BILL ANALYSIS Appropriations Committee Fiscal Summary ------------------------------------------------------------ | |57(Wright) | |-------------------------------+----------------------------| | | | |-------------------------------+----------------------------| |Hearing Date: 9/14/01 |Amended: 7/18/01 and | | |proposed to be amended | |-------------------------------+----------------------------| |Consultant: Lisa Matocq |Policy Vote: E, U & C | | |5-3 | | | | ------------------------------------------------------------ ____________________________________________________________ ___ BILL SUMMARY: AB 57 restructures the "reasonableness review" process, conducted by the Public Utilities Commission (PUC), for energy procurement contracts of electrical corporations (ECs), directs ECs to establish and maintain a diversified procurement portfolio, and makes related changes. Fiscal Impact (in thousands) Major Provisions 2001-02 2002-03 2003-04 Fund PUC $600 annually*, potentially offset by fee Special* revenues Office of Ratepayer $350 annually, potentially offset by fee Special* Advocate (ORA) revenues *Appropriated in the bill. Public Utilities' Reimbursement Account (PURA) STAFF COMMENTS: The author intends to propose substantive amendments which are reflected in this analysis. Current law requires investor-owned utilities' rates to be just and reasonable, and authorizes the PUC to conduct a "reasonableness review" of such charges. This bill, among other things, is intended to eliminate the need for after-the-fact reasonableness reviews by requiring ECs to submit procurement plans in advance. Existing law also prohibits the Department of Water Resources (DWR) from entering into power purchase contracts after January 1, 2003. The bill: requires each EC to submit to the PUC a procurement plan, by a specified date, that contains certain components such as (1) a competitive procurement process, and (2) a diversified portfolio of both short- and long-term contracts, authorizes the PUC to, until January 1, 2006, establish balancing accounts for each of the ECs to track the differences between recorded revenues and costs incurred, and to adjust rates or issue refunds to amortize a balancing account whenever it is under- or over-collected by more than 5% of the EC's actual recorded generation revenues for the prior calendar year, appropriates $600,000 to the PUC from the PURA, requires the PUC to adopt a plan no later than 60 days prior to the proposed date by which the EC intends to resume procurement, allows the PUC to periodically review and modify the plan, requires the PUC to, by January 1, 2002, determine the allocation of electricity to be provided by DWR, authorizes the PUC to contract out for risk management/strategy services, Page Two AB 57 (Wright) allows an EC with less than 500,000 retail customers to be exempted from these provisions, requires the PUC to, prior to its approval of any divestiture of generation assets owned by an EC on September 1, 2001, determine the impact of the divestiture on the EC's procurement rates, and allows approval only if the PUC determines that the divestiture will result in net ratepayer benefits, and makes related changes. Increased costs to the PUC are about $600,000 annually. In addition, the ORA estimates increased costs of about $350,000 annually. PURA revenues are derived from an annual fee charged by the PUC to public utilities, sufficient to cover the PUC's annual budget. Therefore, increased costs should be recovered through fee revenues. SB 997 (Morrow), pending in the Senate, allows the use of forward or bilateral contracts.