November 30, 2010

Financial security rules are the main sticking point in the ongoing rulemaking at the California PUC on reopening direct access, said a filing posted last week by marketers and large consumers nicknamed "the direct access parties."

          The PUC set up workshops to hash out the rules for direct access -- California's term for retail power shopping -- that had the cap on C&I shopping pushed up by SB 695.  Other subjects have largely been agreed to by the parties during the workshops but financial security remains a sticking point.

          California law requires that when a customer being served by a retailer is unexpectedly returned to utility service that existing utility customers are held harmless.  That can happen when a retailer goes belly up or when the PUC revokes it license.

          PUC code says a bond or other demonstration of insurance needs to be posted by the retailer to cover such costs.

          The direct access parties argued that making such customers pay a market-based rate for up to six months will do the trick.  That will mean the customers pay the exact cost needed to serve them, said the group that includes the Alliance for Retail Energy Markets, California Large Energy Consumers Assn, California Manufacturers & Technology Assn, Walmart and others.

          During that six month period, the returned customer can find a new direct access firm or tell the utility it wishes to return to bundled service, meaning it would have to stay on for a minimum period according to market rules.

          The utilities believe that the statute requires such returned customers to go back under their applicable tariff rate from the utility, meaning that making them pay the market rate for power is impermissible.

          The direct access parties believe that the only clear mandate from the code is that other customers be held harmless and noted that the PUC has used the market rates for returned direct access customers for years.