III. Scope of Proceeding

This proceeding proposes ways to resolve several broad issues and presents corresponding proposed rules. (See Attachment A.)

AB 117 defines CCAs as entities formed by a city, county or group of cities and counties, or a joint power authority:


Section 331.1. For purposes of this chapter, "community choice aggregator" means any of the following entities,


1. Any city, county, or city and county whose governing board elects to combine the loads of its residents, businesses, and municipal facilities in a community wide electricity buyers' program.


2. Any group of cities, counties, or cities and counties whose governing boards have elected to combine the loads of their programs, through the formation of a joint powers agency established under Chapter 5 (commencing with Section 6500) of Division 7 of Title 1 of the Government Code.

AB 117 does not define any role for the Commission in creating a CCA or authorizing its activities. However, AB 117 establishes three preconditions to the initiation of community choice aggregation programs:


a. The Commission must adopt a "cost-recovery mechanism" so that the investor owned utility is able to recoup certain costs associated with state power purchase contracts (Section 366.2(h) and (i)(1));


b. The Commission must submit a report to the State Legislature "certifying compliance" with provisions relating to the cost-recovery mechanism (Section 366.2(i)(2)); and


c. The Commission must adopt "rules for implementing community choice aggregation." (Section 366.2 (i)(3).)

This rulemaking is initiated for the purpose of developing the rules required as a precondition to authorizing community choice aggregation, consistent with Section 366.2(i)(3). Among the topics we address below are the cost recovery mechanism and the Commission's report to the legislature.

Several sections of AB 117 require the local investor-owned utility to provide certain services. Section 366.2(c)(9) specifically provides that "(t)he commission shall determine the terms and conditions under which the electrical corporation provides services to community choice aggregators and retail customers." We address related issues below.

Section 366.2 (c)(11) requires that the serving utility provide delivery services at the same rates, terms, and conditions as for direct access customers that have been approved by the Commission:


Delivery services shall be provided at the same rates, terms, and conditions, as approved by the commission, for community choice aggregation customers and customers that have entered into a direct transaction where applicable, as determined by the commission.

For these purposes, a CCA's relationship with the local distribution utility appears comparable to that relationship between the utility and an "electric service provider"(ESP) in that the utility is providing an identical service to entities that are offering retail energy services to local customers. Therefore, we propose to apply the direct access service rules and service agreements to CCAs. Those rules require, among other things, the execution of a service agreement that describes the responsibilities of each party, and utility charges for delivery services.

PG&E's Rule 22, SCE's Rule 22 and SDG&E's Rule 25 describe delivery services to ESPs and we propose that these tariffs be modified to incorporate AB 117 requirements for CCAs. As modified, the tariffs would describe the respective responsibilities of customers, CCAs and utilities in cases where a utility customer in a CCA's territory decides to remain with the utility.

AB 117 requires the utilities to continue to provide " all metering, billing, collection, and customer service to retail customers that participate in community choice aggregation programs." We propose to apply related existing ESP requirements to CCAs. (Section 366.2(c)(9). The same section also provides that:


"(b)ills sent by the electrical corporation to retail customers shall identify the community choice aggregator as providing the electrical energy component of the bill. The commission shall determine the terms and conditions under which the electrical corporation provides services to community choice aggregators and retail customers."

Existing utility tariffs provide consolidated billing to ESP customers, metering, customer service and collections, and we propose that these tariffs be modified to incorporate services to CCAs and their customers.

Section 366.2(a)(3) provides that if a customer decides not to take electrical service from a CCA, or has no CCA program available, the local investor-owned utility must provide service to that customer.

Each utility should propose tariff changes that reflect this obligation and provide for notification of the utility's distribution customers.

Section 366.2(c)(18) requires the serving utility to "install, maintain and calibrate metering devices at mutually agreeable locations within or adjacent to the community aggregator's political boundaries" at the request and at the expense of a CCA, and in ways that do not "compromise the safety, reliability or operational flexibility" of the utility's facilities. It requires the utility to "read the metering devices and provide the data collected to the community aggregator at the aggregator's expense."

Utilities should propose specific tariff language to meet this requirement.

Section 366.2(c) 13 provides that "the community choice aggregator may request the commission to approve and order the electrical corporation to provide the notification" required of CCAs by AB 117.

Each utility should propose tariff language that offers this notification service. We address how the utilities may recover associated costs in a subsequent section.

Section 366.2(c)(16) provides that "(o)nce notified of a community choice aggregator program, the electrical corporation shall transfer all applicable accounts to the new supplier within a 30-day period from the date of the close of their normally scheduled monthly metering and billing process. We propose that this transfer occur no sooner than 30 days following the Commission's notice to the CCA of its approval of the CCA's registration packet, service agreement and CRS. We discuss this notice procedure in Section III.F of this order.


Section 366.2(c)(9) requires that utilities:


"cooperate fully with any community choice aggregators that investigate, pursue, or implement community choice aggregation programs. Cooperation shall include providing the entities
with appropriate billing and electrical load data, including, but not limited to, data detailing electricity needs and patterns of usage, as determined by the commission, and in accordance with procedures established by the commission."

We here state our intention to promote the provision of useful and timely information to entities designated as CCAs or contemplating the creation of a CCA. We understand that the prospects for worthwhile CCA programs may depend on the availability of good information.

The Commission recently ordered Pacific Gas and Electric Company (PG&E), San Diego Gas & Electricity (SDG&E), and Southern California Edison (SCE) to provide certain types of existing information to CCAs to facilitate the development of their energy efficiency program proposals (See D.03-07-034.) We also directed the utilities to submit tariffs that would provide other types of information to CCAs at cost. The information and analysis the utilities will provide at no cost may be useful to CCAs in developing procurement strategies as well. However, they may require additional information.

The utilities and other parties may comment on whether the information requirements adopted in energy efficiency proceeding (R.01-08-028) are adequate for purposes of Section 366.2 (c)(9) and whether and how these requirements should be augmented or changed for purposes of implementing Section 366.2(c)(9). We intend to address this issue in a workshop in the near future.

AB 117 applies equally to all jurisdictional electric utilities. However, the task of developing tariffs is an elaborate one for a small utility that may not ultimately serve CCAs. For that reason, this order requires only PG&E, SCE and SDG&E to submit specific language and proposals at this time. We ask that the parties propose circumstances under which other jurisdictional utilities should develop tariffs.

Similarly, we seek the parties' proposals on whether and how the Commission should adopt cost recovery surcharges for the jurisdictional electric utilities that do not already have them. We are particularly interested in the assessments of those smaller utilities with regard to potential liabilities they may have that would qualify for treatment in a CRS.

Section 366.2(c)(17) provides that a utility "shall recover from the community choice aggregator any costs reasonably attributable to the community choice aggregator, as determined by the commission...including, but not limited to, all business and information system changes...notices, billing, metering, collections, and customer communications or other services provided to an aggregator or its customers." That section provides that the CCA will assume the costs of those utility services but also provides that those costs "not reasonably attributable to a community choice aggregator shall be recovered from ratepayers."

We interpret this section to mean that any cost associated with a specific CCA shall be recovered from the CCA. Any costs of program administration generally would be included in utility rates. Direct Access Service tariffs establish charges allowing the utilities to recover incremental costs associated with services provided to ESPs, such as customer notifications, metering and billing. We propose that these tariff rules apply to CCAs. We suggest that parties refer to PG&E's Schedules (E-ESP, E-EUS and E-DASR) for examples of tariffs for fees for transactional based services established for billing related services. ( www.pge.com/customer_services/business/tariffs.)

The utilities should propose ways to reflect costs associated with specific CCAs in tariffs for each type of relevant service. They should also propose ways to recover program costs not associated with a specific CCA, including how those costs should be allocated to "ratepayers," consistent with the statute.

AB 117 provides that before a CCA may begin aggregating load, the Commission must establish cost responsibility surcharges (CRS) for which the CCA and its customers would assume responsibility. These surcharges allow the utility to recover certain energy purchase costs the utility would continue to incur after losing customers to the CCA. Imposing those costs on CCA customers will also ensure that remaining utility customers will not assume liability for costs originally incurred on behalf of a larger customer base. Such costs include those associated with energy contracts signed by and bonds issued by the DWR during the energy crisis, and certain utility costs for previous electricity purchases (Section 366.2(d)(e)(f)).

Section 366.2(c)(5) anticipates the Commission will review the CCA's Implementation Plan to determine the applicable CRS. Section 366.2(c)(8) requires the Commission to determine the applicable CRS for CCAs taking into consideration the utilities' approved procurement plans.

Section 366(2)(d), (e), (f) and (g), as enacted by AB 117, requires that the CRS applied to CCAs include the same components as those that comprise the CRS for direct access customers, including DWR electricity purchase costs, bond related and administrative costs for the DWR purchases and other unrecovered energy contract costs. Whether the level of the CRS for CCA customers would be the same as we apply to DA customers is unclear because DA customers assume certain undercollections that may not logically apply to CCA customers and may not be liable for certain future costs. D.02-11-022 and D.02-12-045 describe how we set the CRS for direct access customers.

We seek the parties' comments on how we should set the CRS for CCA customers. In addition, we will consider parties' proposals to reduce the CRS, for example, where a CCA assumes liability for a utility's DWR energy contract commitments.

Section 366.2(c)(11) provides that CCA customers who voluntarily return to their local utility will be subject to the same terms and conditions as are applicable to other returning direct access customers. Utility re-entry fees must be based on the utility's cost of reestablishing service and approved by the Commission.

Section 394.25(e) provides that the same fee is to be paid by the CCA when a CCA customer is returned to utility service on an involuntary basis, except if "a

customer [is] returned due to default in payment or other contractual obligations or because the customer's contract has expired."

This section applies equally to ESPs and their customers. 3 We therefore propose to apply to CCA customers the re-entry fees assumed by direct access customers returning to utility service. The utilities currently do not impose re-entry fees. Direct access customers that elect to return to utility bundled service must provide the utility six months' notice and make a three year minimum commitment to receive the bundled portfolio rate. During the six-month period, the customer's rate reflects the spot price of power and includes CRS undercollections incurred in prior periods. We direct the utilities to propose associated accounting mechanisms and tariff language consistent with our proposal.

AB 117 requires a CCA to submit to the Commission an Implementation Plan and Statement of Intent, which describe specified elements of the CCA program.

a. An organizational structure of the program, its operations, and its funding.

b. Ratesetting and other costs to participants.

c. Provisions for disclosure and due process in setting rates and allocating costs among participants.

d. The methods for entering and terminating agreements with other entities.

e. The rights and responsibilities of program participants, including, but not limited to, consumer protection procedures, credit issues, and shutoff procedures.

f. Termination of the program.

g. description of the third parties that will be supplying electricity under the program, including, but not limited to, information about financial, technical, and operational capabilities. (Section 366.2 (c)(3).)

The Implementation Plan and Statement of Intent should also include the following information about programs the statute requires CCAs to "provide for:"

Section 366.2(c)(5) anticipates the implementation plan will guide the Commission's application of the CRS to CCA customers. It also requires CCAs to provide "any other information requested by the Commission that the Commission determines is necessary to develop the cost-recovery mechanism."

Pub. Util. Code § 399.12(b)(2) requires the Commission to institute a rulemaking "to determine the manner in which a CCA will participate in the RPS subject to the same terms and conditions applicable to an electrical corporation."4

Existing Commission policy requires each jurisdictional utility to increase electricity generated by renewable resources by at least 1% a year, until 20% of its sales portfolio is comprised of renewable energy resources. We intend to address the application of these requirements to CCAs in the rulemaking where we are considering procurement issues (R.01-10-024).

Section 394.25(e) requires CCAs to post a bond or purchase insurance adequate to cover the costs of re-entry if their customers are involuntarily returned to utility electric procurement services. We have proposed in Section III.C.3 that the re-entry fees applicable to ESPs also apply to CCAs. We propose that the insurance or bond coverage equal the adopted re-entry fee, if any, times the number of customers served by the CCA.

AB 117, specifically the implementation plan and statement of intent portions of the law, largely makes the CCA the government entity responsible for ratemaking, customer rights and obligations, customer protection, universal access, reliability, and equitable treatment of all customer classes. The CCA assumes and describes these roles in the implementation plan it submits to this Commission. But AB 117 stops short of transferring the Commission's consumer protection responsibilities to the CCA, explicitly stating that the Commission ". . . may require additional information [from the CCA] to ensure compliance with basic consumer protection rules." (Pub. Util. Code § 366.2(c)(14).)

We expect that local government entities will be responsive to the varied needs of diverse customers in their jurisdictions - from low income and medically impaired customers to small and large businesses, for example. We also expect that, in fulfilling the responsibilities to be described in the

implementation plan and statement of intent, the CCA will demonstrate its responsiveness to its customers' needs through the programs and consumer protections it will provide. The Commission proposes in this rulemaking to refrain from imposing specific consumer protection rules in adopting rules for community choice aggregation. (Pub. Util. Code § 366.2(1)(3).)

Instead, the rules we propose for adoption will address the responsibilities of the electric utilities, the establishment of a cost recovery mechanism, re-entry fees, notification of the utility in the event of termination of CCA service, transaction costs, and the process for Commission authorization.

Some of the proposals in this rulemaking address some type of consumer protection, for example, opt out provisions, protections against cost shifting and certain customer notice requirements. These issues, however, involve protections for customers of utilities the Commission regulates. As stated above, our initial analysis of AB 117 leads us to presume that the Legislature did not intend for this Commission to regulate local governments with regard to consumer protections that are not specified in the statute. However, we assume that local governments are providing such protections. We may be convinced otherwise and invite the parties to brief the requirements of Section 366.2(c)(14) in this regard. Accordingly, we do not propose here that CCAs conform their operations and policies to all of those we have required of jurisdictional utilities. Examples of such consumer protections are service requirements and more elaborate notice requirements. Nevertheless, the statute appears to anticipate that CCA customers would have reasonable protections, as well as adequate and reliable service notwithstanding the Commission's role.

Whether or not we ultimately adopt protections for CCA customers that go beyond those specified in AB 117, we believe CCAs would benefit from the experience of Commission staff, regulated utilities and the many parties to our proceedings who have worked to develop rates, standards and practices designed to promote the interests of consumers and the general public. CCAs should be encouraged to take advantage of their joint and individual efforts. For example, CCAs may wish to apply the standards developed for procurement portfolios, utility customer service and system reliability. Another critical element for CCAs to address is how to design special rates for customers with low incomes and medical conditions. In addition to addressing the Commission's role in promoting protection of CCA customers, we ask the parties to address how the Commission can assist CCAs in understanding these issues and facilitating consumer protections and quality service.

A related matter is how the CARE discount would apply to CCA customer's energy bills. We propose here that the utilities automatically apply the CARE discount to that portion of a CCA customer's bill that reflects CCA energy costs. Reimbursements for the discount would be billed to the CARE program so that CCAs would be financially indifferent. We invite the parties to comment on this option.

Section 366.2(c)(11) provides that a CCA must "allow any retail customer to opt out and to continue to be served as a bundled service customer" of the utility. Our rules should address the Commission's role in assuring utility customers are protected from being transferred to the CCA contrary to their wishes. We also seek proposals from the utilities that would assure customer requests to remain with the utility are honored and processed effectively.

Specifically, each utility should describe how it would process opt-out requests with timeliness and operations charts.

In addition, Section 366.2(c)(13)(C) clearly anticipates that the opt-out procedure will be simple for customers to understand and affect. We intend to adopt procedures with that in mind. Some options include self-addressed postcards and/or a check-off on the utility bill.

Section 366.2(c)(13) requires the CCA to notify utility customers in its area of the CCA's intent to provide service and the customers' option to opt out as follows:


a. The community choice aggregator shall fully inform participating customers at least twice within two calendar months, or 60 days, in advance of the date of commencing automatic enrollment. Notifications may occur concurrently with billing cycles. Following enrollment, the aggregated entity shall fully inform participating customers for not less than two consecutive billing cycles. Notification may include, but is not limited to, direct mailings to customers, or inserts in water, sewer, or other utility bills. Any notification shall inform customers of both of the following:

(1) That they are to be automatically enrolled and that the customer has the right to opt out of the community choice aggregator without penalty.

(2) The terms and conditions of the services offered.

(3) The community choice aggregator may request the commission to approve and order the electrical corporation to provide the notification required in subparagraph (A). If the commission orders the electrical corporation to send one or more of the notifications required pursuant to subparagraph (A) in the electrical corporation's normally scheduled monthly billing process, the electrical corporation shall be entitled to recover from the community choice aggregator all reasonable incremental costs it incurs related to the notification or notifications. The electrical corporation shall fully cooperate with the community choice aggregator in determining the feasibility and costs associated with using the electrical corporation's normally scheduled monthly billing process to provide one or more of the notifications required pursuant to subparagraph a.

(4) Each notification shall also include a mechanism by which a ratepayer may opt out of community choice aggregated service. The opt out may take the form of a self-addressed return postcard indicating the customer's election to remain with, or return to, electrical energy service provided by the electrical corporation, or another straightforward means by which the customer may elect to derive electrical energy service through the electrical corporation providing service in the area.

We propose that the CCA describe in its registration packet its plan for notifying customers, as required by Section 366.2(c)(13) and that the utility service agreement and tariffs require evidence of this notification prior to the utility's transfer of service to the CCA. Parties may also propose to comment on other notice options, for example, utility notices in utility bills describing the CCA program prior to its initiation.

We also propose that utility tariffs specify the utility's obligation to provide information about "the feasibility and costs associated with using the electrical corporation's normally scheduled monthly billing process."

Section 366.2(c)(15) provides that "(o)nce the community choice aggregator's contract is signed, the community choice aggregator shall notify the applicable electrical corporation that community choice service will commence within 30 days."

We propose that the Service Agreement signed by the utility and the CCA meets the type of contract referred to in Section 366.2(c)(15). We also interpret this provision to mean that aggregation will not occur in less than 30 days after the contract is signed in order to provide time for the utility to make necessary system changes.

In the event that a CCA decides to discontinue its aggregation program, utility ratepayers must be protected from service problems and additional costs. We propose existing Commission rules required of Direct Access customers also be applied to CCAs. Specifically, CCAs would have to provide notice of program termination at least six months in advance. If during that six months, the CCA returns its customers to bundled service, it would pay electric rates that reflect the utility's prices on the spot market. We also propose that the CCA notify customers of program termination twice during the 60-day period before termination. If the CCA transfers the customers to the utility before the six-month notice period, the CCA's notices to customers would explain the customers' liability for utility spot market purchases.

Before a CCA may offer aggregated services to local customers, Section 366.2(c)(14) requires each CCA to "register with the commission." This section also gives the Commission authority to "require additional information to ensure compliance with basic consumer protection rules and other procedural matters."

We propose that this registration process be initiated with the filing of a CCA's Implementation Plan. Its registration packet should include the kind of documents and information required of ESPs:


a. A Service Agreement with the utility serving each service territory in which the CCA plans to offer service. We propose that this Service Agreement be a version of the existing ESP IOU Service Agreement modified for CCAs and consistent with the Direct Access Service Rules. This Service Agreement would fulfill the requirements of the CCA "contract" referred to in Section 366.2(c)(15).


b. A signed agreement with a scheduling coordinator authorized by the Independent System Operator. This requirement would be waived For CCAs authorized as scheduling coordinators.


c. Evidence of a bond or insurance adequate to cover potential re-entry fees. (Section 394.25(e).)

As we see it, the process of registration and Commission approval would be comparable to that applied to ESPs, plus the additional requirements imposed on the Commission:

(1) CCA files registration packet;

(2) Within 10 days of the CCA's filing, the Commission notifies the utility serving the customers proposed for aggregation of the CCA's. (Section 366.2(c)(6));

(3) Within 90 days after the community choice aggregator files its implementation plan, the Commission certifies to the CCA that it has received the implementation plan, including any additional information necessary to determine a cost-recovery mechanism. (Section 366.2(c)(7));

(4) Notice by the Commission of the amount of cost recovery that must be paid by future CCA customers. (Section 366.2(c)(7)); and

(5) Notice by the Commission of the earliest possible effective date for implementation of a CCA program, taking into consideration the impact on any annual procurement plan of the electrical corporation that has been approved by the Commission. Section 366.2(8).

Consistent with our procedures for registering ESPs, we propose that staff designated by the Commission's Executive Director conduct these procedures. We propose that the Executive Director or designee sign all notices, including those authorizing CCA activity. We also propose that, following receipt of the Commission letter, the CCA inform the Executive Director that (1) the utility and the CCA have signed the designated service agreement and (2) the CCA has requested the transfer of service.

We may also need information from CCAs about how their programs change. Some options we may consider are (1) periodic re-registration; (2) annual reports providing information about program changes; and/or (3) investigations if and when we receive information to suggest problems that affect CCA customers or utilities serving them. We invite the parties to comment on these and other options that would serve the public's interest in understanding CCA programs and getting good service.

AB 117 requires the Commission to submit a report to the state Legislature by January 1, 2006 (Section 366.2(j)). The report must detail "the number of community choices aggregations, the number of customers served by community choice aggregations, third party suppliers to community choice aggregations, compliance with this section, and the overall effectiveness of community choice aggregation programs."

The Commission's report will require our collection of certain information from utilities and established CCAs. We propose that each CCA provide to the Commission an annual report that states the number of customers it serves and the number, type and status of third party power suppliers used by the CCA.

Sometime during 2005, we intend to solicit comments and additional information from CCAs and other parties relating to the effectiveness of CCA programs and other matters relevant to the Commission's report to the Legislature.

Section 366.2(i)(2) prohibits the Commission from authorizing community choice aggregation "until it submits a report certifying...(that it has adopted a cost recovery surcharge) to the Senate Energy, Utilities and Communications Committee, or its successor, and the Assembly Committee on Utilities and Commerce, or its successor." We intend to submit our final order in this rulemaking to the Legislative committees and supporting documents to certify compliance with Section 366.2(d)(e) and (f), which describe the cost recovery surcharge.

3 The exception is in the event of insolvency, in which case the statute requires that the customers of an ESP, but not a CCA, will assume the re-entry fees. 4 Section 399.12(b)(2) was added to the Pub. Util. Code by Senate Bill 1078 (Stats. 2002, Ch. 516).

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