BILL ANALYSIS
AB 60 X1
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Date of Hearing: March 12, 2001
ASSEMBLY COMMITTEE ON ENERGY COSTS AND AVAILABILITY
Roderick D. Wright, Chair
AB 60 X1 (Hertzberg) - As Amended: March 12, 2001
SUBJECT : Electrical generating facilities: certification.
SUMMARY : Specifically, this bill :
1)Requires as a condition of certification by the California
Energy Commission (CEC), that an applicant offer to sell
electricity to a California investor-owned utility (IOU), a
California municipal electrical corporation, or the Department
of Water Resources (DWR) at a terms not less favorable than
the terms of the next offer that the applicant makes for the
sale of electrical power generated by that facility.
2)Contains an urgency statute.
EXISTING LAW:
1) Provides for exclusive federal jurisdiction over
wholesale rates of electricity under the Federal Power Act.
2) Provides that wholesale electricity rates shall be just
and reasonable under the Federal Power Act.
3) Provides the CEC with the exclusive authority to approve
the siting of thermal power plants 50 megawatts (MW) or
greater in generating capacity.
4) Authorizes the DWR to enter into contracts for the
purchase of electric power and then sell it directly or
indirectly to electric consumers in California.
FISCAL EFFECT : Unknown.
COMMENTS :
Keeping California's Generating Capacity in State . Much
attention has been paid to the sale of merchant generators to
entities outside the state since the dramatic increases in
wholesale electricity prices, which began to occur in May of
2000. On some days as much as 15 percent of California's
generating capacity leaves the state in search of higher prices
on the western states' interconnected grid. In past years, when
AB 60 X1
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California was generating at a surplus, the issue of electricity
being sold out of state was not considered important. But in a
time of unprecedented supply constraint, policy makers are now
looking seriously at how to keep as much native generation
within the state as possible to provide adequate supply at
reasonable wholesale prices.
Western States . Today 25 percent of California's generating
capacity comes from out of state generation. The "me-first"
mindset is beginning to gain momentum in other western states as
well. Given that California is a net importer of electricity,
it may not be in the state's best long-term interest to
encourage parochialism with generation supply.
California First, but Not at the Exclusion of other States .
This bill takes a step in the direction of promoting native
generation and provision of in state best available rates. The
tension between the pressing need to add to California's
electricity supply at reasonable wholesale prices and avoiding
discouraging other states from selling California electricity is
significant. The new provisions of this bill provide that as a
condition of certification by the CEC, a new generating facility
applicant will make an offer to enter into contracts to sell its
initial and continuing available capacity on terms not less
favorable than the terms of the next offer that the applicant
makes for the sale of electrical power generated by that
facility.
The new language provides for offers of sale of electricity at
terms at least as favorable as those to be made in the next
offer the generating facility will make for available generating
capacity. This bill still requires that offers on initial
generating capacity be made in this fashion, and such provisions
may be construed as a California first imperative. Removal of
language which would have required that offers be made to
California facilities first at "just and reasonable" rates,
however, removes a lot of the problems with enforceability that
the previous iteration of this bill may have contained. This
bill in its present form allows for market rates to be applied
to California generating supply resulting from certification by
the CEC subject to the terms of this bill. The bill now
requires that an offer be made to the stated California entities
on terms at least as favorable as those made in subsequent
offers for additional, available capacity.
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Essentially this bill now encourages new generators to sell to
California electrical corporations, munis or the DWR, but in a
manner which is consistent with market-based pricing and which
does not reserve all generating capacity on a de facto basis to
California sources. The amended language provides that both
initial generating capacity must be offered to California retail
electricity providers on terms at least as favorable as those of
the next offer to sell, and that offers for subsequent
continuing available capacity must also be made at the same
terms as offered to the next provider.
Pro . This bill seems to have found a balance between the need
to add generation supply at reasonable wholesale prices into
California's purchasing mix without discouraging new generators
from seeking certification by appearing to be bound to sell all
capacity to California at lower rates than they could sell to
other states. This bill should encourage new generation siting
and should help provide for long term additional electricity
supply for California's wholesale market at more reasonable
prices.
Con . As with any provisions which seem to infer that California
should get preferential treatment with regard to available
generation supply, this bill might encourage out-of-state
generators to sell within their own states rather than to
California. However, since this bill allows for mutually
beneficial pricing structures for both in state and out of state
sale, while encouraging initial new California generation to be
sold in state, it would remain in the interest of out of state
generators to sell into California where market-based pricing
would continue to exist.
Suggested Amendment : The author may wish to change the
definition of "municipal corporation" to clarify that these
include all municipal electrical corporations such as "municipal
utility districts" and "public utility districts" and other such
districts to be more inclusive.
REGISTERED SUPPORT/OPPOSITION
Support
None on file.
Opposition
AB 60 X1
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None on file.
Analysis Prepared by : Kelly Boyd / E. C. & A. / (916)
319-2083