BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 19XX|
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THIRD READING
Bill No: AB 19XX
Author: Florez (D), et al
Amended: 6/19/01 in Senate
Vote: 27 - Urgency
SENATE ENERGY, U.&C. COMMITTEE : 10-0, 6/12/01
AYES: Bowen, Morrow, Alarcon, Battin, Dunn, Murray,
Poochigian, Sher, Speier, Vincent
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 77-0, 5/24/01 - See last page for vote
SUBJECT : Facilities: thermal electric power
SOURCE : Author
DIGEST : This bill exempts dormant thermal electric
generating facilities, as specified, from provisions of the
Public Utilities Code prohibiting the sale of such power
plants.
ANALYSIS : Under existing law, the California Public
Utilities Commission (CPUC) must authorize the sale of
property owned by a public utility that is "necessary or
useful in the performance of its duties to the public."
Existing law 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
CONTINUED
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ratepayers.
This bill exempts from the above prohibition a thermal
power plant that hasn't been operated for at least ten
years and that has not had a permit to generate electricity
for at least five years. These criteria are intended to
apply only to Pacific Gas & Electric's (PG&E) Kern facility
in Bakersfield, which it has proposed to sell to the North
American Power Group (NAPG).
This bill requires that the entity purchasing such a power
plant enter into contracts to sell an unspecified amount of
power for an unspecified period of time to the State
Department of Water Resources (DWR), the California
Consumer Power and Conservation Financing Authority, or a
CPUC-regulated utility at cost-of-service rates. Such
contracts are subject to CPUC approval.
Background
Section 851 of the Public Utilities Code requires any
public utility to secure CPUC authorization 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 and is designed to ensure
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 created 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.
AB 6X (Dutra), Chapter 2, Statutes of 2001, resolved the
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confusion by amending Sections 216(h) and 377 to clarify
that generation assets must undergo Section 851 review
prior to their sale. In addition, AB 6X flatly prohibited
the sale of any public utility-owned power plant until
January 1, 2006, and required, in any event, that the CPUC
ensure that generation assets remain dedicated to service
for the benefit of California ratepayers.
Prior to passage of AB 6X, PG&E applied to the CPUC for
authorization to sell its Kern facility to NAPG. Kern was
operated by PG&E from 1948 until 1985, when it was shut
down because less expensive sources of power were available
to meet PG&E's needs. All operating permits for the
facility have since lapsed. According to the author, the
restarted plant will produce 180 megawatts of electricity,
but according to NAPG, it will be a minimum of four months
from the time when the plant is sold to the time when it
begins producing electricity for sale. This time frame
assumes the shortest possible permitting process, running
concurrently with project construction.
On April 3, the CPUC denied PG&E's application to sell the
plant and ordered the utility to restart the Kern facility
itself. The CPUC found the sale was prohibited by AB 6X
and that PG&E had failed to show that the sale was in the
public interest. Recognizing that PG&E may be ill-equipped
to restart Kern itself, the CPUC suggested that PG&E could
contract with NAPG to restore and/or operate the plant.
Following the CPUC ruling, NAPG expressed a willingness to
lease the property from PG&E.
This bill exempts the Kern facility (and any others which
may meet the criteria) from AB 6X's prohibition on sale.
Under the bill, PG&E will still need CPUC approval to sell
the facility. The bill attempts to address the concern
about whether the sale is in the public interest by
requiring that power be sold on a cost-of-service basis
pursuant to contracts which will be subject to CPUC
approval.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 7/12/01)
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City of Bakersfield
Bakersfield Fire Department
Coachella Valley Water District
Congregational Children's Center
Frugatti's Restaurant
KGET - Bakersfield
North American Power Group, Ltd.
Plumbers, Pipe and Refrigeration Fitters Local Union No.
409
The Limousine Scene
28 individuals
ARGUMENTS IN SUPPORT : North American Power Group, Ltd.
(NAPG) states that they are well aware of the high energy
prices California has been subjected to. We are looking
forward to being part of the solution by committing
ourselves to a long-term contract that will protect the
people of California from "price gouging."
By approving the sale of PG&E's Kern Power Plant to NAPG,
Californians get the best of both worlds - the advantages
of both regulation and deregulation. We can bring the
plant back to life with the speed and streamlined agility
of a private company, yet we are willing to submit
ourselves to prices similar to the ratemaking methodology
followed by the regulated utilities.
NAPG is willing to enter into a long-term agreement to
dedicate the generating capability at the site and sell
associated energy and energy related services to a
creditworthy California entity for distribution to
California ratepayers on a cost of service basis.
ASSEMBLY FLOOR
AYES: Aanestad, Alquist, Aroner, Ashburn, Bates, Bogh,
Briggs, Calderon, Bill Campbell, John Campbell,
Canciamilla, Cardenas, Cardoza, Cedillo, Chan, Chavez,
Chu, Cogdill, Cohn, Corbett, Correa, Cox, Daucher, Diaz,
Dickerson, Dutra, Firebaugh, Florez, Frommer, Goldberg,
Harman, Havice, Hollingsworth, Horton, Jackson, Kehoe,
Kelley, Koretz, La Suer, Leach, Leonard, Leslie,
Longville, Lowenthal, Maddox, Maldonado, Matthews,
Migden, Mountjoy, Nakano, Nation, Negrete McLeod,
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Oropeza, Robert Pacheco, Rod Pacheco, Papan, Pavley,
Pescetti, Reyes, Richman, Runner, Salinas, Shelley,
Simitian, Strickland, Strom-Martin, Thomson, Vargas,
Washington, Wayne, Wesson, Wiggins, Wright, Wyland,
Wyman, Zettel, Hertzberg
NC:kb 7/12/01 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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