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  
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          <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.

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          <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  














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          <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.