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Community Choice Aggregation Feasibility Analysis Alameda County <br />June, 2016 45 MRW & Associates, LLC <br />Current CCAs have chosen to have customers bear the financial risk associated with the level of exit fees they will pay to PG&E. Thus, for a customer taking CCA service to be economically <br />better off (i.e., pay less for electricity), the sum of the CCA charges plus the PCIA must be lower <br />than PG&E’s generation rate. <br />This risk can be mitigated in two ways. First, as discussed in more detail elsewhere, a rate stabilization fund can be created. Second, the CCA can actively monitor and vigorously participate in CPUC proceedings that impact cost recovery and the PCIA. <br />Impact of High CCA Penetration on the PCIA <br />Currently, the PCIA calculation is based on the cost and value of a utility's portfolio, without <br />regard to how much of that portfolio is to be paid for by bundled customers and how much by <br />Direct Access (DA) and CCA customers. As such, the PCIA is not affected by the number of <br />DA/CCA customers. <br />Currently, for bundled customers the rate impacts associated with fluctuating PCIAs are <br />relatively small, but this will change as the number of DA/CCA customers grows. At some point, <br />bundled customers' rates may experience marked volatility as the impacts of the annual PCIA <br />rate swings reverberate to bundled rates. This may be unacceptable to ratepayer advocates and <br />the Commission. <br />The PCIA rate volatility in part reflects changes to the utilities generation costs, which is <br />appropriately reflected in bundled customers’ rates. But, often to a large degree, it reflects <br />changes to the market price benchmark, which should not be relevant to bundled customer rates. <br />For a utility with flat RPS costs, this would have increased the RPS-related PCIA, which would <br />have reduced bundled rates, even though there was no change in RPS costs. This could also happen in the reverse direction, increasing bundled rates when there is no increase in underlying <br />generation costs. <br />Once DA/CCA load gets large enough that there are real stranded contracts, we suspect that the <br />Commission is going to look much more closely at the value of these stranded contracts (and <br />how to get the most value for them). <br />Bonding Risk <br />Pursuant to CPUC Decision 05-12-041, a new CCA must include in its registration packet evidence of insurance or bond that will cover such costs as potential re-entry fees, specifically, <br />the cost to PG&E if the CCA were to suddenly fail and be forced to return all its customers back <br />to PG&E bundled service. Currently, a bond amount for CCAs is set at $100,000. <br />This $100,000 is an interim amount. In 2009, a Settlement was reached in CPUC Docket 03-10-003 between the three major California electric utilities (including PG&E), two potential CCAs (San Joaquin Valley Power Authority and the City of Victorville) and The Utility Reform <br />Network (TURN) concerning how a bonding amount would be calculated. The settlement was <br />vigorously opposed by MCE and San Francisco and never adopted.