BILL NUMBER: AB 57 AMENDED
BILL TEXT
AMENDED IN SENATE MAY 15, 2002
AMENDED IN SENATE APRIL 24, 2002
AMENDED IN SENATE SEPTEMBER 14, 2001
AMENDED IN SENATE JULY 18, 2001
AMENDED IN SENATE JULY 9, 2001
AMENDED IN ASSEMBLY APRIL 26, 2001
AMENDED IN ASSEMBLY APRIL 16, 2001
INTRODUCED BY Assembly Member Wright
DECEMBER 4, 2000
An act to add Section 399.10 454.5
to the Public Utilities Code, relating to public utilities, making an
appropriation therefor, and declaring the urgency thereof, to take
effect immediately.
LEGISLATIVE COUNSEL'S DIGEST
AB 57, as amended, Wright. Electrical corporations: procurement
plans.
(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
providing guidance to electrical corporations and the commission for
the procurement of electricity and electricity demand reductions by
an electrical corporation and providing for review by the commission
of procurement plans of electrical corporations.
This bill would amend the act to require the commission to review
and adopt a procurement plan for each electrical corporation in
accordance with elements, incentive mechanisms, and objectives set
forth in the bill.
The bill would authorize the commission to engage a highly capable
independent consultant or advisory service to evaluate risk
management and strategy. The bill would require the commission to
adopt appropriate procedures to ensure the confidentiality of any
market sensitive information submitted in an electrical corporation's
proposed procurement plan or resulting from or related to its
approved procurement plan, and to determine the impact of a proposed
divestiture on an electrical corporations procurement plan.
The bill would allow an electrical corporation that serves less
than 500,000 retail customers within the state to file with the
commission a request for exemption from the provisions of the bill
, which requested exemption the commission would be required
to grant . The bill would require the commission to
grant the exemption upon a showing of good cause.
(2) Existing law makes a violation of the provisions of the Public
Utilities Act a crime.
This bill, by imposing new requirements on electrical
corporations, would expand the scope of that crime, and thus impose a
state-mandated local program.
(3) 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.
(4) The bill would appropriate $600,000 from the Public Utilities
Commission Utility Reimbursement Account to the commission for the
purposes of implementing this bill.
(5) The bill would declare that it is to take effect immediately
as an urgency statute.
Vote: 2/3. Appropriation: yes. Fiscal committee: yes.
State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. It is the intent of the Legislature to do all of the
following:
(a) Provide guidance to electrical corporations and the Public
Utilities Commission for the prospective procurement of electricity
and electricity demand reductions by an electrical corporation.
(b) Ensure, by no later than January 1, 2003, that each electrical
corporation whose customers are currently being served by the
Department of Water Resources will resume procurement for those needs
that are not being met by the Department of Water Resources.
(c) Direct the Public Utilities Commission to review each electric
corporation's procurement plan in a manner that complies with the
commission-adopted integrated resource plan, and
(c) Direct the Public Utilities Commission, consistent with
subdivisions (a) and (b) of Section 701.1 of the Public Utilities
Code, to review each electrical corporation's procurement plan in a
manner that assures creation of a diversified procurement
portfolio, assures just and reasonable electricity rates, provides
certainty to the electrical corporation in order to enhance its
financial stability and creditworthiness, and eliminates the need,
with specified certain exceptions, for
after-the-fact reasonableness reviews of an electrical corporation's
prospective electricity procurement performed consistent with an
approved procurement plan.
SEC. 2. Section 399.10 454.5 is
added to the Public Utilities Code, to read:
399.10. (a) Each electrical corporation shall file a proposed
procurement plan with the commission 60 days after the commission
specifies the allocation of electricity, including quantity,
characteristics, and duration of electricity delivery, to be provided
by the Department of Water Resources under its power purchase
agreements to the customers of the electrical corporation. The
proposed procurement plan shall specify the date the electrical
corporation intends to resume procurement of electricity for its
retail customers, consistent with its obligation to serve, which
shall be referred to for purposes of this subdivision as the
"proposed commencement date." The commission shall review and adopt
a procurement plan as specified in subdivisions (b), (c), and (d) no
later than 90 days prior to the proposed commencement date.
454.5. (a) The commission shall specify the allocation of
electricity, including quantity, characteristics, and duration of
electricity delivery, that the Department of Water Resources shall
provide under its power purchase agreements to the customers of each
electrical corporation, which shall be reflected in the electrical
corporation's proposed procurement plan.
(b) An electrical corporation's proposed procurement plan shall
include, but is not not be limited to,
all of the following:
(1) An assessment of the price risk associated with the electrical
corporation's portfolio, including any utility-retained generation,
existing power purchase and exchange contracts, and proposed
contracts or purchases under which an electrical corporation will
procure electricity, electricity demand reductions, and
electricity-related products and the remaining open position to be
served via spot market transactions.
(2) A definition of each electricity product, electricity-related
product, and procurement related financial product, including support
and justification for the product type and amount to be procured
under the plan.
(3) The duration of the plan.
(4) The duration, timing, and range of quantities of each product
to be procured.
(5) A competitive procurement process under which the electrical
corporation may request bids for procurement-related services,
including the format and criteria of that procurement process.
(6) An incentive mechanism, if any incentive mechanism is
proposed, including the type of transactions to be covered by that
mechanism, their respective procurement benchmarks, and other
parameters needed to determine the sharing of risks and benefits.
(7) The upfront standards and criteria by which the acceptability
and eligibility for rate recovery of a proposed procurement
transaction will be known by the electrical corporation prior to
execution of the transaction. This shall include an expedited
approval process for the commission's review of proposed contracts
and subsequent approval or rejection thereof. The electrical
corporation shall propose alternative procurement choices in the
event a contract is rejected.
(8) Procedures for updating the procurement plan.
(9) A showing that the procurement plan will create or maintain a
diversified procurement portfolio consisting of both short-term and
long-term electricity and electricity-related and demand reductions
products.
(10) The electrical corporation's risk management policy,
strategy, and practices including specific measures of price
stability.
(11) A plan to achieve appropriate increases in diversity of
ownership and diversity of fuel supply of nonutility electrical
generation.
(12) A mechanism for recovery of reasonable administrative costs
related to procurement in the generation component of rates.
(c) The commission shall review and accept, modify, or reject each
electrical corporation's procurement plan. The commission's review
shall consider each electrical corporation's individual procurement
situation, and shall give strong consideration to that situation in
determining which one or more of the features set forth in this
subdivision shall apply to that electrical corporation. A
procurement plan approved by the commission shall contain one or more
of the following features, provided that the commission may not
approve a feature or mechanism for an electrical corporation if it
finds that the feature or mechanism would impair the restoration of
an electrical corporation's creditworthiness or would lead to a
deterioration of an electrical corporation's creditworthiness:
(1) A competitive procurement process under which the electrical
corporation may request bids for procurement-related services. The
commission shall specify the format of that procurement process, as
well as criteria to ensure that the auction process is open and
adequately subscribed. Any purchases made in compliance with the
commission-authorized process shall be recovered in the generation
component of rates.
(2) An incentive mechanism that establishes a procurement
benchmark or benchmarks and authorizes the electrical corporation to
procure from the market, subject to comparing the electrical
corporation's performance to the commission-authorized benchmark or
benchmarks. The incentive mechanism shall be clear, achievable, and
contain quantifiable objectives and standards. The incentive
mechanism shall contain balanced risk and reward incentives that
limit the risk and reward of an electrical corporation.
(3) Upfront achievable standards and criteria by which the
acceptability and eligibility for rate recovery of a proposed
procurement transaction will be known by the electrical corporation
prior to the execution of the bilateral contract for the transaction.
The commission shall provide for expedited review and either
approve or reject the individual contracts submitted by the
electrical corporation to ensure compliance with its procurement
plan. To the extent the commission rejects a proposed contract
pursuant to this criteria, the commission shall designate alternative
procurement choices obtained in the procurement plan that will be
recoverable for ratemaking purposes.
(d) A procurement plan approved by the commission shall accomplish
each of the following objectives:
(1) Enable the electrical corporation to fulfill its obligation to
serve its customers at just and reasonable rates.
(2) Eliminate the need for after-the-fact reasonableness reviews
of an electrical corporation's actions in compliance with an approved
procurement plan, including resulting electricity procurement
contracts, practices, and related expenses. However, the commission
may establish a regulatory process to verify and assure that each
contract was administered in accordance with the terms of the
contract, and contract disputes which may arise are reasonably
resolved.
(3) Complies with the commission-adopted integrated resource plan.
(4)
(3) Ensure timely recovery of prospective procurement costs
incurred pursuant to an approved procurement plan. The commission
shall establish rates based on forecasts of procurement costs adopted
by the commission, actual procurement costs incurred, or combination
thereof, as determined by the commission. The commission shall
establish power procurement balancing accounts to track the
differences between recorded revenues and costs incurred pursuant to
an approved procurement plan. The commission shall review the power
procurement balancing accounts, not less than semiannually, and shall
adjust rates or order refunds, as necessary, to promptly amortize a
balancing account. Until January 1, 2006, this adjustment shall
occur no later than when the power procurement balancing account
adjustment is overcollected or undercollected in an amount that
exceeds 5 percent of the electrical corporation's actual recorded
generation revenues for the prior calendar year excluding revenues
collected for the Department of Water Resources. After January 1,
2006, this adjustment shall occur when deemed appropriate by the
commission consistent with the objectives of this section.
(5)
(4) Moderate the price risk associated with serving its
retail customers, including the price risk embedded in its long-term
supply contracts, by authorizing an electrical corporation to enter
into financial and other electricity-related product contracts.
(6)
(5) Provide for just and reasonable rates, with an
appropriate balancing of price stability and price level in the
electrical corporation's procurement plan.
(e) The commission shall provide for the periodic review and
prospective modification of an electrical corporation's procurement
plan.
(f) The commission may engage a highly capable independent
consultant or advisory service to evaluate risk management and
strategy. The reasonable costs of any consultant or advisory service
is a reimbursable expense and eligible for funding pursuant to
Section 631.
(g) The commission shall adopt appropriate procedures to ensure
the confidentiality of any market sensitive information submitted in
an electrical corporation's proposed procurement plan or resulting
from or related to its approved procurement plan, including, but not
limited to, proposed or executed power purchase agreements, data
request responses, or consultant reports, or any combination,
provided that the Office of Ratepayer Advocates and other consumer
groups that are nonmarket participants shall be provided access to
this information under confidentiality procedures authorized by the
commission.
(h) Nothing in this section alters, modifies, or amends the
commission's oversight of affiliate transactions under its rules and
decisions or the commission's existing authority to investigate and
penalize an electrical corporation's alleged fraudulent activities,
or to disallow costs incurred as a result of gross incompetence,
fraud, abuse, or similar grounds.
(i) An electrical corporation that serves less than 500,000
electric retail customers within the state may file with the
commission a request for exemption from this section, which the
commission shall grant upon a showing of good cause.
(j) (1) Prior to its approval pursuant to Section 851
of any divestiture of generation assets owned by an electrical
corporation on September 1, 2001 or after the
date of enactment of the act adding this section , the
commission shall determine the impact of the proposed divestiture on
the electrical corporation's procurement rates and shall approve a
divestiture only to the extent it finds, taking into account the
effect of the divestiture on procurement rates, that the divestiture
is in the public interest and will result in net ratepayer benefits.
Any
(2) Any electrical corporation's procurement necessitated as
a result of the divestiture of generation assets on or after the
effective date of the act adding this subdivision shall be subject to
the mechanisms and procedures set forth in this section only if its
actual cost is less than the recent historical cost of the divested
generation assets , or if the commission deems that
procurement eligible when it approves the divestiture.
.
(3) Notwithstanding paragraph (2), the commission may deem
proposed procurement eligible to use the procedures in this section
upon its approval of asset divestiture pursuant to Section 851.
SEC. 3. Nothing in this act is intended to imply that procurement
of electricity from third parties in a wholesale transaction
is the preferred method of fulfilling an electrical corporation'
s obligation to serve its customers at just and reasonable rates.
SEC. 4. No reimbursement is required by this act pursuant to
Section 6 of Article XIII B 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 XIII B of the California
Constitution.
SEC. 5. The sum of six hundred thousand dollars ($600,000) is
hereby appropriated from the Public Utilities Commission Utility
Reimbursement Account in the General Fund to the Public Utilities
Commission for the purposes of implementing this act.
SEC. 6. 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 that the Public Utilities Commission may undertake the
review and approval of each electric corporation's procurement plan
at the earliest possible time, in a manner consistent with this act,
it is necessary that this act take effect immediately.