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Will increased PICA costs cripple the CCAs?
To date, there are 19 Community Choice Aggregators (CCAs) operating in California serving over 8 million customers. CCAs are local municipal programs that purchase (procure) energy and provide it to their customers in place of an Investor Owned Utility (IOU). CCAs are the first step in consumer choice regarding energy delivery to their homes and businesses.
Most CCAs offer a clean mix of energy to their customers at the same or lower price than their regional utility company. The CCAs do this by procuring a cleaner mix of electricity generated from sources such as solar, wind, or geothermal. In fact, some of the larger CCAs are currently investing in their own utility-scale solar projects to help ensure long-term clean generation. Sounds like a great idea, locally sourced, clean energy at the same or lower cost than the investor-owned utilities (IOUs).
It didn’t take long for the IOUs to try and burst the bubble. Recently legislation was passed to allow the IOUs to increase the Power Charge Indifference Adjustment or PICA fees. The PICA fee is an exit fee that CCAs must pay as customers move from the investor-owned utilities to the CCAs. The idea is to “make sure departing customers pay their fair share of the long-term costs incurred on their behalf.” Some of the long-term costs make sense, like improvements to the distribution grid. Others seem to favor the utilities, as they cover the construction of new power plants and even worse, the costs incurred previously by the IOUs, known as legacy costs. A significant example of a legacy cost is the decommissioning of the Diablo Canyon nuclear generation facility.
The CPUC is justifying an increase of the PICA to “make sure increased costs are not unfairly passed on to those who don’t join or can’t join a CCA.” In other words, they want to prevent an undue burden to those who stay with the IOU.
In Oct. of 2018, the CPUC revised PICA fees charged to the CCAs. PICA fees are determined primarily by the utilities using a complex and challenging to understand calculations. This recent increase in PICA fees is significant, as it nearly doubles the PICA fees for MCE and SCP, two of the larger CCAs in California. Due to the new PICA fees, CCA customers in PG&E territory will see a 1.68% increase in costs compared to last year.
The CCAs are determined to support the adoption of a new calculation for the PICA formula that lowers the exit fee and promotes a more competitive environment that offers consumers choice over their energy sources.
Most agree that the increase in PICA fees won’t stop the current trend of customers moving away from traditional utilities to CCAs. That said, there is no doubt the PICA fee increases will affect the CCAs business models and perhaps slow the rapid adoption of the CCAs across the state. While this represents a set back for the CCAs the majority of participants in the industry expresses confidence that the CCA business model will survive.