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Community Choice Aggregation Feasibility Analysis Alameda County <br />June, 2016 44 MRW & Associates, LLC <br />The CCA will by necessity have to procure a certain amount of short-term supplies. These short-term supplies bring with them price volatility for that element of the supply portfolio. While this <br />volatility is not unexpected, the CCA must be mindful that such volatility could increase the need <br />for reserve funds to help buffer rate volatility for the CCA’s customers. Funding such reserve <br />funds could be challenging in this time of low gas prices (resulting in high PCIA charges). <br />The CCA will be entering the renewable market at an interesting time. While all LSEs must meet the expanded RPS targets by 2030, at least the IOUs are currently over-procured relative to their <br />2020 RPS targets. Whether the IOUs will attempt to sell off some of their near-term renewable <br />supplies is unknown. However, if the IOUs believe that this is a good time to acquire additional <br />renewables, the CCA could face stiff competition for renewable supplies, meaning that the green portfolio costs for the CCA might be higher than expected. <br />Finally, it should be noted that as greater levels of renewables are developed to meet the State’s <br />very aggressive RPS goals, it is possible that the traditional peak period will change. Adding <br />significant amounts of solar could depress prices during the middle of the day. This could result <br />in the need to try to sell power to out-of-state market participants during the middle of the day, possibly even at a loss. It could also result in the curtailment of renewable resources (even resources owned or controlled by the CCA). This could force the CCA to acquire greater levels <br />of renewable supplies, thereby increasing costs. <br />Legislative and Regulatory Risks <br />As noted above, the CCA must meet various procurement requirements established by the state <br />and implemented by the CPUC or other agencies. These include procuring sufficient resource <br />adequacy capacity of the proper type and meeting RPS requirements that are evolving.47 Additional rules and requirements might be established. These could affect the bottom line of the <br />CCA. <br />PCIA Uncertainty <br />Assembly Bill 117, which established the CCA program in California, included a provision that <br />states that customers that remain with the utility should be “indifferent” to the departure of <br />customers from utility service to CCA service. This has been broadly interpreted by the CPUC to mean that the departure of customers to CCA service cannot cause the rates of the remaining <br />utility “bundled” customers to go up. In order to maintain bundled customer rates, the CPUC has <br />instituted an exit fee, known as the “Power Charge Indifference Adjustment” or “PCIA” that is <br />charged to all CCA customers. The PCIA is intended to ensure that generation costs incurred by <br />PG&E before a customer transitions to CCA service are not shifted to remaining PG&E bundled service customers. <br />Even though there is an explicit formula for calculating the PCIA, forecasting the PCIA is <br />difficult, since many of the key inputs to the calculation are not publicly available, and the <br />results are very sensitive to these key assumptions. For PG&E, the PCIA has varied widely; for <br />example, at one time the PCIA was negative. <br /> <br />47 Rules to establish RPS requirements under the new 50% RPS mandate are currently being debated at the CPUC.