Large investor-owned utilities (IOUs) have been the vehicle of choice for the state to implement its wide ranging energy policies. In particular, the California Public Utilities Commission has implemented state renewable energy policy by requiring a series of competitive solicitations conducted by the IOUs. In total this has been a success in increasing renewable generation and in reducing its cost.
But now, major head winds are affecting the state’s policy options:
- The state has authorized Community Choice Aggregators (CCAs) which have been peeling off IOU bundled load leaving less utility load to absorb state mandated purchases. For instance, PG&E now estimates that Direct Access and CCAs will serve 55% of its load in 2020. With that amount of load departing, PG&E states they have sufficient renewable resources to meet all their current state-mandated requirements. The impacts of this huge structural change in the electric market are now just starting to unfold.
- PG&E’s bankruptcy has many indirect impacts. Owners of the 298 contracts/projects selling to PG&E as part of the State’s RPS program are now faced with assertions that many of these contracts are at “above market rates”. While the utility hasn’t concluded or recommended to the bankruptcy court that some of these contracts be invalidated, this is a serious concern for generators and state policy-makers.
This combination of major market restructuring, and the risk that contacts might be invalidated, is dramatically changing the dynamics for the state. While for generators it’s business as usual, expect for generator produced pre-bankruptcy and not yet paid for, these uncertainties are chilling.