SB 237: Reopening the Doors for California Businesses Seeking Energy Choice

Article by Constellation

Legislation in California limits the number of commercial and industrial businesses who may select an energy supplier of their choice. But new legislation, SB 237, passed in September increases the cap on the state’s Direct Access program, allowing more California businesses to take advantage of the benefits that come with energy choice.

Direct Access – the state’s name for its energy choice program – allows customers to purchase electricity from a competitive provider called an electric service provider (ESP), such as Constellation, instead of from a regulated electric utility, according to the California Public Utilities Commission (CPUC).¹ Competitive providers tend to offer a wide variety of energy solutions that can be customized for your business’ needs.

How Does the New Bill Work?

SB 237 increases the current cap of how much energy customers can buy from ESPs – in this case, by an additional 4,000 GWh –  increasing the size of the Direct Access market from 13 percent to about 16 percent of the entire load served by the utilities.² The CPUC is required to issue an order by June 1, 2019, that specifies the allocation of the 4,000 GWh to utilities and to determine what businesses can receive the benefits of energy choice, either by using an existing waitlist or some other means.

“The latest data we had on the waitlist was about 7,400 GWh-worth of businesses seeking entry into the direct access market,” says Mary Lynch, director of wholesale market development at Constellation. The businesses that don’t make the cut will have to wait until customers in the Direct Access program leave, or until another law expands access. In some cases, if a business’s load decreases – say by implementation of energy efficiency measures or deployment of on-site generation – this may allow the opportunity for another business to enter the Direct Access market as well.

Customers can also access the Direct Access Market through community choice aggregation (CCA). The aggregation is formed by local communities under state law aiming to negotiate lower energy prices for businesses.³ In California, there are 19 community choice aggregators actively serving load. In comparison, there are 14 ESPs also providing power to businesses. Learn more about CCAs.

The History of the Direct Access Market

The Direct Access market was created in 1998 but was then suspended during the 2001 energy crisis. Although suspended, existing customers in the Direct Access market were able to continue reaping the benefits of energy choice.

It wasn’t until 2009 that a law passed that re-opened the doors to Direct Access, allowing approximately 8,400 GWh of new Direct Access load into the program. Then this fall, SB 237 passed and expanded Direct Access by an additional 4,000 GWh of Direct Access annual load.

The Importance of Competitive Markets and Energy Choice

States across the country have developed competitive markets for energy providing the opportunity for energy suppliers to compete with one another to supply the electricity and natural gas that powers your business.

This competition:

• drives innovation
• allows customers to choose specialized products such as supply that meets their own environmental and sustainability goals,
• and provides customers with pricing certainty that helps them manage their overall energy budgets.

This competitive market cannot exist when a single company provides all aspects of energy services. Because of the existing competitive market, Constellation is able to offer an array of products for businesses that a utility may not be able to. Learn more about Constellation’s diverse energy solutions for businesses.

Actions Businesses Can Take

Constellation has been working hard to advocate for energy choice so that commercial and industrial businesses have access to the same benefits that businesses in the Direct Access market have. Your business can get involved by getting on the direct access wait list to show legislators that energy choice is highly desired by many large companies, and to be in line if new legislation further expands the cap.

Subscribe to our communications to be informed of the latest on energy policies affecting your business by visiting www.constellation.com/subscribe.

References

1. http://www.cpuc.ca.gov/General.aspx?id=7881
2. https://www.greentechmedia.com/articles/read/california-law-will-expand-direct-access-market#gs.vWotu5U
3. http://www.cpuc.ca.gov/uploadedFiles/CPUC_Public_Website/Content/Utilities_and_Industries/Energy_-_Electricity_and_Natural_Gas/Cal%20Customer%20Choice%20Report%208-7-18%20rm.pdf