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Energy Market Update: October 2, 2018

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The California energy market is expanding. Two bills approved by Governor Jerry Brown last month are sure to change the way Californians purchase energy.

Electricity providers have been supplying California businesses directly since 1998 in compliance with California state law. Senate bill no. 237 amends state law and raises the cap on electricity providers by 4 terawatt hours, effective June 1st, 2019. Additionally, the bill calls for a study that would explore a complete reopening of the market for commercial and industrial customers.

Senate bill no. 100 sets renewable energy procurement targets for retailers (more on this below).

What does this all mean? Here’s our take:

S.B. 237 - Cap Raise Implementation

It is uncertain at this point how exactly the cap raise will be implemented. The California Public Utilities Commission (or CPUC) could work from this year’s existing queue of suppliers to approve new electricity supply, or they could resort to a new lottery in June 2019, when the cap raise goes into effect.

Right now, the onus is on the CPUC to provide a decision regarding implementation. The Direct Energy Business team will conduct initial calls with the CPUC to learn:

  • The overall plan for implementation

  • When the CUPC plans to issue an order under a docket

  • When stakeholders will be able to comment on the implementation plan via the docket process, and how the CPUC plans to take comments into account

Direct Energy expects to use customer feedback as guidance in our conversations with the CPUC and other stakeholders.

S.B. 100 - Renewables and The Markets

This bill sets statewide renewable targets. You may find details here. From a market standpoint, renewable-related legislation may be responsible for ushering in the period of volatility that we are seeing now in the natural gas and electricity markets.

As the country moves toward more renewable energy sources, fossil fuels will continue to play a major role in the short-term. In the SOCAL CityGate region, forecasts for fixed natural gas in Q1 2019 have been as low as sub-$3.00 in February of this year, and as high as $5.00+ in August. PGE CityGate has also fluctuated somewhat unpredictably.

Electricity prices have followed right along with the volatility in natural gas. California still relies on gas for electricity generation, so while the price of gas remains volatile, we can expect electricity prices to fluctuate too.


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Posted: October 02, 2018

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