BILL ANALYSIS AB 9 X2 Page 1 ASSEMBLY THIRD READING AB 9 X2 (Migden) As Introduced May 15, 2001 2/3 vote. Urgency SUMMARY : Authorizes customers to aggregate their electric loads as individual consumers with private aggregators, or as members of their local community with community choice aggregators. Specifically this bill : 1)Authorizes any municipality or group of municipalities acting together to aggregate their electrical load within its boundaries. 2)Requires the California Public Utilities Commission (CPUC) to authorize municipalities to file for a pro rata share of energy efficiency funds collected from their customers by electrical corporations and authorize the municipality to spend the funds on energy efficiency measures that benefit its customers. 3)Provides for "community choice aggregators" to form either outside the jurisdiction of a municipal utility district (MUD), or within such a district if the MUD did not provide electrical service as of May 14, 2001. EXISTING LAW : 1)Authorizes specified entities to aggregate electrical loads, and defines an "aggregator" as one of those specified entities that provides specified power supply services, including combining the loads of multiple end-use customers and facilitating the sale and purchase of electrical energy, transmission, and other services on behalf of the end-use customers. 2)Requires CPUC to order specified electrical corporations to collect and spend certain funds for prescribed public benefit programs, cost-effective energy efficiency, and conservation. FISCAL EFFECT : Unknown COMMENTS : 1)Broadening the definition of "Aggregator". In the electricity AB 9 X2 Page 2 procurement market, aggregators of electricity purchases benefit from certainty of supply by purchasing in large quantities directly from the wholesale market. An additional benefit of purchasing on the wholesale market is the elimination of pass through charges and padded profits which may occur in retail prices for electricity. This bill eliminates the current, narrow definition of aggregator from Public Utilities Code Section 331 and adds a number of different types of aggregators to this code section to enable wholesale, bulk purchasing of electricity for end-use customers. The broadened definition essentially allows for direct purchases for end-use customers and electricity suppliers, and provides for CPUC to facilitate these types of transactions. Under this bill's provisions a municipal or private aggregator can purchase electricity for residents and businesses absent a negative declaration from any individual consumers. Individual consumers may opt out of the aggregator group without any fee or penalty if they wish, but if they choose to opt back into the aggregator group they must pay a fee. Municipal aggregators may not aggregate electrical load if that load is served by a local publicly owned electric utility as defined in Public Utilities Code Section 9604. This bill appears to protect existing municipal utilities and existing local publicly owned utilities from bypass, and instead has broad provisions for load aggregation which would in part bypass investor owned utilities. 2)Other Legislation. This bill's provisions with regard to aggregator groups appear to conflict with AB 61 X1 (Alquist). AB 61 X1 removed the rebuttable presumption clause (with regard to property being more useful by acquisition) from eminent domain provisions in allowing districts to seize utility property and function as a provider of electric service without approval of CPUC. Similarly, SB 8 X1 (Alarcon) contained provisions for community aggregators which differ from those of this bill. This bill has more benign provisions than AB 61 X1 and does not contemplate seizure of utility property by aggregator groups. This bill does not contain provisions to allow a municipal utility acting as an aggregator to sell electrical service to customers outside its territory, whereas SB 8 X1 does allow for outside the service territory sales. This bill appears to AB 9 X2 Page 3 have more benign terms of service than the other related legislation. 3)Requirements for service - Consumer Protection/Consumer Benefits: The same consumer protections and non-discriminatory provision requirements would apply to private and community aggregators as currently apply to investor owned utilities (IOUs), and any single or group of municipalities seeking to form such an aggregator group has requirements of preparing a statement of intent. The statements include information about organizational structure, rate-setting policies and participant costs, contractual methodologies and other rights and responsibilities of participants, and participation by retail customers in these aggregator groups is voluntary. Another benefit of adding new types of aggregators to existing authorizations in the Public Utilities Code is that municipal aggregators can collect pro rata shares of available energy efficiency and renewable energy funds for purposes including: a) Support for existing renewable energy capacity; and, b) Incentives for installation of new renewable energy capacity. 4)Pro. Especially in an electricity market with both uncertain supply and unstable prices, the ability of customer groups to aggregate load and purchase electricity supply directly at the wholesale level can have long-term benefits for those involved in community aggregator or private aggregator groups. Ultimately, these configurations result in lower consumer prices and can provide for other direct benefits not generally provided in retail end-use purchasing situations. Allowing municipal aggregator customers to obtain pro rata shares of available energy efficiency and renewable funding to provide direct benefit for the programs desired by the participants in the aggregator groups is an added and direct benefit both to the aggregator group and to California. 5)Con. For those individual customers not able to participate in community or private aggregator groups, the retail price of electricity may be higher in the long run. Direct purchases by aggregators remove retail revenue from IOUs at the same AB 9 X2 Page 4 time they are lessening the demand on IOUs and the purchase needs of IOUs. The same detriment can be brought to bear by streaming off energy efficiency and renewable program funds. Analysis Prepared by : Kelly Boyd / E. C. & A. / (916) 319-2083 FN: 0000865