The Direct Access (DA) Program allows a limited selection of consumers living in the state of California to purchase their electricity from an Electric Service Provider (ESP).  While utilities continue to provide consumers with electric delivery related services, ESPs are competitive providers that facilitate the sale of supply related products and services.

This program, albeit extremely limited in scope, is very similar to electricity deregulation programs in states like Texas and Connecticut. While there is a slight difference in terminology and function, California’s Direct Access Program ultimately gives eligible customers the power to choose who supplies their electricity.

Brief History of Direct Access

In the early 2000s California experienced an energy crisis. The state had a shortage of electricity supply for many reasons, some of which include capped retail supply, illegal oil pipeline closures, drought and market manipulations. As a result, the price of wholesale electricity increased dramatically, and rolling blackouts hurt many businesses that relied on electricity to conduct day to day tasks. It is estimated that this crisis cost California between $40 to $45 billion.

Energy Deregulation

Some believe that the energy crisis occurred in part because of incorrectly implemented, partial energy deregulation laws. These laws pertained directly to the DA Program. To help offset the damage from the crisis, California suspended the DA Program in 2001 stating, “Suspending the right to acquire direct access service will assist in issuing these bonds at investment grade, by providing DWR with a stable customer base from which to recover its costs. Furthermore, we note that the suspension of the ability to acquire direct access service will provide DWR with a stable customer base from which to recover the cost of the power it has purchased and continues to purchase.”

At that time, the state also indicated that “Currently, the State of California through the DWR is purchasing electric energy on behalf of the utilities’ existing ratepayers (except those purchasing electric energy from ESPs) with funds from the State’s General Fund and an interim loan. To repay the General Fund and continue the power purchase program, state agencies are preparing to issue DWR Power Supply Revenue Bonds.”

District Access Re-Opens

Since then, the California has made corrections to their energy market. One of these corrections was to re-introduce deregulation concepts, but in a way that would not harm the industry and its consumers. In October of 2009, Governor Arnold Schwarzenegger signed Senate Bill 695. This bill called for DA to open up again (starting in 2010), but only to non-residential customers.

Senate Bill 695

This bill outlines the different laws associated to California’s DA program. The most important items to highlight include:

Utility Territory Maximum Supply Load – The DA Program allows non-residential customers to receive supply services from an ESP in utility territories. However, there is a limit to how much electricity is supplied. This amount is defined by the Public Utility Commission (PUC) of California as the “maximum total kilowatt hours supplied by all other providers to distribution customers of that electrical corporation during any sequential 12-month period between April 1, 1998, and the effective date of this section.” (Section 365.1.b, California Public Utilities Code)

ESP Service Area Limitations – This point emphasizes the energy limit (GWh) that ESPs can serve. This limit is defined by the Commission as a 3 to 5 year phase. “Within six months of the effective date of this section, or by July 1, 2010, whichever is sooner, the PUC shall adopt and implement a reopening schedule that commences immediately and will phase in the allowable amount of increased kilowatt hours over a period of not less than three years, and not more than five years, raising the allowable limit of kilowatt hours supplied by other providers in each electrical corporation’s distribution service territory from the number of kilowatt hours provided by other providers as of the effective date of this section, to the maximum allowable annual limit for that electrical corporation’s distribution service territory.” (Section 365.1.b, California Public Utilities Code)

The Right to Suspend DA Services for Retail End-Use Customers – Due to the caps or limitations placed on ESPs and the electricity supply, the program is currently unable to accept any additional applicants. According to the PUC, “…the right of retail end-use customers … to acquire service from other providers [e.g., ESPs but not Community Choice Aggregators] is suspended until the Legislature, by statute, lifts the suspension or otherwise authorizes direct transactions.” (Section 365.1.a, California Public Utilities Code)

Phase In Period

Between the years, 2010 to 2013 the PUC allowed utilities to increase load allowance in a phased approach. The reason for this increase was to help more companies take advantage of ESP services. Utility, PG&E for example had an initial load limit of 5,574 GWh, which reached 9,520 GWh by 2013.

The phased in period for all ESPs during that four year stretch included,

Start at 1,381 GWh – Year 1 (2010): Up to 35% of the room available under the cap
An additional 1,381 GWh – Year 2 (2011): Up to 70% of the room available under the cap
An increase of 789 GWh – Year 3 (2012): Up to 90% of the room available under the cap
Final increase of 395 GWh – Year 4 (2013): Up to 100% of the room available under the cap

Lottery System

Prior to 2013, applicants applied under a first-come, first served process. In 2013, this changed to a lottery system, where utilities assign a random number to approved Six Month Notice applications. This random number determines the applicant’s position for available places within that utility’s DA Load Cap. If a customer’s load moves the utility above the indicated cap, they are placed on a wait list. For example, customers in 2014 that exceeded the cap were placed on a wait list for any available load up until the end of 2015.

Eligible Customers

The DA Program is only available to non-residential customers in the state of California. These types of customers include:

  • Lighting
  • Agriculture
  • Medium & Large Commercial/Industrial
  • Small Business

Six Month Notice Form

The “Six Month Notice” is a form that the customer or applicant is required to complete in order to enter the lottery. This form indicates to the appropriate utility that the customer intends to switch their supply services over to an ESP. It is mandatory for the customer to complete this form to be considered.

Completing this form means that the customers understands the following:

  • The form lets the utility know the customer wishes to transfer services to DA service.
  • Customers must provide the utility with notice, six months in advance of the change.
  • The utility will notify the customer of their application status within 20 days of receipt of the form.
  • If accepted, the utility will indicate the date that the ESP must complete and submit a Direct Access Service Request (DASR) to the utility.
  • If the available annual load limit has been reached, the notice will be rejected.

Typically, the Six Month Notice form also requires standard customer information including:

  • Customer Name
  • Business Name
  • Service address
  • Email address
  • Signature
  • Date
  • Active Electric Service Agreement Identification Numbers

Samples of this form can be found at Sempra Energy and PG&E.

Since the process is based on a lottery system, many utilities outline specific dates and periods during which an application will be accepted.  Each utility also has its own process.

Direct Access Billing

Customers accepted into the DA Program can typically receive their billing in one of several ways. Options include:

Dual Billing – A customer will receive two bills. The ESP will send one bill with power charges and the utility will send a second bill for distribution, transmission and other related charges (such as low-income assistance program charges or franchise fees).

Consolidated Billing (UDC) – The utility will send this bill to the customer. The charges will be detailed separately, and will include both ESP and utility line items.

Consolidated Billing (ESP) – This bill is sent from the ESP to the customer. It will include both utility and ESP charges. The charges will be detailed separately.

Benefits of Direct Access

The benefits to the DA Program are similar to benefits of energy deregulation found at a more widespread level in other deregulated states.  ESPs have the ability to buy electricity from various entities and take advantage of different contracts compared to utilities. Due to the structure of these contracts, the electricity offered to non-residential customers can sometimes be cheaper when compared to a utility that offers the same services.

California Registered ESP List

Reliable ESPs in California will register with the PUC. Some of the ESP’s currently registered include,

  • 3 Phase Renewables
  • Agera Energy
  • Commerce Energy
  • Commercial Energy of California
  • Liberty Power Holdings
  • Palm Power
  • Shell Energy
  • Tenaska Power Services
  • Tiger Natural Gas
  • YEP Energy

In order to successfully register as an ESP in California, the company must prove several details including:

  • An executed UDC-ESP Service Agreement
  • A completed ESP Registration Application Form
  • Security deposit of $25,000 (minimum) via cashier’s check or financial guarantee Bond
  • Agreement executed with scheduling coordinator by an Independent Systems Operator
  • Fingerprints for appropriate employees

Want more information about the Direct Access program or electric choice programs in other states?  Don’t hesitate to call us at 800-974-3020 or shop and compare electricity quotes instantly online.