The Exit Fee Dilemma

Utility contractual obligations to independent generation project owners must be honored and/or renegotiated.  Unlike other states, California allows its incumbent for profit utilities to impose “exit fees” on electricity users switching to community choice energy service.  In northern California, these fees now add 25% to the cost of newly purchased renewable electricity. 

Not surprisingly, these surcharges have come under fire from cities and counties across the state.  Conflicts and trade-offs among important societal values, e.g.  equity, innovation, the state’s climate action goals, etc., demand resolution.  Unfortunately, they do not lend themselves to integrative resolution via “quasi-judicial” processes of utility economic regulation. 

One scenario for resolution is a protracted collaboration between the California Public Utilities Commission (CPUC) and California’s  energy utilities to “oversee” the on-going creation and planning of locally accountable CCE service.  However, in this approach there is an inherent conflict between utilities’ financial motivation to create new centralized assets on which the utilities can “earn” a return, and the potential fast track CCE-enabled deployment of customer and third party financed decentralized energy resources (DERs) that attract local investment and create local jobs.

The conflict and potential for collaboration between grid asset owners and communities creates an urgent need for integrative policy attention. 

Strategically deployed and properly integrated DERs can obviate the need for additional grid capacities at all levels, especially high voltage bulk transmission infrastructure. 

New transmission lines take as much as a decade to plan, permit and deploy.  Transmission infrastructure in general has demonstrated vulnerabilities.  In the face of plummeting costs of DERs, it is also increasingly at risk of becoming an under-utilized or even stranded economic asset. 

Independent transmission operators have their hands full ensuring market and infrastructure stability in the face of these contingencies.  In parallel, the CPUC has its hands full charting a socially beneficial future for corporate monopolies that currently have little short term financial incentive to innovate, i.e. to plan and manage assets according to their highest value in a likely DER driven energy future.

Legislative action will likely be needed to balance legitimate financial interests of utility managers and compelling interests of local jurisdictions in economic and infrastructure resiliency.

-- Gerry Braun

Integrated Resources Network