Photo courtesy of Tom Arnold

While there are considerations, winning a spot from the Direct Access lottery can be a bonanza (notice deadline is June 10th - 14th).

Total electric utility bill savings from about 6% to 16% are the main reason buildings served by a California investor-owned utility should heed the Direct Access lottery deadline of the second full week in June and submit their Six Month Notice To Transfer To Direct Access Service. While the payback has always been strong justification for a longshot paperwork process, the signing of California Senate Bill 237 into law increases the chances of success by about 17%. This boost is a result of a 4,000 gigawatt-hour increase in the capped serviceable load in Direct Access, previously limited to 24,000 gigawatt-hours across the state.  

Links to the three California IOU Direct Access lotteries are included below.

Direct Access (DA) is retail electric service where buildings purchase electricity from a competitive third party power provider, instead of from a regulated electric utility via bundled service. Buildings with a DA contract continue to pay their local investor-owned utility monthly Transmission & Distribution charges and exit fees, primarily the PCIA. The trade association Advanced Energy Economy views DA has a useful way for corporations to gain access to advanced energy resources.

“SB 237…make[s] California a more attractive place to do business and open[s] up new opportunities for nonresidential customers to meet their electricity needs while driving innovation and supporting the reliability, affordability, and decarbonization of California’s electric grid.” –Amisha Rai, Advanced Energy Economy

How are these savings possible?

Regulated utilities’ cost of service rate making is a simple formula, where rates equal the cost of service divided by volumetric sales. On bundled service from an IOU, the cost of your utility’s entire portfolio of electricity generating assets is averaged together, including legacy powerplants, or long-dated purchase contracts, that might be more expensive to operate, less efficient, or both.

And while there is a correction mechanism in place, a steadily widening gap between wholesale power prices, available in the Direct Access market, and the prices built into bundled service has left plenty of space for third party power providers to offer cheaper prices.

Of course, a building has to think about how its load profile fits into the possible rate schedules. Certain unique factors of each building will change the total savings potential of switching to DA.

Competition & choice in addition to savings

The AEE describes Direct Access as simply the status quo in unregulated energy markets, where energy prices are set by competitive market participants. And Caitlin Marquis, federal and state policy manager for AEE, states “Direct access really gives our customers both access and control over their energy choices. Whether that’s renewable energy, energy storage or other pieces, every customer is different, and direct access gives them the flexibility to meet their goals on their own timeframe. That’s the primary appeal.”

For a customer limited by its infrastructure, and what it can do onsite behind the meter, Direct Access also opens up options to invest in offsite solar or wind as opposed to purchasing Renewable Energy Credits. And with a twelve to thirty-six month DA contract, a building can set a known price for energy and bring predictability to power costs with a fixed rate.

It’s not reinventing the wheel, but it is negotiating

Our advice wouldn’t be complete if we didn’t mention that getting your building on Direct Access involves negotiating and contracting with a third party power provider. And it can be difficult to compare two offers apples to apples–look for what is, and is not, included in the contracts, such as ancillary pass-through charges like resource adequacy costs, renewable portfolio standards costs, and California ISO fees. Other elements include locational basis and line loss fees and congestion charges.

And once you’re done with contracting, prepare your team to process an additional bill–the original bill from the IOU will now have Transmission & Distribution charges and exit fees, and another bill will have the generation charges from your new Direct Access partner.

We recommend finding a longstanding provider with a reputation of excellent customer service. And if your building is currently supplied through a CCA, we still suggest completing the Direct Access paperwork.

Direct Access resources

To enter a DA lottery, download, complete, and submit the relevant forms from your utility’s website. Note that this will include collating active Electric Service Agreement Identification Numbers for your account(s):

About Millen Paschich

Millen began his career at Cambridge Associates, trained in finance at SMU, and has an MBA from UCLA. Talk to him about bicycling, business, and green chile burritos.

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