BILL ANALYSIS
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THIRD READING
Bill No: AB 80
Author: Havice (D), et al
Amended: 6/25/02 in Senate
Vote: 21
SENATE ENERGY, U.&C. COMMITTEE : 8-0, 6/11/02
AYES: Bowen, Morrow, Alarcon, Battin, Dunn, Murray, Sher,
Speier
SENATE APPROPRIATIONS COMMITTEE : 9-0, 8/5/02
AYES: Alpert, Battin, Bowen, Burton, Karnette, McPherson,
Murray, Perata, Speier
ASSEMBLY FLOOR : Not relevant
SUBJECT : Aggregation: Magnolia Power Project
SOURCE : City of Cerritos
DIGEST : This bill authorizes the cities participating in
the Magnolia Power Project to aggregate their electricity
loads and provide direct access to their residents.
ANALYSIS : Existing law authorizes retail competition
within investor-owned utility (IOU) service areas (direct
access) and authorizes marketers, public agencies, cities,
counties, and special districts to offer electric service
to customers aggregated on a voluntary basis, provided that
each customer in their jurisdiction agrees to participate
by a positive written declaration (community aggregation).
CONTINUED
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Existing law (AB 1X (Keeley), Chapter 4, Statutes of 2001)
requires the California Public Utilities Commission (CPUC)
to suspend the right of retail customers of IOUs to acquire
electric power service from non-IOU providers until the
Department of Water Resources (DWR) no longer supplies
power to IOU customers. Pursuant to AB 1X, the CPUC has
suspended direct access as of September 20, 2001.
This bill authorizes the cities participating in the
Magnolia Power Project to act as community aggregators and
provide direct access service to their residents. The two
cities are San Marcos and Cerritos and most of the
residents currently receive their electricity from Southern
California Edison.
The bill requires the PUC to develop a cost recovery
mechanism for DWR's uncollected costs, including financing,
of providing service to those customers who subsequently
receive service from the cities of San Marcos and Cerritos.
Background :
In 1996, the Legislature passed AB 1890 (Brulte), Chapter
856, Statutes of 1996, to restructure the electric
industry. One of the key features of electrical
restructuring was the authorization of retail competition
within IOU service areas. AB 1890 ended the service
monopoly of utilities and authorized retail customers to
purchase energy directly from suppliers. These
transactions are known as "direct access." Community
aggregation is a form of direct access where, for example,
a city may act as a purchasing agent on behalf of its
residents.
AB 1X, as part of the structure to authorize DWR to
purchase electricity for utility customers, authorized the
CPUC to prohibit additional direct access. AB 1X permits
the issuance of ratepayer-backed revenue bonds to finance
DWR purchasing costs. To ensure the predictable revenue
stream necessary for the issuance of bonds and prevent
cost-shifting from direct access to bundled service
customers, the CPUC was authorized to prevent additional
migration of IOU customers by suspending direct access.
Pursuant to AB 1X, the CPUC has suspended IOU customers'
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right to acquire direct access service after September 20,
2001.
Comments :
Where will the power come from? The cities affected by
this bill (Cerritos and San Marcos) are partners in the
development of the Magnolia Power Project, along with five
other cities (Anaheim, Colton, Glendale, Burbank and
Pasadena) which operate municipal electric utilities.
Magnolia is currently under review at the California Energy
Commission (CEC). The CEC projects a decision on the
project in August, and, if approved, an on-line date of
August 2004.
According to the author, Cerritos and San Marcos were
relying on direct access to sell their share of the output
of Magnolia to their residents and committed $5 million to
Magnolia prior to the CPUC's suspension of direct access.
Proponents suggest the bill will allow the cities to sell
their share of the output of Magnolia to their residents.
It is unclear whether the cities, absent the enactment of
this bill, would be able to recoup their investment in
Magnolia through other means, such as sale of the power at
wholesale (e.g. via their municipal utility partners).
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
SUPPORT : (Verified 8/20/02)
City of Cerritos (source)
California Municipal Utilities Association
City of Anaheim, Anaheim Public Utilities Department
City of Burbank
City of San Marcos
Discovery Valley Utility
San Elijo Hills
Sempra Energy
Southern California Public Power Authority
NC:jk 8/20/02 Senate Floor Analyses
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SUPPORT/OPPOSITION: SEE ABOVE
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