4. Phase-In Schedule for Increased Cap
4.1. Parties' Positions
The statute requires that the new DA load growth be phased in over a period of not less than three years and not more than five years.12 Certain parties express support for a three-year phase-in period, arguing that it offers the most efficient and consumer-friendly approach. PG&E, SDG&E, and various parties representing DA interests believe that a three-year phase-in period will accommodate IOU long-term procurement and resource planning needs. All parties generally agree to defining the duration of each phase-in interval as a calendar year, with the exception of the first year, which would cover only the period from the effective date of this decision through December 2010.
PG&E recommends an annualized usage cap increment of 1,500 GWh/year for each year of the phase-in period. If additional DA load is fully subscribed each year, the phase-in would then be completed in three years. If, however, DA demand varied from year to year, the cap would guard against the potential for extreme load changes from any one year to the next, but could extend the phase-in period up to the five years allowed under the statute.
PG&E states that establishing an annual cap will address the potential procurement issues that could otherwise occur if there were extreme differences in demand for new DA from one year to the next during the phase-in period.
To provide additional flexibility, however, PG&E expresses a willingness to employ a "soft" cap each year of the phase-in period to allow a customer whose load may slightly exceed the annual cap to proceed with enrollment onto DA service. PG&E believes that an additional 5% over the annual cap is reasonable.
A group of parties (Joint Parties) entered into discussions after the initial round of comments were filed, and agreed upon a joint proposal.13 In entering into the joint proposal, some of the Joint Parties modified their previous position set forth in opening comments.
The Joint Parties propose a four-year phase-in period, structured to allow up 50% of the room available under the cap in the first year, up to 70% in the second year, up to 90% in the third year, and up to 100% in the fourth year of the phase-in period. The Joint Parties argue that a four-year phase-in with a larger increment available initially, will accommodate a larger influx while avoiding the need for customers to rush to get in under the cap at the outset if they are not ready to do so.
SCE argues that allowing excessive DA enrollment in the first year could detrimentally impact the administration and processing of Direct Access Service Requests (DASRs) as well as the utility's ability to meet procurement requirements to accommodate changes in load.
TURN joins with the other Joint Parties in proposing a four-year phase-in period. Alternatively, assuming that the Commission is convinced that a rush of new customers could reasonably be expected at the initial reopening, TURN believes that a three-year phase-in might be warranted. TURN supports the establishment of annual GWh caps in advance, independent of the amount of actual load migration in prior years of the transition.
TURN believes that monitoring must continue beyond the initial phase-in period to keep up with changes in DA load. The level of the DA cap will remain in effect beyond the end of the phase-in period unless or until changed by future legislation. The IOUs will need to know on an ongoing basis whether or not they can accept new DASRs, and ESPs will need to know whether they is any further room available for marketing purposes.
CLECA and California Manufacturers & Technology Association (CMTA) jointly argue that the Commission should phase in the reopening over the full five-year period, rather than a three-year period. DRA agrees with CLECA and CMTA. CLECA believes that three-year phase-in period, with as much as 75% of the available headroom made available to new customers during a 60-day open-enrollment period, will create a "gold rush" mentality, resulting in a variety of negative consequences. For example, CLECA expresses concern that customers would be motivated to act quickly, perhaps precipitously, to exercise their option to acquire DA, without having adequate time to analyze and absorb the many factors that should be weighed in such a decision. CLECA also argues that a gold rush environment would tend to increase transactional costs, particularly for the IOUs' processing of new requests to switch to DA.
CLECA notes that if a DA-eligible customer returned to bundled service in July 2009, that customer could return to DA service immediately during the initial enrollment period after the April 2010 reopening of DA, but if the customer did not make the election during the initial enrollment period, the customer would have to wait more than two years after that reopening to make its return to DA service. CLECA expresses concern that an existing DA-eligible customer could find that it had lost entirely the ability to return to DA if the Commission were to permit a rapid phase-in of the new DA service for non-DA-eligible customers.
CLECA also proposes that the Commission should permit additions per year of no more than 20% of the total allowed increment in new DA. CLECA argues that this slower pace of phase-in would reduce transitional and generational planning issues.
CEC suggests a three-year phase-in schedule, with 75% of total load permitted in the first year, and the remaining 25% spread equally over the following two years. In this manner, subsequent adjustments can be made based on the first year's experience.
4.2. Discussion
We have considered the range of proposals as to the duration and pacing of phase-in, ranging from three years to five years. We conclude that a three year period is too short, and could cause an excessive surge in demand for new DA, resulting in potential negative consequences, as noted by CLECA and DRA. We likewise conclude that a five-year phase-in period is too long, and would unduly prolong the phase-in of new DA. We shall therefore adopt a four-year phase-in period. Our adopted phase-in generally incorporates the Joint Parties' proposed four-year phase-period, but we shall apply a more gradual pace in annual DA limits compared with the Joint Parties' proposed first-year limit of up to 50%. A front-loading of 50% in the first year could create a surge in demand for DA concentrated in the open enrollment window between mid April and June 30, 2010. This surge could be amplified especially since Year 1 will be truncated to nine months with an April 11 start date. Joint Parties' proposal for a cumulative DA load cap of 70% by the second year only leaves 20% in the second year if enrollment reaches 50% in the first year. As a result, customers could feel pressured to rush to sign up before the June 30th deadline.14 The truncated first year could create an undue burden on the program's first year.15
We shall therefore adopt annual DA caps of up to 35% in the first year, up to 70% in the second year, up to 90% in the third year, and up to 100% in the fourth year. Limiting the adopted limits in this manner reduces the burden on potential DA customers to sign up in the first year, and correspondingly increases the load available for new DA customers in the second year. Moderating the first year's cap to 35% will help prevent the potential for customers to become aggrieved by being rushed into signing up for direct access without adequate time to consider all of the factors involved.
We conclude that the four-year phase-in period, with the related annual limits on new enrollments, strikes a reasonable balance, providing for an orderly implementation schedule that is manageable by the IOUs while still satisfying the requirements of SB 695 in a timely manner. We find that adopted phase-in schedule reasonably addresses the relevant concerns that must be balanced in crafting the appropriate pacing of the phase-in process. The first year of the phase-in covers the partial period beginning on the effective date of this decision, and continuing through the end of the 2010 calendar year. Each subsequent phase-in period shall cover a full 12-month calendar year.
If any annual allocation of DA allotments under the cap is not fully subscribed in any one year, the unused portion shall be rolled over to the subsequent years. Each individual year's DA limit shall stand alone, and not be dependent on the amount of actual migration in prior years of the phase-in.
All DA-eligible customers will be free to switch to DA at any time, subject to the applicable switching rules, as long as room exists under the overall cap. Monitoring shall continue beyond the phase-in period because the cap on DA will remain in effect and must be enforced unless or until changed by future legislation.
12 Pub. Util. Code § 365.1(b).
13 Parties sponsoring the joint proposal were TURN, SCE, CACES/AReM, the California State Universities, DACC, Silicon Valley Leadership Group, and School Project for Utility Rate Reduction.
14 Appendix 2 at 4, 8.a., "Customers may submit 6-month advance NOIs starting July 1, 2010 to switch to DA in 2011."
15 Reply Comments of The Division of Ratepayer Advocates on Assigned Commissioner's Ruling Regarding Issues Associated With Senate Bill 695 Relating To Direct Access Transactions (February 1, 2010) at 5.
