how we get this information even just to our customers, let alone to customers in general, So they understand what's being done to them, for them, and upon them here in a very short timeframe.
Speaker 4
This is Noah from San Diego. This is probably dangerous for shooting from the hip here. Question, and I because I have not talked to our IT folks on this, but if the LSCs that opted in to self procurement provided the IOUs with the rate. Instead of putting into the generation rate, through the billing system we put it for the specific LSEs onto a CAM like rate to sort of be equivalent for everybody. Would that solve your problem?
Again, shooting from the hip here, not sure it's we can do this either, but just asking the question. Yeah. So I'm gonna use Melissa for an example. She has a 2¢ or 2 tenths of a cent cost for her customers. That would normally go onto her generation rate.
Instead she would tell PG and E, hey this 2.2% needs to go for this modified CAM so that it equalizes for everyone and it shows up as a modified CAM for her customers. She reduces effectively her generation rate to be equal to all the other, not equivalent but certainly, of the other LSCs that opted out as well as the IOU. And that just essentially levelizes everybody's, if you will, CAM rate. Okay, I'm getting shaking heads. Never mind.
Speaker 15
Without talking about whether we can do it because I don't know. I don't know if that would work unless everybody's camera was the same. Otherwise, they're then gonna have to compare camera rates and compare gen rates, which seems somehow worse than where we are. I like it, but I do like the idea, Noah.
Speaker 11
This is an ignorant question, this is Sumaira. Do the IOUs currently bill LSCs? I know you probably have wholesale transactions but like this kind of a billing, do you do this? I don't think so.
Speaker 4
Speaking on, you have an SDG for IT folks. I don't know if they're on the phone, might be. It's an option in the system but I'm not aware of how many or how often that happens. But it is an option to sort of direct bill a specific LSE.
Speaker 8
For PG and E normally no, but I do know that we have DA service fees. I think that's a different animal than what we're talking about here. So I wouldn't want to conflate that oh these are that's something we could leverage in this instance. We have we've had ESP service fees for a while. I don't know if we have CCA service fees but again whether those two could be conflated to be leveraged you know we haven't talked about it and I don't know the extent that actually utilize those service fees.
Speaker 22
This is another thing we're talking about in PCIA working group three as well. There's a structure and a rate payment structure that charges the LLC directly. So if we were to choose that payment option too, that's what they'd be doing.
Speaker 15
I may actually be front running you, but we were interested in what the next procedural steps were. Sort of like when comments are due, and then also like what they are, like will we get a decision on what we should implement, that kind of stuff.
Speaker 6
So the next procedural steps will be defined most likely by a ruling that will define them. And we do envision that there'll be comments and the next steps are gonna have to be determined within the proceeding. So just stay tuned for a ruling.
Speaker 18
Sareetha Sarwate from CLICA. I'm just wondering will there be proposals circulated from IOUs and from the CCAs? Because today we just had presentations, we didn't get them in advance, it was hard to review them. So without like having a more detailed proposal, it would be hard to comment. Thank you.
Speaker 6
So just to get input from all of you, how much time do you all think you'd need to prepare detailed proposals?
Speaker 10
I can't speak for the commission but I think we're just trying to get a sense of how much time parties think they would need to prepare some details to these proposals that we saw today and potentially put those into the record and get party comments on them. Think that would be
Speaker 10
Do the IAUs have a sense of option A and option B and East Bay? Do you have a sense of how much time you guys would need? No, no. Yeah. Yeah, I don't think those were connected like this, you know, that progress report and yeah.
Speaker 1
I I don't know if I if I think it would take that long to flush out what we have. I mean, it's mostly like follow cam, this one sort of modification around the RA price. Everything else is sort of staying largely consistent. I think what would be helpful from my perspective, I just don't don't think that there's enough time for other LCs is to sort of understand the direction of where the mechanism's going. I just don't it doesn't feel like that's in the cards.
And we also have this issue of the IOUs are in the, you know, need to procure, and and there's a short runway between now and 2021. And so, you know, it's a it's challenging situation. But I think, you know, I think we could fill out our proposal. There's gonna be some holes like I think around how to deal with deficient LSEs where I don't know if we should be the ones making determination on timing of making those sorts of decisions or what qualifies for making those decisions. Think what we're asking for is we're gonna use a similar mechanism as what we're proposing.
We want some flexibility in terms of how it's applied so we can determine whether to create one super vintage or create new vintages at that time. I mean I feel like the basics of most of what we're talking about has been laid out. The rest of it's just sort of a follow cam.
Speaker 10
Okay, maybe so I'll ask this question a different way. If you were to start relatively soon on implementing a billing system to, know, make a CAM system or a chem like system implementable by 2022, you said that was the earliest. I mean at what point would you need to start to know what the adopted mechanism is? Right and parties would want detailed proposals to comment on, right? Or would the presentations be enough to comment on?
Speaker 4
Noah from San Diego. I think we were thinking primarily the framework, the general overview already provided in the presentation. The specific accounts and so on may go through the normal, is it, era proceeding to set up these types of accounts.
Speaker 10
Okay, well I mean I can't speak for the Commission but we can you know go back and get direction on how what next steps there'll be with regard to this mechanism and let parties know. Thanks for your input.
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