BILL NUMBER: AB 57 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 16, 2001
INTRODUCED BY Assembly Member Wright
DECEMBER 4, 2000
An act to add Section 390.5 to the Public Utilities Code,
relating to public utilities, and declaring the urgency thereof, to
take effect immediately. An act to add Section 332.3
to the Public Utilities Code, relating to public utilities.
LEGISLATIVE COUNSEL'S DIGEST
AB 57, as amended, Wright. Electrical energy: forward
contracts.
(1) The Public Utilities Act imposes various duties and
responsibilities on the Public Utilities Commission with respect to
the purchase of electricity.
This bill would state findings and declarations regarding
long-term contracts for the purchase of electricity and would state
the intent of the Legislature with respect to the procurement of
electricity by an electrical corporation. The bill would declare the
intent of the Legislature that an electrical corporation, as
defined, shall achieve and maintain a portfolio of electricity
supplies for its bundled service customers.
This bill would amend the act to require the commission to reflect
in bundled service rates, and to deem reasonable without engaging in
a reasonableness review, any contract entered into by an electrical
corporation in accordance with guidelines set forth in the bill.
(1) Existing law restructuring the electrical service industry
requires a public utility electrical corporation to pay energy prices
to nonutility power generators based on a methodology prescribed by
the Public Utilities Commission.
This bill would require the commission to immediately establish,
by rule or order, procedures for the preapproval of forward contracts
for the purchase of electrical energy. Those procedures would be
required to provide for the protection of the proprietary information
of utilities and other affected parties. Since a violation of a
rule or order of the commission is a crime, this bill would impose a
state-mandated local program by creating a new crime.
(2) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
(3) This bill would declare that it is to take effect immediately
as an urgency statute.
Vote: 2/3 majority .
Appropriation: no. Fiscal committee: yes. State-mandated local
program: yes no .
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 390.5 is added to the Public Utilities
SECTION 1. (a) The Legislature finds and declares that the
customers of an electrical corporation, as defined in Section 218 of
the Public Utilities Code, will benefit by increased reliance on
long-term contracts, and less reliance on the spot markets, including
the day-ahead and real time markets. This increased reliance on
long-term purchases will bring needed price stability at reasonable
prices to all consumers and may attract new electric supply into the
State of California.
(b) It is the intent of the Legislature to do all of the
following:
(1) Provide guidance for the procurement of electricity by an
electrical corporation.
(2) Establish standards under which the procurement of electricity
by an electrical corporation will be deemed reasonable.
(3) Eliminate the need for after-the-fact reasonableness reviews
of an electrical corporation's electricity procurement contracts,
practices, and related expenses.
SEC. 2. Section 332.3 is added to the Public Utilities Code, to
read:
332.3. (a) It is the intent of the Legislature that, no later
than July 1, 2001, an electrical corporation shall achieve and
thereafter maintain on an annual basis a portfolio of electric supply
commitments for its bundled service customers, which shall consist
of forward contracts sufficient to supply no less than 50 percent,
and no greater than 95 percent forward contracts, with terms up to 10
years in duration, of that portion of the electrical corporations's
supply portfolio that was not already being supplied from generating
resources owned or contracted for by electrical corporations. As long
as an electrical corporation maintains such a portfolio mix, its
portfolio may not be subject to reasonableness reviews by the
commission.
(b) The commission shall reflect in bundled service rates, and
deem reasonable without a reasonableness review, any contract entered
into by an electrical corporation in accordance with the guidelines
set forth in this section or any contract, for which, upon
application therefor by the electrical corporation, the commission
has granted approval. For all of those contracts, there may be no
after-the-fact review, whether based on the individual contracts, the
electrical corporation's portfolio, or otherwise.
(c) The commission shall deem standard forward contracts
reasonable if one or more of the following applies:
(1) Those contracts are entered into pursuant to or compared with
the results of an open, competitive bidding process. One acceptable
form for an open, competitive bid is a request for proposals (RFP).
The commission shall deem reasonable any contract the price of which
is within the range of prices that is no higher than the lowest 25
percent of the bids received during that particular RFP or other
bidding process. An RFP shall be considered open and competitive if
the request was distributed to at least 15 potential suppliers, and
notice of the RFP was posted on the electrical corporation's website
concurrently with the distribution of the RFP or the procurement
through electricity exchanges or brokerage services which may also
include electronic platforms with access to more than 15 potential
suppliers.
(2) The price of the contract is lower than the electrical
corporation's then-current volume-weighted portfolio cost as
calculated by the electrical corporation. However that portfolio
cost shall be determined excluding any generation assets retained by
the electrical corporation.
(3) The contract was entered into by the electrical corporation
through the Independent System Operator or any other market or power
exchange recognized by the commission.
(4) The contract was executed by the electrical corporation before
January 1, 2001.
(d) The commission shall deem a nonstandard contract for
electricity reasonable if the contract price is below the electrical
corporation's then-current volume-weighted portfolio cost as
calculated by the electrical corporation, assuming an equivalent
level of annual production. However, that portfolio cost shall be
determined excluding any generation assets retained by the electrical
corporation. The fuel costs associated with those contracts are
deemed reasonable. As used in this subdivision, the term
"nonstandard contract for electricity" includes a tolling agreement,
a peaking service agreement, a load-following service agreement, a
capacity agreement, an exchange agreement, an ancillary services
agreement, or another agreement for a service that is not traded on
an exchange.
(e) Electrical corporations may enter into financial and other
contracts to moderate the price risk associated with long-term
forward contracts, including natural gas used to produce power under
these contracts. Those contracts may be gas-based or
electricity-based. Those contracts and the premiums paid by the
electrical corporations for those contracts also shall be deemed
reasonable if the contracts are entered into by the electrical
corporation for the purpose of hedging the price risk associated with
the electrical corporation's procurement portfolio.
(f) A purchase transaction entered into between an electrical
corporation and a renewable energy developer shall be deemed
reasonable if contract prices to the electrical corporation for
renewable energy are less than 115 percent of the average of the
lowest bid established pursuant to paragraph (1) of subdivision (c).
(g) Under the protection of Section 583, each electrical
corporation shall file quarterly with the commission its long-term
forward contracts and financial contracts, together with an
explanation of how those contracts meet the guidelines set forth in
this section. The commission may verify the accuracy of these
submissions for the sole purpose of ensuring compliance with these
guidelines.
(h) The commission shall adopt a ratemaking mechanism that ensures
that the existing bundled service customers as of the date an
electrical corporation enters into a bilateral contract to serve
those customers remain responsible for, and pay, their proportionate
share of the electrical corporation's obligations under each
contract. Code, to read:
390.5. Notwithstanding any other provision of law, the commission
shall immediately establish, by rule or order, procedures for the
preapproval of forward contracts, including, but not limited to,
bilateral contracts, for the purchase of electrical energy. Those
procedures shall provide for the protection of the proprietary
information of utilities and other affected parties.
SEC. 2. No reimbursement is required by this act pursuant to
Section 6 of Article XIIIB of the California Constitution because the
only costs that may be incurred by a local agency or school district
will be incurred because this act creates a new crime or infraction,
eliminates a crime or infraction, or changes the penalty for a crime
or infraction, within the meaning of Section 17556 of the Government
Code, or changes the definition of a crime within the meaning of
Section 6 of Article XIIIB of the California Constitution.
SEC. 3. This act is an urgency statute necessary for the immediate
preservation of the public peace, health, or safety within the
meaning of Article IV of the Constitution and shall go into immediate
effect. The facts constituting the necessity are:
In order to immediately establish procedures for the preapproval
of forward contracts for the purchase of electrical energy, thereby
providing a way of reducing electricity consumer exposure to volatile
electrical energy market prices, it is necessary that this act take
effect immediately.