BILL ANALYSIS
Appropriations Committee Fiscal Summary
1 (Keeley)
Hearing Date: 1/30/01 Amended: 1/29/01
Consultant: Lisa Matocq Policy Vote: E, U & C
6-2
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BILL SUMMARY: AB 1X, an urgency measure, (1) authorizes
the Department of Water Resources (DWR) to purchase power
and then sell it either directly or indirectly to
consumers, (2) appropriates $500 million from the General
Fund (GF) to the Electric Power Fund for this purpose, and
(3) authorizes DWR to sell revenue bonds.
Fiscal Impact (in thousands)
Major Provisions 2000-01 2001-02
2002-03 Fund
Appropriation $500,000* --
-- General
Deficiency authorization Unknown, potentially multibillions
General
Revenue bond debt Unknown, potentially $10 billion plus
interest Special**
Offsetting revenues Unknown, potentially
multibillions Gen/Spec.**
Administrative costs Potentially $8,000-$10,000 annually
General
Audits ----------- Unknown ----------
General
*The bill transfers $500,000 from the General Fund to the EPF.
**Electric Power Fund.
STAFF COMMENTS: This bill was heard on 1/26/01 and put
over primarily to review Department of Finance (DOF)
suggested amendments. As amended on 1/29/01 this bill:
authorizes DWR to contract for the purchase of power at
prices DWR deems appropriate, taking into account
specified factors, and to sell it at prices which
include the costs of acquisition, transmission,
scheduling, administration, bond payments, GF repayment
of appropriations made to the Electric Power Fund
pursuant to SB 7X (Burton), and amounting to $400 million
and monies expended by DWR pursuant to the Governor's
Emergency Proclamation (approx. $13 million), interest on
funds advanced, and other related costs;
authorizes DWR to issue revenue bonds, with DOF approval,
at prices, terms, and maturity dates to be determined by
DWR, and specifies that bonds may not be issued in an
amount that exceeds four times the annual revenues
generated by the "California Procurement Adjustment"
(CPA);
defines the CPA as the difference between each electrical
corporation's retail rate and the sum of costs of the
utility's own generation, qualified facility and
bilateral contracts, transmission, and distribution, and
requires the Public Utilities Commission (PUC) to
determine the amount of the CPA allocable to the power
sold by DWR, and provides that that amount be paid to
DWR;
requires the power purchased by DWR to be allocated on a
pro-rata basis;
prohibits DWR from entering into any contract after
January 1, 2003; however, it appears that options or
"forward contracts" could result in sales beginning after
that date;
transfers up to $500 million from the GF to the EPF and
requires repayment as soon as possible;
for purposes of this bill, authorizes DOF to approve
deficiencies, in an unlimited amount, with 10-day
notification (rather than 30-day as in the Section 27
process) to the Joint Legislative Budget Committee (and
not to Appropriations Committees as in the Section 27
process);
authorizes DWR to contract with electrical corporations
for transmission, distribution, billing, and collection
services;
authorizes PUC to set rates to cover revenue requirements
of DWR's power purchasing program. It prohibits any
future rate increase for residential customers for usage
up to 130% of baseline quantities, as specified;
authorizes DWR to hire staff at salaries which exceed
Department of Personnel Administration standards;
establishes the EPF, a continuously appropriated fund,
and provides that payments from the fund may only be made
for specified purposes, including, but not limited to,
the cost of purchased power, repayment of GF advances as
specified, payment of bonds or other obligations,
interest, and admin. costs;
specifies that "neither the full faith and credit nor the
taxing power of the state are pledged for any payment
under any obligation authorized by this division";
requires DWR to report quarterly and annually to the
Legislature and the Governor on its activities, and
requires the Bureau of State Audits to conduct a
financial and performance audit of the program by
December 31, 2001, and issue a final report by March 31,
2003; and
makes related changes.
STAFF RECOMMENDS AMENDMENTS TO:
1. Delete the continuous appropriation and require the
program to be reviewed and funded in the budget process.
2. Provide for repayment of General Fund monies no later
than 1/1/02.
3. Cap DWR's administrative costs.
4. Include a sunset.
5. Limit the term in which employees may be paid more than
DPA-approved salaries by providing that no "excess"
salaries be paid after 1/1/03, the date DWR's authority to
purchase electricity terminates. Provide that "excess"
salaries are treated as a bonus and not considered salary
for determining final-year compensation for PERS retirement
purposes.
6. Require DOF to notify the Appropriations Committee
Chairs of deficiency requests, and to notify the Joint
Legislative Budget and Appropriations Committees upon bond
issuance.
7. Further clarify on page 17, lines 24 and 25 that the
EPF is already established.
STAFF NOTES that (1) based on the expenditure of $400
million appropriated by SB 7X, Burton) in approximately 10
days, there is considerable General Fund pressure to
continue power purchases at a potential cost of $1.2
billion per month until such time as revenue bonds are
issued, and (2) it is unclear why the amendments address
the $13 million but not the $38 million DWR spent to
purchase power from funds otherwise committed for other
purposes. SB 7X (Burton, Ch. 3, St. of 1999-2000, First
Extraordinary Session), appropriated $400 million from the
General Fund to DWR to purchase and sell electricity on a
short-term basis, and created the Electric Power Fund.