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CA Aggregator Throws in the Towel

CA Aggregator Throws in the Towel

One of California's largest retail natural gas aggregators, a nonprofit coalition of school districts throughout the southern half of the state, has decided to throw in the towel out of frustration with Southern California Gas and an inability to realize savings generated in the earlier years of the program, which dates back to 1991. The Retail Energy Management Association (REMAC), representing 151 school districts with a total annual gas load of 17 to 25 MMcf, will phase out of core aggregation by mid-year, according to Tom Solberg, an executive heading the coalition.

REMAC's board met last month and decided to give up its aggregation program, Solberg said.

"I think it is too bad, but very understandable," said Solberg, speaking from his northern California office. "Southern California Gas gets whatever it wants unfortunately. If they don't want this [aggregation] to fly, it isn't going to fly. So it is [the utility's] own fault that their largest aggregator and a great representative group for aggregation throughout the U.S. is throwing in the towel."

For the past nine years, California has had a limited retail choice program for residential and small business (core) customers who pool their loads, but it has never reached the original maximum of 10% of the total core supplies, hovering instead around the 5% level. With the advent of Pacific Gas and Electric's Gas Accord and more recently the two-year effort to further unbundle natural gas in the state, there have been programs proposed to liberalize the aggregation program, eliminate any limits on the size of loads and generally stimulate more participation.

However, state legislation supported by the utilities and their unions in the past two years has been enacted that specifically blocks any additional unbundling, including loosening up the core aggregation program. It is making it very difficult for any of the approximately dozen aggregators, including REMAC, to make any money. Margins are razor thin, and the statewide restructuring is bogged down in complex settlement discussions.

Solberg said that REMAC's school districts do not have to return to the utility, so with the help of a management consulting firm that manages the schools' aggregation programs, he is trying to initiate an RFP to third-party suppliers for a number of the 151 REMAC districts that want to pursue alternatives to SoCalGas.

"Our hope is to do an RFP in April, and have a qualified bid completed and in place by the end of April and get it out to the school districts that have expressed interest to sign on to a revised aggregation effort," Solberg said.

A sister organization, the School Program for Utility Rate Relief or SPURR, operating in northern California will continue to operate as an aggregator. It has more school districts and a larger overall gas load because of the colder climate (180 districts; 40 MMcf annually).

"Everyone in California has benefited from the schools' effort [which stimulated California's aggregation program on a pilot basis in 1991]," Solberg said. "We were saving nearly 20% on our gas bill in northern California in 1992; last year we were down around 2-3%."

The northern California program "is alive and well," according to Solberg, because PG&E went through some unbundling before the legislative freeze was put in place last year. "The mandate from the PG&E administration to make this program go has trickled down to the front line operators, the account executives," Solberg said. "But in Southern California, the people who administer the program are sometimes so counterproductive on the littlest things, such as doing DASRS [direct access service requests].....it is a complete fiasco with them."

Richard Nemec, Los Angeles

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