HomeMy WebLinkAboutAgenda Bill 3.B-Attch2 08/16/2004ATTAC6 MENT B
BACKGROUND
The Members formed„ ABAG POWER to. operate, .among others , "the Electric `Program. Each
Member agreed to pay „its share of all; costs ; associated, with, the Electric °Program and
appointed ABAG. POWER as its agent for the purposes of`iinplementing the Electric Program.
1. The Electric Program under rules promulgated 6y the California Public Utilities
Commission (CPUC), the. California Independent system Qperator.(,ISO), the California
Power Exchange i(PX) and ;the conventions and practices established by each of the
aforementioned entities and by PG &E pursuant to AB 1890: ( "D.eregulated Market "), The
Electric Program `,pro'vided °electricity to accounts specified by each Member under the JPA
and DA Agreement'as' defined in the. body of the Wind Up Agreement'to which this
document is attached. .
ABAG POWER ,,is. a separate legal entity'under the JPA. Each Member is represented on'the
ABAG POWER Board of Directors (Board). ,ABAG POWER continues to operate ,a natu "ral gas
aggregation program. Al program decisions: are made under the policy direction of the
Board or the Executive Committee of the Board.
ABAG POWER,.used the following resources from the described" entities in order to implement
the Electric Program:
(a) electrical energy from various generators and brokers,
(b) distribution and other services. "•fromaPG &E,
(c) electric grid services (reliability,a id control) from the ISO,
(d) schedule coordination '(as described below) from NCPA,
(e) billing services from Arizona ,Public'Services (APS), and
(f) adininistrati've 'and support services from the Association of Bay Area
Governments (ABAG). `
In addition,; ABAG POWER procured occasional services (not relevant to the wind up of the
Electric Program) during the operation of the Electric Program. Occasional services included,
but are not Limited to financial auditors, attorneys, electric meters.sales and installation and
meter reading , services.
ABAG POWER, paid for the resources described above with payments. made Members.
In order to maintain -cash flow liquidity, Members funded Working Capital reserves for ABAG
POWER through both their "month "ly payments for electricity and'thm'ugh Working Capital
°calls.•" 1
Under the Deregulated Market all electric aggregators were required to pay for ancillary
eiectric,services (transmission and distribution costs, system'refiability services, etc.)
through the ISO. In addition; energy purchases made from the PX required certain security
deposits be maintained. The PX and the ISO required , such payments 7 be made through a
recognized "scheduling. coordinator,"
' At the beginning of the program, ABAG POWER billed Members. on an estimated "leveliz'ed" schedule that included
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bull Based on actual expenses andka separrate series of ca o e r t wo d rking capital tal contribu toned in favor of a monthly
ions from the Members.
ABAG POWER retained NCPA to act as the scheduling coordinator for the Electric Program. i
NCPA also served as scheduling coordinator for its own members. The Deregulated Market
required electric aggregators to deposit funds into two escrow accounts, one with the ISO
and the other with the PX. (The latter deposit was only required if the electric raggregator
purchased, energy from the PX,) . NCPA made such. deposits on behalf. of ABAG POWER. The
ISO and, PX1 drew down on the escrow accounts to pay for monthly energy (;PX).; 'if ;any, and
electric grid' service charges (ISO),. The escrow deposit funds were , mainta'ined at- a level
sufficient to pay for 90 days. (estimated) worth of ehergy an'd ancillary 'service'charges.
ABAG POWER paid NCPA the funds necessary to maintain the escrow deposit funds at the
required, 4 The' fundswere'held by 'NCPA in trust ` forABAG.IPOVVER.
levels. "
WIND UP PLAN .
Upon the suspension of'the Electric Program, ABAG POWER's billing agent,. APS compiled '
'charges attributed to Member accounts., This data ;indicated that there. were seniice charges,
for transmission and other services from PG&E (UDC.Charges) That :had'not been Invoiced 'to
ABAG POWER in the approximate amount of Three Million Three Hundred Thousand Dollars
($3,-).00,00 "0.). ,ABAG POWER also .experienced' ) -week period i'n Aug I st 2000 during
which it did not, purchase electricity for the: Members, due to unstable market, conditions.
Members continued' 'to receive power. ABAG POWER has not been invoiced' for-the costs: of
the energy consumed during this period.. ABAG POWER estimates this cost, to be
approximately One Million 'Four Hundred Thousand D'oilars ($1. (based on: load
profiling and prevailing energy costs).
'Initially; ABAG '�POWER'retained the ' in its own accounts to pay for the
uninvoiced UDC Charges and energy charges and to pay ongoing wind up costs. ABAG
POWER has concluded that:
(a) some' o of
(see below),
h e , uni v d Charges were included in the* Direct Access
Credit (b) the balance of uninvoiced UDC Charges have not been and may" ;never,be
invoiced to ABAG POW -ER (for further discussion see Attachment D`); and
(:e) the ener..gy charges have not been, and may never be: invoiced to ,ABAG
POWER (for further "discussion see Attachment D).
Based on the: foregoing ABAG POWER is concluding the wind! up of the Electric Program
without settling the potential liabilities for UDC'Charges and energy described above.
Further, ABAG POWER has "concluded that, the funds held by NCPA will not ;be released in the
foreseeable future (see below;),. Therefore, ABAG POWER is concluding the wind up of the
Electric Program without having received a'll ofthe funds held��by'NCPA in trust for ABAG
POWER in the ISO Escrow Depositand the PX Escrow. Deposit.
Finally, ABAG POWER has settled its claim againsfP.G &E for the Direct Access`Credits (.see'
below),. ABAG POWER'is distributing the, funds " from the settlement as part of °the wind up,
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D I RECT ACCESS. CREDIT
The Direct Access' Credit m results fro the interseetion CP
UC' regulations and
extraordinarily high prices for electricity in•2000. The foliowing is excerpted from a CPUC
draft document'that describes whatthe Direct Access Credit is and how it is derived .2
Since 1998, PG &E and SCE have offered, service to two distinct classes of customers.
Bundled service customers received the full range of electric services from the utilities,
which include energy procurement and delivery PG &E and SCE customers could also
choose; under the DA option,, to purchase ,energy .from an electric service provider
(ESP)'.. ' PG &E and SCE contin'60 to deliver electricity to both [Direct Access] and
bundled service customers.
A. Rate >Freeze
Total''�rates were frozen at levels; in effect on -June 10, 1996 for all customers. Bundled
service customers paid these frozen rates for the duration of the transition period
(January 1, 1998 through March 31, 2002 or a, Commission - authorized earlier end
date). These frozen tariff rates included a.,generatiion rate component. The generation
rate was'unbundied into a market price and a compe
p'
tition''transition. charge (CTC)
, .. - . ated residually as the difference between the fixed
ever.
g m at on rate com and It
on the utility's cost of. rocurin p g power a r et price, where the market price was based
the PX and the California Independent
System Operator (ISO). All customers pay the CTC -'and the CTC revenues were to be
used to, pay,.for the, utility's stranded. generation costs, also known as transition costs.
B.. The Avoided Cost Credit
The,utilities; calculated a 'market price.for billing purposes utilizing the cost and
quantifies °'of power purchased . from the PX, This PX* price was used to determine the
contribution-to the recovery of CTC (when compared to the generation rate component
of frozen rates) and also represented the utilities' avoided cost of procuring energy.
The PX 'component of the "generation. rate was either applied to recover the cost of
purchasing power,for bundled service customers or given as 'a credit to DA customers.
The credit reflected the fact that DA customers had ,chosen to procure their energy
through an ESP rather than the utility. 'So long as the market price, or DA credit,
remained below the generation °com pone nt of the customer's frozen rate, the DA
customer continued to make a contribution to CTC in exactly the same manner as a
similarly situated bundled "service customer.
C. The Zero Minimum Bill Provision
ecause t e' DA credit was
based on the market price. from "'the PX, it was possible that
eit
rate the credit wo uld ex Geed her the generation compon
PX cr ent or the entire bill. If the
edit lexceeded ge „neration rate component, there was a negative CTC, i.e., no
contribution 'to recovery , of'stranded costs. 'If the PX. credit exceeded the: entire
amount•of the bill,'rn10'aning that,the PX credit was - greater than the sum of the
t would
generation, i d stribution, transmission, public purpose and the other rate components,
d
e a negative bill. In other words,, the DA customer would receive a credit
for the'entire'iatility� bill. This is also known as a "credit” bill.
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Z ' See Attachment` D:,�description of 1998 RAP - Draft Decision.
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Prior to June .1999, under the adopted tariffs; DA, customers receiving the PX credit •
could experience, at a minim 'um , a monthly b,i_II ,of'$;0. In D-99-06-058 the
Commission eliminated the zero minimum bill provision. The elimination of'th:e ;zero -
minimum bill provision allowed' DA customers to receive the entire PX credit' even; if it
resulted in a negative (credit) bill. Prior to market dysfunctions in raid 2000, PX.
credits in excess of - total monthly char.,ges ;were generally carried over to succeeding
months and were netted' against positive bills.
The::dysfunction of California energy market jjn 2000 °throu4h early;200'1., undermined
the�origina[,basis.for calculating the DAtredit. The prices charged the utilities during
the waning days of .the PX w.e"re substantially higher than_the cost of producing the
energy,; were regula "rly higher than the generation component, of frozen' rates; and in
fact, were frequently so high that,the FDA credit exceeded the entire amount of a DA
ciastorner's bill for the services the DA customer did take from the utility and the'
generation rate component. The PX collapsed in January 2001."
Upon the suspension of the Electric Program PG &E owed POWER approximately
Twenty -One .Million Three Hundred Thousand, Dollars ($21,300,000) in unpaid. Direct Access
Credits. , ABAG POWER filed a complaint with the CPUC to c' ollect the ,credits, The CPUC
Complaint was stayed when ,PG &E filed'for Chapter 11, bankruptcy in April 2002. ABAG '
POWER settled its claim, against', PG &EforSeventeen Million Dollars ($'17,000;;000) plus
bankruptcy °required interest at the rate of 4.19 %o per annum. PG &E has paid Seventeen
Million D,oilars ($17',000',000) in principal- and'Two Million Four Hundred Thousand Dollars
W interest in fulfillment of the settlement.
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