Wealthy Californians Go Green, Putting Utilities in a Squeeze
California Utilities Face Competition From Clean-Power Providers
(Bloomberg) -- California utilities are losing business to local power authorities that were created to deliver clean power to residents.
Pacific Gas & Electric Co., the state’s biggest utility, expects to lose about 7.3 percent of its electric load this year, and potentially 21 percent by 2020, to these so-called community choice aggregators, according to Moody’s Investors Service. The shift may eventually account for 40 percent of the total load at San Diego Gas & Electric Co. and Southern California Edison.
There are five community aggregators in the state, and six more may go into operation in 2017, said Lesley Ritter, a New York-based analyst at Moody’s. As of early this year, 27 of 58 counties in California and more than 300 cities were either members of a community aggregator or evaluating them. The expansion reflects consumers’ growing interest in choosing green energy and shows a potential threat to utilities from these power providers.
“Right now, it’s the part of the state that’s pretty wealthy opting out” of traditional utility service, Ritter said in an interview Wednesday at Moody’s Power and Renewable Energy Conference in New York. “As it becomes more common, it may become more difficult for the utilities.”
Marin Clean Energy was formed in 2008, the first community consumer aggregator in California, after a 2002 law let communities buy power on behalf of residents. The not-for-profit agency serves Marin and Napa counties, as well as six nearby cities.
Unless area residents opt out, they’re automatically signed up to receive clean energy, including solar, delivered by PG&E. They also continue to get monthly bills from the utility for electricity procured by MCE, as the aggregator is best known. It signed agreements last year to buy power from at least three clean-energy projects.
“It relieves the utilities of the responsibility of providing electricity,” Alex DiGiorgio, a senior community development manager at MCE, said in a phone interview. “It’s going to change the model, but it’s not an existential crisis for utilities.”
Losing electric load isn’t the same as losing revenue, according to Amber Albrecht, a spokeswoman for Sempra Energy’s San Diego Gas & Electric. While community aggregators may start providing a growing share of the electricity it delivers to customers, the utility will continue to get paid.
“It is important to remember SDG&E does not make money from the power it purchases on behalf of its customers, but rather from building, maintaining and operating the power grid,” Albrecht said in an email Wednesday.
Edison International’s Southern California Edison utility said it’s “neutral” on community aggregators. PG&E “supports customer choice and control of their energy,” Donald Cutler, a spokesman, said in an email.
The community aggregator model has some political support behind it. Michael Picker, president of the California Public Utilities Commission, said at an event last week in San Francisco that the state should consider opening up its electricity market to retail competition. The model is permitted by law in six other states, Ritter said, but it’s only taken off in California.
“It’s going to take more than MCE to make an impact that will avoid the worst of climate change,” DiGiorgio said.
The rapid growth may eventually be curbed by regulators, Ritter said. Aggregators must pay utilities an exit fee for departing load, under a formula that was developed before their model became popular.
“It’s fair to say any adjustments to the formula used to calculate exit fees is a logical response,” Ritter said. “It’s the intent of the current exit fee to avoid any cost shifting onto the remaining utility customers.”
--With assistance from Mark Chediak
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