BILL ANALYSIS
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THIRD READING
Bill No: AB 1X
Author: Keeley (D), Migden (D), and Hertzberg (D)
Amended: 1/31/01 in Senate
Vote: 27 - Urgency
SENATE ENERGY, U.&C. COMMITTEE : 6-2, 1/25/01
AYES: Bowen, Alarcon, Speier, Vasconcellos, Sher, Vincent
NOES: Morrow, Dunn
SENATE APPROPRIATIONS COMMITTEE : 7-2, 1/31/01
AYES: Alpert, Bowen, Escutia, Karnette, Murray, Perata,
Speier
NOES: Battin, Johnson
ASSEMBLY FLOOR : 60-5, 1/16/01 - See last page for vote
SUBJECT : Power exchanges: Department of Water
Resources: electric
power
SOURCE : Author
DIGEST : This bill (1) authorizes the State Department of
Water Resources (DWR) to enter into long-term power
purchase contracts and to sell the power, directly or
indirectly, to electric consumers in California, (2)
appropriates a total of $500 million from the General Fund
(transfers $495,755,000 to the Electric Power Fund and
appropriates $4,245,000 to DWR for the administrative costs
in 2000-01), (3) authorizes DWR to sell revenue bonds, and
(4) repeals a prohibition on electrical corporations from
CONTINUED
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purchasing electricity from any exchange other than the
Power Exchange.
Senate Floor Amendment of 1/31/01 makes a clarifying
change. The bill contains a provision which insulates
residential usage up to 130 percent of the baseline
allowance from any potential rate increase. Language taken
in Senate Appropriations Committee inadvertently modified
and confused that provision. This amendment strikes that
confusing language.
ANALYSIS : Assembly Bill 1890 (Brulte), Chapter 854,
Statutes of 1996, restructured California's electric
industry in order to establish a competitive generation
market. The California Public Utilities Commission (PUC),
in D.95-12-063 (as modified by D.96-01-009) required the
investor-owned utilities (IOUs) to divest at least 50
percent of their fossil generating assets. While the IOUs
have divested most of their generating assets, they are
still required to provide distribution service to all
retail customers, and to procure power for customers who do
not choose direct access (i.e., an alternate supplier).
This bill authorizes DWR to:
1. Contract for purchasing power at such prices DWR deems
appropriate, taking into account specified factors.
2. Sell the power at prices which are not more than DWR's
acquisition costs, including transmission, scheduling,
administration, bond payments, General Fund 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 (approximately $13
million), interest on funds advanced, and other related
costs.
3. Sell the power to retail end use customers and, with
specified exceptions, to publicly owned electric
utilities. DWR may not sell power to any local
publicly owned electric utility which is itself a net
seller of power.
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4. Requires the power purchased by DWR to be allocated on
a pro-rata basis.
5. Authorizes DWR to issue revenue bonds, with State
Department of Finance (DOF) and State Treasurer
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).
6. Defines the CPA as the difference between the
generation related component of each electrical
corporation's retail rate and the sum of costs of the
utility's own generation, qualifying facility and
bilateral contracts and ancillary services, and
requires the PUC to determine the amount of the CPA
allocable to the power sold by DWR, and provides that
that amount be paid to DWR upon receipt.
7. Prohibits DWR from entering into any contract after
January 1, 2003.
8. Authorizes DWR to adopt emergency regulations to
implement the power purchase program.
9. Transfers $495,755,000 from the General Fund to the
Electric Power Fund for purposes of the purchase
program, and requires repayment as soon as possible.
10. Appropriates $4,245,000 to DWR for administrative
costs for 2000-01, and provides that in subsequent
years such costs will be subject to the Budget process.
11. Establishes a continuously appropriated fund - the
Department of Water Resources Electric Power Fund - and
provides that interest accrued on monies in the fund
shall remain in the fund. Payments from the fund are
only for the purposes authorized in the bill, and
include:
A. Cost of power and transmission, scheduling and
other related expenses.
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B. Interest at the pooled money investment rate on
cash advances to the fund.
C. Repayment to the General Fund of the amount
advanced in the bill.
D. Payment of bonds or other obligations, and
interest costs.
E. The bill specifies that "neither the full faith
and credit nor the taxing power of the state are or
may be pledged for any payment under any obligation
authorized by this division."
12. For purposes of this bill, authorizes DOF to approve
deficiencies, in an unlimited amount, with ten-day
notification to the Joint Legislative Budget Committee
and Appropriations Committees.
13. Provides, with specified exceptions, that nothing in
the bill authorizes the department to take ownership of
transmission, generation, or distribution assets, as
specified.
14. Authorizes DWR to contract with electrical
corporations for transmission, distribution, billing,
and collection services.
15. Authorizes the 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 percent of baseline
quantities, as specified.
16. Authorizes DWR to hire staff at salaries which exceed
the State Department of Personnel Administration's
standards and contract with public and private entities
to carry out the provisions of the bill. No excess
salary authorized under this provision may be paid on
or after January 1, 2003 and the excess salaries shall
not be considered salary for determining final year
compensation for State Public Employment and Retirement
System retirement purposes.
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17. Requires DWR to report quarterly and annually to the
Legislature and the Governor on activities in the
program.
18. Requires the Bureau of State Audits to conduct a
financial performance audit of the program by December
31, 2001, and issue a final report by March 31, 2003.
19.Authorizes all state agencies and other official state
organizations, and all persons connected therewith, to
give DWR reasonable assistance or other cooperation in
carrying out these provisions, upon the request of DWR.
20.The bill also deletes a statute enacted last year which
allows utilities to utilize only the statutorily created
Power Exchange. The Power Exchange is discontinuing
operations this week.
Related Legislation
SB 7X (Burton), Chapter 3, Statutes of 2001-02, First
Extraordinary Session, provided $400 million to DWR to
allow it to purchase electricity through February 1, 2001
(the contracts themselves can run through February 15,
2001) and also created the Electric Power Fund. This
action was taken with the hope of avoiding rolling
blackouts throughout the state while the Legislature
crafted a mechanism to allow DWR to enter into longer term
contracts to buy a certain amount of electricity for the
residents of California.
Comments
Senate Appropriations staff notes that 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.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
Fiscal Impact (in thousands)
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Major Provisions 2000-01 2001-02
2002-03 Fund
Appropriation $495,755* --
-- General
Deficiency
authorization Unknown, potentially
multibillions General
Revenue bond debt Unknown, potentially $10 billion
plus Special**
interest
Offsetting revenues Unknown, potentially multibillions
General/
Special**
Administrative costs $4,245*** Potentially $9,000
annually General
Audits --
Unknown -
*The bill transfers $495,755 from the General Fund to
the Electric Power
Fund.
**Electric Power Fund.
***Appropriated in the bill.
ASSEMBLY FLOOR :
AYES: Strom-Martin, Dickerson, Cox, Nation, Wiggins,
Thomson, Steinberg, Pescetti, Canciamilla, Shelley,
Migden, Aroner, Chan, Matthews, Corbett, Papan, Dutra,
Simitian, Alquist, Diaz, Cohn, Cardoza, Keeley, Salinas,
Florez, Reyes, Maldonado, Jackson, Cardenas, Hertzberg,
Pavley, Koretz, Frommer, Liu, Goldberg, Cedillo, Wesson,
Wright, Romero, Firebaugh, Horton, Washington, Nakano,
Lowenthal, Oropeza, Havice, Chavez, Calderon, Negrete
McLeod, Longville, Leonard, Correa, Bill Campbell,
Daucher, Bates, Wyland, Kehoe, Wayne, Vargas, Kelley
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NOES: Leslie, Cogdill, Wyman, Mountjoy, Hollingsworth
DLW:cm 2/01/01 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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