BILL ANALYSIS
Appropriations Committee Fiscal Summary
1 (Keeley)
Hearing Date: 1/26/01 Amended: 1/25/01
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 contract with
any person or entity to purchase power and then sell it,
either directly or indirectly, to electricity consumers,
and (2) appropriates up to $400 million from the General
Fund (GF) to the Department of Water Resources Electric
Purchases Fund (EPF) for this purpose.
Fiscal Impact (in thousands)
Major Provisions 2000-01 2001-02
2002-03 Fund
Appropriation $400,000* --
-- General
Administrative costs Unknown, probably multimillions
annually General
Audits ----------- Unknown ----------
General
*The bill transfers $400,000 from the General Fund to the EPF.
STAFF COMMENTS: This bill:
authorizes DWR to purchase power at such prices the
department deems appropriate, taking into account
specified factors, including, but not limited to, the
intent of the program to achieve an overall portfolio of
the lowest possible price per kilowatt hour (kWh), and to
then sell it either directly or indirectly to consumers
at cost plus GF repayment and interest on funds advanced;
prohibits DWR from entering into any contract after
January 1, 2003;
transfers up to $400 million from the GF to the EPF for
purposes of the bill, and requires repayment as soon as
possible;
provides that retail end-use customers shall not be
charged more than the PUC authorized rate in effect on
the date power is made available;
authorizes DWR to hire staff at salaries which exceed
Department of Personnel Administration standards and
contract with public and private entities to carry out
the provisions of the bill;
creates the EPF, a continuously appropriated fund, and
provides that interest accrued on monies in the EPF shall
remain in the fund, and 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 to the EPF, and interest at the pooled money
investment rate on funds advanced;
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";
provides that DWR's administrative costs shall be
provided in the annual budget act and that such costs are
not to be included in the contract price of electricity;
provides that if a utility defaults on a contract, the
department is authorized to take possession of its
assets, as specified;
authorizes DWR to borrow money for cash flow purposes.
Notes could not exceed 90 days but may be renewed;
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;
contains legislative findings and declarations; and
makes related changes.
STAFF RECOMMENDS AMENDMENTS TO:
1. Delete the continuous appropriation.
2. Provide for repayment of General Fund monies no later
than 1/1/02 with interest calculated at the pooled money
investment rate.
3. Provide for and cap DWR's administrative costs in this
bill, and specify that they are to be included in the
selling price of energy purchased for sale by the state.
4. Limit the term in which employees may be paid more than
DPA-approved salaries. No "excess" salaries may be paid
after 1/1/03, the date DWR's authority to purchase
electricity terminates.
5. Address transmission, scheduling and other related
costs.
6. Address billing and collection processes.
7. Make the following technical changes (page and line
numbers refer to the 1/16/01 version of the bill):
On page 5, line 29, strike "(5)" and insert "(3)";
On page 7, line 17, after "department" insert "pursuant
to this division";
On page 8, line 4, after "activities" insert "and
expenditures";
On page 8, line 18, after "The" insert "up to";
Clarify that an option may not be exercised after January
1, 2003; and
Strike the reference to interest earned remaining in the
EPF.
STAFF NOTES that there are several fiscal issues still
outstanding: it is unknown how DWR intends to repay the
$51 million in funds otherwise committed for state water
projects and flood control subvention and used to purchase
electricity prior to 1/19/01, and it is unclear which
entity would be responsible for any potential EPF deficit.
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. These funds
have nearly been depleted.