BILL ANALYSIS 1
1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
DEBRA BOWEN, CHAIRWOMAN
AB 6X - Dutra & Pescetti
Hearing Date: January 17, 2001 A
As Amended: January 16, 2001 FISCAL
B
X
1
6
DESCRIPTION
This bill clarifies that public utility-owned generation
assets remain regulated by the California Public Utilities
Commission (CPUC), until the CPUC authorizes their disposal
under Section 851 of the Public Utilities Code.
The bill further flatly prohibits the sale of any public
utility-owned power plant until January 1, 2006, and
requires the CPUC to ensure that generation assets remain
dedicated to service for the benefit of California
ratepayers.
KEY QUESTIONS
1.Should utilities be required to secure explicit
authorization from the CPUC prior to disposing of
generation assets?
2.Should there be an outright ban on the sale of utility
power plants for five years?
BACKGROUND
Section 851 of the Public Utilities Code requires any
public utility, such as Pacific Gas and Electric (PG&E),
Southern California Edison (SCE) and San Diego Gas and
Electric (SDG&E), to secure authorization from the CPUC
prior to disposing of any property "necessary or useful in
the performance of its duties to the public."
The authority conferred to the CPUC in Section 851, which
dates back to 1915 and the original Railroad Commission, is
fundamental to utility regulation - ensuring that the CPUC
maintains the powers and functions necessary to protect the
public interest. In the case of an application to sell a
power plant, CPUC review under Section 851 would entail a
finding of public interest and environmental review under
the California Environmental Quality Act (CEQA).
AB 1890 (Brulte), Chapter 854, Statutes of 1996, added
Sections 216(h) and 377 to the Public Utilities Code.
These sections create some confusion with respect to the
CPUC's authority to review and approve the disposition of
generation assets by suggesting that these assets may be
released from CPUC regulation simply as a consequence of
the market valuation required by AB 1890.
This bill resolves the confusion by amending Sections
216(h) and 377 to clarify that generation assets must
undergo Section 851 review prior to their sale. In
addition, the bill flatly prohibits the sale of any public
utility-owned power plant until January 1, 2006, and
requires, in any event, that the CPUC ensure that
generation assets remain dedicated to service for the
benefit of California ratepayers.
The generation assets in question - those that are retained
by the utilities - are PG&E's hydroelectric system and its
Diablo Canyon nuclear plant; SCE's hydroelectric system,
its interest in the San Onofre nuclear plant and its
interest in the Mohave coal-fired plant in Arizona; and
SDG&E's interest in the San Onofre nuclear plant.
COMMENTS
1.Five-year ban. This bill's outright ban on divestiture
of power plants until 2006 may go beyond the initial
purpose of ensuring that generation assets are not
deregulated simply as a consequence of market valuation.
This provision may limit PG&E's or SCE's ability to
undertake projects which may very well be in the public
interest, such as decommissioning of uneconomic
hydroelectric facilities to achieve water quality and
aquatic habitat goals.
Utilities have also suggested that they may be unable to
offer power plants as collateral to secure loans.
Arguably, risking the fate of utility power plants by
offering them as collateral when unregulated generators
and marketers are the utilities' primary creditors is not
a desirable arrangement from a ratepayer perspective.
2.Prior legislation. SB 1095 (Bowen) in the 1999-2000
Legislative Session was substantially similar to ABX1 6.
SB 1095 also amended Sections 216(h) and 377 of the
Public Utilities Code to explicitly require Section 851
review. SB 1095 was defeated in the Assembly Utilities
and Commerce Committee on August 23, 1999.
ASSEMBLY VOTES
Assembly Energy Costs & Availability Committee(17-1)
Assembly Appropriations Committee (17-2)
Assembly Floor (61-10)
POSITIONS
Sponsor:
Author
Support:
None on file.
Oppose:
None on file.
Lawrence Lingbloom
AB 6X Analysis
Hearing Date: January 17, 2001