NUS Consulting Group
Energy Blog / Market Updates
Posted: Oct. 15th 2023

California Direct Access Dilemma

What to do if your business is invited into California's Direct Access Program.

If you are an electricity customer on the 2024 Direct Access Wait List with Southern California Edison, the next couple weeks will likely bring the news that your electric accounts have been admitted through the lottery to the Direct Access Program, where you can now shop for a 3rd-party retail electric provider.

This would generally be an automatic “Yes” for a customer, and the invitation would be accepted. However, the current state of CAISO (the power grid operator for the state of California) makes this a questionable decision.

What Do I Do If I’m Invited to Enter?

If your organization is on the 2024 waitlist and receives a notification from the Direct Access lottery, please contact your NUS consultant immediately. Do not automatically accept.

While renewals for customers already in the Direct Access program are being offered, the availability of supply for new entrants is not guaranteed, and carries risk to the customer.

Once a customer is approved to enter Direct Access, that customer will then have 15 days to either accept or decline the invitation. If you decline, you remain on tariff supply with SCE.

If you accept the offering, you have a 60-day term on a transitional product with SCE that is indexed to the spot market price for electricity.

If they are unable to enroll with a supplier and submit a DASR at that point, then they will need to remain on the spot market-based transitional product for another 6 months, before being returned to regular tariff supply.

There are no guarantees that customers will be able to find a new supplier willing to sign a contract and therefore accepting entry into Direct Access is not without some risk.

Resource Adequacy in Short Supply

The most pressing issue in the California markets revolves around the availability and price of Resource Adequacy (RA) - the supply component associated with ensuring there is always adequate power generation capacity to meet full system demand at any time, plus a reserve margin.

This component has become more scarce, and therefore much more expensive in recent years, due to several factors:

  • Large utilities (SoCal Edison, SDG&E, PG&E) holding the legacy generation assets, making acquisition of RA for retail suppliers and Community Choice Aggregators (CCAs) more difficult, and expensive for customers.
  • The ongoing phase-out of “dispatchable” generation — assets that can be ramped up or down as needed to balance the system is also a factor.
  • Coal is now nearly obsolete, and natural gas plants have begun to retire as well. This creates increased reliance on “intermittent” generation (renewables) that will only produce as weather allows.
  • The Public Utility Commission of CA has limited ability of suppliers/CCAs to acquire renewables as RA compliance, despite the growing concentration of renewables in the generation stack.
  • New generating assets awaiting interconnection to the grid are caught in a log-jam and delayed due to the permitting process
  • Requirements for energy imports from neighboring regions has become increasingly strict, resulting in less available RA from outside