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California retailers see positives ahead

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Article from Platts Megawatt Daily, January 7, 2013, by Tom Tiernan

The retail choice market in California can grow only in small steps, but retail suppliers are hopeful that some recent regulatory changes and possible legislative efforts will improve market conditions in 2013 and beyond.

The retail choice load in California is limited by the cap that has been in place for several years, though a pair of retail suppliers have commented on the positive signs for competitive suppliers.

Legislative efforts to eliminate or raise the cap on retail choice will be pursued in the Legislature, while the Public Utilities Commission has taken a small step to improve the retail market and is being asked to take a bigger one, said Andrea Morrison, director of government and regulatory affairs for Direct Energy Services.

“We’ll be working on cap expansion legislation this year” and there are a lot of new lawmakers in the California Legislature, Morrison said.

Fewer than 50,000 customers in the state can buy power from marketers “and there is tremendous demand for choice beyond the arbitrary limits on competition California has imposed,” said Tim LoCascio, head of market development at Liberty Power. “Legislation is needed to allow the market to work, allowing more — if not all — customers to exercise their right to choose” a power supplier, said LoCascio, who is the California chairman for the Retail Energy Supply Association.

California and Michigan are essentially the only restructured states that have a limit on the amount of load that can buy power from retail marketers, with utilities arguing that more customers should not be allowed to leave utility default service. Oregon also has a limit, but few suppliers compete in that state for the small amount of load in the competitive market.

California’s cap is scheduled to grow in small increments, and in the past as the cap was raised, the PUC determined the customers that could get in under the cap based on a first-come, first-served basis, with the amount of load being filled in a matter of seconds by electronic submittals.

The change approved by the PUC in late December moves the process to a lottery system, so all participants will have the same chance of being selected to sign a deal with a competitive supplier. “It is a much more fair process” that was supported by retail suppliers, Morrison said.

Even with the limited amount of load that can buy power from retail marketers, California ranks about ninth among the 15 or so states with retail competition due to large size of the overall market in the state, statistics show. The competitive retail market, referred to as direct access in California, is expected to reach about 25 TWh by the end of 2013, and it stood at about 23.5 TWh as of November, according to the PUC. The direct access market represents 12.19% of the total load in the state, but at 23.5 TWh, it puts California in the middle of the pack among switched load in restructured states because of the size of the overall California market.

Connecticut has about 68% of its retail load buying power from marketers, but it is below the 23.5 TWh in California, switching statistics among the states show. California’s direct access market also exceeds the switched load in Delaware, New Hampshire, Rhode Island and the District of Columbia, figures show.

The California PUC has a petition from RESA and other retail choice advocates to begin a rulemaking that straightens out utility cost allocations so that they do not inhibit customer choice, including community choice aggregation plans. “The risk of continuing to address cost allocation policy issues in a diffuse manner, across many rulemakings and applications, is that the commission will reach inconsistent — and potentially contradictory — outcomes in different cases,” the groups said in their December petition.

Comments on the petition are due later this month.

A number of customers alternate between utility service and direct access from retail suppliers, or often switch suppliers, monthly statistics from the PUC show. In November, the latest month with information available, 576 customers switched retail suppliers, while 54 went from a supplier to a utility, and 40 went from a utility to a supplier.

In other states with retail competition, headroom for marketers improved during December as forward wholesale power priced dropped a bit during the month, according to the Retail Power Index from consulting firm Intelometry.

The RPI, compiled monthly, shows utility prices and a one year forecast of default prices for small commercial customers in nine markets with retail competition. It also shows wholesale power prices in those cities, providing the spread between current power prices and the forecasted default utility price, indicating the headroom for suppliers to operate in those markets.

In December, Chicago had the largest spread at $31.24/MWh, even with a reduced spread due to a lower default service forecast price.

Posted: January 08, 2013