BILL ANALYSIS
AB 19 X2
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 19 X2 (Florez)
As Amended June 19, 2001
2/3 vote. Urgency
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|ASSEMBLY: |77-0 |(May 24, 2001) |SENATE: |38-0 |(July 12, |
| | | | | |2001) |
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Original Committee Reference: E. C. & A.
SUMMARY : Exempts dormant electric generating facilities
currently owned by electric utilities that meet specific terms
from provisions under Public Utilities Code Section 377
prohibiting the sale of such power plants prior to January 1,
2006.
The Senate amendments add California Consumer Power and
Conservation Financing Authority (Power Authority) to the list
of acceptable entities to which power generated at purchased
dormant facilities may be purchased subject to cost of service
rates determined by the California Public Utilities Commission
(CPUC).
EXISTING LAW prohibits any facility for the generation of
electricity owned by a public utility prior to January 1, 1997,
to be disposed of prior to January 1, 2006.
AS PASSED BY THE ASSEMBLY , this bill specified that facilities
owned by a public utility prior to January 1, 1997, which have
been out of service at least 10 years and which have not been
permitted for at least five years, qualify for an exemption from
Public Utilities Code Section 377. The exemption applies if the
facility offers to enter into a contract to sell generated power
to the California Department of Water Resources (DWR) for
initial and continuing available capacity subject to
cost-of-service pricing and CPUC regulation.
FISCAL EFFECT : Unknown
COMMENTS : In response to the escalating power crisis in
California, AB X1 6 (Dutra), Chapter 2, Statutes of 2001, First
Extraordinary Session, amended existing Public Utilities Code
Section 377, relating to the sale of generation assets of public
AB 19 X2
Page 2
utilities. The previous version of the code section applied to
all non-nuclear generation assets of utilities and required that
facilities owned prior to January 1, 1997, could not be sold
prior to January 1, 2006. The current version of Public
Utilities Code Section 377, as enacted in January of 2001
includes nuclear power plants in the group of plants which
cannot be sold by utilities and which must remain under CPUC
regulation. AB X1 6 was enacted in order to preserve native
generation assets within California and to encourage investor
owned utilities (IOUs) to repower dormant facilities to provide
generated electricity at reasonable rates.
Prior to AB X1 6 taking effect in January 2001, Pacific Gas and
Electric Company (PG&E) filed an application with CPUC to sell
its Kern River Facility, which had long been dormant. As a
statutory matter, when Public Utilities Code Section 377 was
amended to include all generating facilities, the proposed sale
of the Kern River Facility became legally moot. On April 3,
2001, CPUC voted out a decision in the Kern River case, not
allowing the sale to go through and ordering PG&E to repower the
facility as soon as possible. One of the five CPUC
Commissioners indicated that Public Utilities Code Section 377
made the transaction impossible. Among the four Commissioners
voting on the matter, two expressed grave concerns with yet
another generation asset being sold to an out-of-state company
in addition to the prohibition on sale as the reason for
disallowing the sale.
The CPUC decision on Kern River stated the policy that it is in
the public interest to retain the generation assets with the
utility under cost-of-service regulation. Since the Kern River
purchase proposal involves financing through DWR, CPUC asserted
that the same financing could be obtained by PG&E to repower the
plant and provide electricity subject to cost-of-service
regulation. Subsequent to the CPUC decision, PG&E filed Chapter
11 bankruptcy in federal court, which leaves the handling of
existing assets under the control of the federal bankruptcy
judge, including sale or other disposition of existing assets.
This bill addresses CPUC's concerns with sale of existing
utility owned generation facilities to out-of-state interests by
requiring that the purchaser offer power for sale to DWR for
initial and continuing available power on a cost-of-service
basis subject to CPUC regulation. Both the policy of CPUC and
the stated intent of AB X1 6 indicate that providing generation
AB 19 X2
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at cost of service subject to CPUC regulation are desired to
ensure continued benefit to California ratepayers, as is
retaining these assets within the state, not selling them to out
of state generators.
Under the bankruptcy scenario, the situation becomes decidedly
more complicated and mandates as to disposition of the assets is
largely taken out of legislative control. The state, either
through CPUC police powers in a state of emergency, or through
executive powers in such a situation, could attempt to seize the
asset and might be able to bring that matter before a state
court to retain the plant and re-power to generate much needed
electricity. In all practicality it is unlikely a federal
bankruptcy judge would entertain the sale of a dormant facility
before resolution of the entire bankruptcy proceeding was at
hand.
Analysis Prepared by : Kelly Boyd / E. C. & A. / (916)
319-2083
FN: 0001944