BILL ANALYSIS AB 1235 Page A Date of Hearing: August 23, 2002 ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE Roderick D. Wright, Chair AB 1235 (Leslie) - As Amended: August 14, 2002 SUBJECT : Generation facilities: sale or transfer. SUMMARY : This bill exempts four Truckee River hydroelectric projects and two hydroelectric projects located on the Naches River in the State of Washington from a prohibition on sale of electric generating facilities by a public utility, which is currently in effect until January 1, 2006. Specifically, this bill : 1)Exempts four run-of-river hydroelectric project works located on the Truckee River and two run-of-river hydroelectric projects<1> in the State of Washington from laws prohibiting public utility sales of electric generation facilities. 2)Declares that a special statute is necessary because a statute of general applicability cannot be enacted under the circumstances. 3)Contains an urgency clause. EXISTING LAW prohibits any public utility from disposing of a facility for the generation of electricity prior to January 1, 2006. FISCAL EFFECT : Unknown. COMMENTS : Section 851 of the Public Utilities Code requires a public utility to obtain California Public Utilities Commission (PUC) approval of utility property that is "necessary or useful" to the utility as it performs its duties to the public. AB X1 6 (Dutra)<2> prohibited the sale of any public utility-owned power plant until January 1, 2006, and required, in any event, that PUC ensure that generation assets remain --------------------------- <1> The projects are the Naches Drop plant and Naches plant, both located on the Wapatox Canal on the Naches River. <2> Chapter 2, Statutes of 2001. AB 1235 Page B dedicated to service for the benefit of California ratepayers. Out-of-state utilities also regulated by California's PUC In 1999, Sierra Pacific Power (SPP) merged with Nevada Power and became the largest utility in the State of Nevada. In approving the merger, the Public Utilities Commission of Nevada (PUCN) and the Federal Energy Regulatory Commission (FERC) ordered SPP to divest themselves of electric generation assets to avoid the potential for them to exercise market power as a result of the merger.<3> Thus, SPP agreed to sell off its municipal water system, which serves Reno and Sparks. Among the assets in the system are four hydroelectric facilities,<4> one in California<5> and three in Nevada. If the sale of these assets to the Truckee Meadows Water Authority is completed, it will also serve to essentially complete the final steps needed to make the Truckee River Operating Agreement (TROA) become operative.<6> The other PUC-regulated electric utility whose principal place of business is currently outside the state is PacificCorp, an Oregon-based company that serves Del Norte and Siskiyou Counties in Superior California. This bill also permits PacificCorp to sell its hydroelectric assets located in the State of Washington, notwithstanding the prohibition in AB X1 6. --------------------------- <3> PUCN and FERC have jurisdiction over 95 percent of SPP's electric generation assets. <4> The total electric output from these facilities is about 10 megawatts, a very small portion of the load in the service area. <5> The hydroelectric facility in California was destroyed during recent floods, but the sale agreement requires SPP to repair the facility in California. <6> The TROA is outlined in federal law, and deals with an equitable interstate allocation of water on Lake Tahoe, and the Carson and Truckee Rivers. Among other things, TROA allows California to make use of its Truckee River Basin water allocation, and permits California to store part of its Truckee River allocation in federal reservoirs for environmental, industrial and municipal use. AB 1235 Page C The Bonneville Power Administration (BPA), in a cost-sharing arrangement with the U.S. Bureau of Reclamation (USBOR), has set a high priority on the purchase of the water rights for Wapatox/Naches Power Plant diversions from the Naches River for the benefit of anadromous fish species.<7> The acquisition of these assets by project serves several purposes from a biological perspective, is a cost share between USBOR and BPA, was a recommended project in the 1994 U.S. Fish and Wildlife Plan, has been approved by Yakima Nation and is part of the Tribal Recovery Plan. The Washington State Department of Fish and Wildlife, Washington Department of Ecology, as well as USBOR and BPA supports the project and sale. REGISTERED SUPPORT / OPPOSITION : Support Sierra Pacific Power Company Nevada Governor Kenny Guinn PacifiCorp Opposition None on file. Analysis Prepared by : Paul Donahue / U. & C. / (916) 319-2083 --------------------------- <7> Anadromous fish are born in fresh water, migrate to the ocean to grow into adults, and then return to fresh water to spawn, and include Salmon, Steelhead Trout, Pacific Cod and Pacific Herring.