BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
DEBRA BOWEN, CHAIRWOMAN
AB 117 - Migden Hearing
Date: June 25, 2002 A
As Amended: June 19, 2002 FISCAL B
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DESCRIPTION
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 (opt-in community
aggregation).
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 establishes a general exception to the direct
access suspension for community aggregation undertaken by
cities and counties serving their own residents. This bill
changes the procedures governing community aggregation to,
among other things, allow cities and counties to aggregate
on an "opt-out" basis, rather than an "opt-in" basis. This
bill contains provisions to ensure cost recovery from
departing customers.
Existing law requires IOUs to collect a non-bypassable
surcharge in the distribution component of rates to fund
public purpose programs, including energy efficiency and
conservation activities.
This bill requires the IOU to direct a proportional share
of its energy efficiency activities to the community
aggregator's territory.
Existing law requires non-IOU electric service providers
(ESPs) to register with the CPUC, but only if they serve
residential and small commercial customers.
This bill requires all ESPs to register with the CPUC.
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.
Opt-in community aggregation, wherein the governing body of
the community, such as the city council, chooses an
electricity supplier for the entire community, was
discussed but ultimately tabled during the AB 1890 debates.
This bill resurrects that concept by permitting the
governing body to select a provider of electricity which
then becomes the default provider for everyone in the
community.
AB 1X, as part of the structure to authorize DWR to
purchase electricity for utility customers, authorized the
CPUC to prohibit additional direct access (including
community aggregation). 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' right to acquire direct access
service after September 20, 2001.
The public goods surcharge and accompanying programs were
established initially by AB 1890 and extended by SB 1194
(Sher), Chapter 1050, Statutes of 2000 and AB 995 (Wright),
Chapter 1051, Statutes of 2000. The public goods surcharge
is a per-kilowatt-hour fee paid by all electric customers
to fund four public goods categories: 1) energy
efficiency; 2) renewable energy sources; 3) research and
development of alternative energy supplies; and 4)
assistance to low-income customers.
The law requires the IOUs to spend specific amounts of
money or percentages of money from the baseline year 1994,
in each of the first three categories, while the fourth,
the low-income assistance program, is a needs-based
program. Because the public goods surcharge is collected
in the distribution component of rates and is
non-bypassable, customers purchasing electricity from a
community aggregator would continue to pay the public goods
surcharge to their IOU.
COMMENTS
1)Opt-in vs. opt-out . Under current law, cities, counties,
special districts, public agencies, and private
individuals and businesses can aggregate their electric
loads on a voluntary basis, provided that each customer
"opts in" to the system. Like other direct access
service, new aggregation arrangements have been suspended
by the CPUC.
This bill changes the burden on the individual customer
because it permits cities and counties to aggregate the
load for every customer within their jurisdiction and
requires the individual customer to "opt-out" if he or
she wants to continue buying power from the applicable
IOU.
While individual consumers, so long as they receive
adequate disclosure, bear some obligation for
understanding the risks, the opt-out change also places a
high consumer-protection burden on city or county
officials, who will be representing their constituents in
an unregulated electricity market not well known for its
emphasis on the needs of consumers. While they are
accountable to voters for their successes or failures,
many will not have the level of sophistication in the
electricity business as a CPUC-regulated utility or a
municipal electric utility.
2)From each according to consumption, to each according
to?"proportional share." This bill requires an IOU to
direct a "proportional share" of its energy efficiency
activities to the territory of a community aggregator.
Unlike a municipal utility, community aggregators have no
means to collect a public good surcharge on their own,
so, like individual direct access customers, they will
rely on the funds collected and spent by the IOU on
programs designed by the IOU and approved by the CPUC.
This bill introduces the concept of a particular group of
customers, in this case a city or county, being entitled
to a proportional share. "Proportional share" is not
defined, but since the public goods surcharge is assessed
according to electricity consumption, the proportional
share would likely be determined according to consumption
as well, rather than other factors such as population or
geographic area.
This represents a departure from the current "public
good" philosophy (whether this philosophy works in
practice in another matter) by entitling certain
communities to services according to what their customers
pay, rather than what they need. The author and
committee may wish to consider amending the bill to
clarify what the share of energy efficiency activities is
proportional to and to allow a community to receive more
or less than a proportional share if the CPUC finds that
a "non-proportional" allocation would be more
cost-effective.
3)Related legislation. AB 80 (Havice), approved by this
committee on June 11 and pending in the Senate
Appropriations Committee, establishes an exemption from
the direct access suspension which would authorize two
cities (Cerritos and San Marcos) to act as community
aggregators and provide direct access service to their
residents.
AB 9XX (Migden), approved by this committee on August 29,
2001 and vetoed by the Governor on October 14, 2001,
changed the procedures governing community aggregation in
the same way as this bill, but contained more general
provisions intended to ensure cost recovery from
departing customers.
According to Governor's veto message, "rapid growth in
direct access necessitates more concise cost-containment
provisions for the remaining IOU customers than those
contained in (AB 9XX), and those provisions should apply
to all direct access contracts."
The cost-containment provisions in this bill are
agreeable to the Administration and essentially identical
to those adopted by this committee for AB 80.
ASSEMBLY VOTES
Assembly Floor (73-0)
Assembly Appropriations Committee (20-0)
Assembly Business and Professions Committee(12-0)
POSITIONS
Sponsor:
Author
Support:
California Public Interest Research Group
California State Association of Counties
City of Berkeley
City of Corona Joint Powers Authority
City of Culver City
East Bay Municipal Utility District
League of California Cities
Pacific Area Communications
Pacific Gas and Electric Company (if amended)
An individual
Oppose:
Southern California Edison
Lawrence Lingbloom
AB 117 Analysis
Hearing Date: June 25, 2002