BILL ANALYSIS
AB 6 X1
Page 1
Date of Hearing: January 11, 2001
ASSEMBLY COMMITTEE ON ENERGY COSTS AND AVAILABILITY
Roderick D. Wright, Chair
AB 6 X1 (Dutra) - As Introduced: January 11, 2001
SUBJECT: Electrical restructuring.
SUMMARY : Establishes that utility-owned generation assets shall
be subject to California Public Utilities Commission (CPUC)
regulation until their disposition has been reviewed and
approved by CPUC. Specifically, this bill :
Requires that generation assets owned by any public utility
prior to January 1, 1997, and subject to rate regulation by
CPUC, shall continue to be subject to regulation by CPUC until
those assets have undergone market valuation in accordance with
procedures established by CPUC, and CPUC has authorized the
disposition of those assets pursuant to Section 851 of the
Public Utilities Code.
EXISTING LAW :
1)Requires generation assets owned by any public utility prior
to January 1, 1997, and subject to rate regulation, to
continue to be subject to CPUC regulation until those assets
have undergone market valuation.
2)Requires that the valuation of assets, for the purposes of
calculating public utilities' uneconomic costs, be completed
no later than December 31, 2001, using appraisal, sale, or
other divestiture.
3)Provides that, subsequent to market valuation, if the public
utility wishes to retain ownership of non-nuclear generation
assets in the same corporation as the distribution utility,
the public utility shall demonstrate to the satisfaction of
CPUC, through a public hearing, that it would be consistent
with the public interest and would not confer undue
competitive advantage on the public utility to retain that
ownership in the same corporation as the distribution utility.
4)Provides related findings and declarations.
FISCAL EFFECT : Unknown.
AB 6 X1
Page 2
COMMENTS :
Assembly Bill 1890 (Brulte), [Chapter 854, Statutes of 1996]
restructured California's electric industry in order to
establish a competitive generation market. The CPUC, 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. The IOUs have divested most of
their generating assets, including a large number of natural gas
power plants. San Diego Gas and Electric has rights to a
portion of the output of the San Onofre Nuclear Generating
Station. Pacific Gas and Electric (PG&E) and Southern
California Edison (SCE) still own a considerable amount of
generating resources, including hydroelectric facilities. PG&E
owns 3,890 megawatts (MW) of hydroelectric generating capability
made up of 68 powerhouses, and 99 reservoirs. SCE owns 35
powerhouses that generate 1, 173 MW of electricity. (The
combined hydroelectric generation capacity of PG&E and SCE meets
approximately 15 percent of the state's electricity demand).
SCE has an application pending at CPUC to retain its remaining
generation facilities. PG&E recently announced its intention to
retain its remaining generation assets for the next two years.
Under existing law, the IOU generation assets are subject to
rate regulation by CPUC and shall continue to be subject to CPUC
regulation until those assets have undergone market valuation.
This bill deletes the reference to market valuation, and
provides that the remaining generation assets will continue to
be regulated by CPUC until the owner of those assets has applied
to CPUC, in accordance with procedures established by CPUC under
Public Utilities Code Section 851, to dispose of those assets
and has been authorized by CPUC to undertake that disposal. PU
Section 851 requires that when a public utility seeks to divest,
sell, or purchase facilities, they must go before CPUC for
approval.
The Federal Energy Regulatory Commission (FERC), which has
jurisdiction over the wholesale electricity market, recently
issued an order (issued December 15, 2000) which, among other
things, effectively "de-federalized" the IOUs' approximately
25,000 MW of remaining generation resources by allowing
California to exercise its retail ratemaking authority and
regulate this power on a cost-of-service basis.
AB 6 X1
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CPUC, citing an "extraordinary and unforeseen crisis in
wholesale and retail electric power markets in California," is
presently engaged in a proceeding which is evaluating whether it
is in the public interest for the IOUs to divest their remaining
generation facilities.
Suggested Technical Amendment. Legislative intent language
codified by AB 1890 provides that the generation of electricity
"should be open to competition and utility generation should be
transitioned from regulated status to unregulated status through
means of a commission-approved market valuations." (PU Section
330 (l)(2)). This bill deletes the market valuation "trigger"
for deregulation of the assets. The author may wish to consider
modifying or deleting the existing legislative intent language
so that it is in conformance with the intent of this bill.
REGISTERED SUPPORT/OPPOSITION :
Support :
None on file.
Opposition :
None on file.
Analysis prepared by: Joseph Lyons / E. C. & A. / (916)
319-2083