The Colorado Public Utilities Commission (PUC) has been tasked by the Colorado legislature to recommend whether and how to implement Community Choice Energy (CCE).[1]
California’s CCE experience has been rich in diversity and local/state decarbonization impact.[2] California CCE generation portfolios are on track to become fully decarbonized in the next few years. The California CCE model was conceived and adopted two decades ago. It exploits economic options available at the time but allows little flexibility to capture economic, environmental and energy resilience benefits of local supply and infrastructure investment.
Nevertheless, Colorado and other states can adapt and expand California’s CCE model to facilitate 21st century energy policy implementation. Specific adaptations can result in greater reliance on local renewable electricity sources and electrification of local transportation. By adopting them Colorado can take CCE to the next level of public benefits and impact.
I filed initial comments[3] in the Colorado PUC’s CCE proceeding and then responded to a list of specific questions[4]. Recently, I offered public comments[5] suggesting that Colorado: 1) aim for collaboration between CCEs and investor owned utilities (IOUs), 2) define and empower a CCE role in deploying community renewables, and 3) make transition fees fair, temporary and accurately predictable. Specifically:
1. Colorado will be well served if CCE authorizing legislation requires and rewards CCE/IOU collaboration as well as collaboration with other CCEs, local governments, solar retailers and prosumers, and retailers.
2. Colorado should incent and empower Colorado CCEs to cause renewable electricity projects to be developed within their service areas.
3. If Colorado determines a purpose and need to impose transition fees, 1) the transition period should be limited to no more than five years, and 2) transition fees should be accurately forecastable by CCEs for the full transition period.[6]
How Colorado deals with transition fees will be crucial. A valid rationale for transition fees is that an incumbent generation provider’s supply portfolio might need to be adjusted following the departure of a large cohort of electricity customers from IOU generation service if their departure is the sole cause of higher costs to remaining customers. By contrast, in California transition fees are used by IOUs and their regulatory partners, not to compensate for transition costs, but for the dubious purpose of ensuring that IOU and CCE generation rates remain at parity over the long term.
Instead, transition fees should apply when IOU generation portfolios are materially impacted...and then only for a limited time sufficient to complete portfolio adjustments. Specifically, transition fees should be authorized only upon departure to CCE service of more than five percent of an IOU’s customers in a single year. To avoid disrupting CCE planning and financial stability, they should be accurately predictable. CCE compensation of IOUs for the cost of necessary IOU generation portfolio adjustments should occur over a period of up to five years, and only after specific transition costs have been identified and confirmed by state regulators.
Fair, temporary and accurately predictable transition fees will allow Colorado to take CCE to the next level.
[1] https://leg.colorado.gov/sites/default/files/2021a_1269_signed.pdf
[2] https://cal-cca.org/cca-renewable-energy-map-and-list-of-ppas/
[3] https://www.dora.state.co.us/pls/efi/EFI.Show_Filing?p_session_id=489654&p_fil=G_786766
[4] https://www.dora.state.co.us/pls/efi/EFI.Show_Filing?p_session_id=489654&p_fil=G_794713
[5] https://www.iresn.org/s/Public-Comment-California-Experience-Informing-CCE-Consideration-by-Colorado.docx
[6] California CCEs should be allowed and encouraged to retain a portion of state mandated transition fees to cover above-market costs of community renewable projects and of grid upgrades necessary to accommodate them.