BILL ANALYSIS
AB 60 X1
Page 1
( Without Reference to File )
ASSEMBLY THIRD READING
AB 60 X1 (Hertzberg)
As Amended March 19, 2001
2/3 vote. Urgency
ENERGY 17-0 APPROPRIATIONS 19-0
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|Ayes:|Wright, Pescetti, Briggs, |Ayes:|Migden, Bates, Alquist, |
| |Canciamilla, Diaz, Dutra, | |Aroner, Ashburn, Cedillo, |
| |Florez, Jackson, Keeley, | |Correa, Daucher, |
| |Migden, Oropeza, Reyes, | |Goldberg, Maldonado, |
| |Richman, Steinberg, | |Robert Pacheco, Papan, |
| |Vargas, Wesson, Zettel | |Runner, Shelley, |
| | | |Simitian, Reyes, Wesson, |
| | | |Wiggins, Zettel |
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SUMMARY : 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 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.
EXISTING LAW:
1)Provides for exclusive federal jurisdiction over wholesale
rates of electricity under the Federal Power Act (FPA).
2)Provides that wholesale electricity rates shall be just and
reasonable under FPA
3)Provides CEC with the exclusive authority to approve the
siting of thermal power plants 50 megawatts (MW) or greater in
generating capacity.
4)Authorizes DWR to enter into contracts for the purchase of
electric power and then sell it directly or indirectly to
electric consumers in California.
AB 60 X1
Page 2
FISCAL EFFECT : Unknown
COMMENTS : Keeping California's Generating Capacity in State.
Much attention has been paid to the sale by merchant generators
to entities outside the state since the dramatic increases in
wholesale electricity prices, which began to occur in May of
2000. In past years, when 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% 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 avoid
discouraging other states from selling California electricity is
significant. This bill requires that as a condition of
certification by 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.
Essentially this bill encourages new generators to sell to
California electrical corporations, munis or 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. This bill provides that 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.
AB 60 X1
Page 3
This bill establishes 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.
Analysis Prepared by : Kelly Boyd / E. C. & A. / (916)
319-2083
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