CPUC to Consider Issues Related to Providers of Last Resort – Will the Commission Recognize Modern Trends of Retail Choice?

Pursuant to Senate Bill (SB) 520, the California Public Utilities Commission (CPUC) issued an Order Instituting Rulemaking (OIR) on March 25, 2021, to address issues related to providers of last resort (POLR) requirements. In California, a POLR is regulated by the CPUC and recovers its costs from all retail customers.

A POLR is the "back-up"—it steps in to provide uninterrupted service in the event that a provider fails and there is an unplanned customer migration. This concept exists in many contexts other than electric service. For example, in telecommunications, the "carrier of last resort" is required by law to provide universal service access and meet other requirements developed in the 1990s.

Each investor-owned utility (IOU) is the POLR in its service territory. Given the rise of Community Choice Aggregators (CCAs) and increasing interest in Direct Access (DA), the current approach of considering the IOUs as the "last resort" is controversial.

Many would argue that the assumption is an outdated one. Given the fact that some CCAs serve significantly more customers than the local IOU and, coupled with the recent bankruptcy of the largest IOU, Pacific Gas and Electric Company, the assumption of the IOU being the "safe bet" can be precarious.

In this proceeding, the CPUC intends to focus on:

• (1) Assessing whether existing procedures are sufficient to assure uninterrupted service;
• (2) Resolving procurement continuity risks; and
• (3) Resolving gaps and misalignments between existing proceedings and programs.

According to the CPUC, "[t]his examination includes whether, given the specific directives and authorizations of SB 520, overall improvements can be made to the existing procurement and cost recovery framework." However, the OIR makes it clear that the CPUC does not intend to duplicate work already completed or already in progress.

Two phases of the proceeding are currently contemplated:

• Phase 1 will focus on the default POLR framework (IOUs), and
• Phase 2 will examine the ability and requirements for a non-IOU to be a "Designated POLR."

Having worked on the Power Charge Indifference Adjustment (PCIA) and the Electric Service Provider Bond proceedings, our Energy Group is looking forward to a more up-to-date approach that adequately considers modern trends when addressing this POLR issue.