BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
DEBRA BOWEN, CHAIRWOMAN
AB 1724 - Pavley Hearing Date:
June 26, 2001 A
As Amended: May 31, 2001 FISCAL B
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DESCRIPTION
Current law provides for a surcharge on electric bills to pay
for energy efficiency, renewable energy, and research,
development, and demonstration (RD&D) projects. The authority
to impose this surcharge sunsets on January 1, 2012. As of
January 1, 2002, public entities aren't eligible to receive any
customer credits for renewable energy programs.
This bill alters that limitation on public entities by
permitting those that have contracts that were in effect on
January 1, 2001, to continue receiving customer credits for
renewable energy through January 1, 2012.
BACKGROUND
The electric surcharge to pay for energy efficiency, renewable
energy, and RD&D projects was created in the original electric
restructuring legislation, AB 1890 (Brulte), Chapter 854,
Statutes of 1996. These activities had always been supported
through customer charges, but AB 1890 made those charges
explicit, non-bypassable, and established specific funding
levels which were to be met through a per kilowatt hour
surcharge paid by all electric customers, including public
entities.
The public goods surcharge amounts to less than 3% of an
electricity customer's bill. This surcharge was initially
established for four years and was scheduled to end on December
31, 2001, prior to the enactment of SB 1194 (Sher), Chapter
1050, Statutes of 2000, and AB 995 (Wright), Chapter 1051,
Statutes of 2000, made various modifications to the programs and
extended the authority to impose the surcharge for 10 years.
The renewables portion of the surcharge is a $135 million
program administered by the California Energy Commission (CEC)
that has five components, including production incentives to
energy producers, customer education programs, and customer
credits for the use of renewable energy. Those credits are
$0.01/kilowatt hour (kwh) and are credited to all direct access
customers. The maximum annual credit is $1,000 per meter with
large customers limited to an aggregate credit of $15 million
out of the total program component cost of $75 million. About
100,000 customers participate in the customer credit program,
4%-16% of which are made up of local governments. As part of the
agreement to extend the renewable program, SB 1194 and AB 995
specifically made public entities ineligible for the customer
credits.
COMMENTS
1)That Was Then, This Is Now . Last year, when the agreement to
extend the public goods surcharge for ten years and to
eliminate the ability of public entities to receive customer
credits was made, the decision was based in part on the notion
that local governments have other ways to fund renewable
energy programs. Assuming that was the case, the argument was
there was no reason to permit public entities to continue to
draw from the fund and, worse yet, allowing the subsidy to
continue might crowd out other potential recipients, such as
residential customers who would be more deserving of the
subsidy.
Because of the dysfunctional wholesale electric market, the
direct access market has, for the time being, effectively
dried up. The market has led many customers to abandon
service and return to their regulated investor-owned or
municipal utility and has also led some direct access
providers to simply abandon their customers, forcing those
customers to go back to their default provider. This has
reduced participation in the customer credit program by half,
from a peak of about 200,000 customers, and the customer
credit program won't use all of its budget this year.
2)All Deposits, No Withdrawals . As noted in the "Background"
section, all investor-owned utility customers pay the public
goods charge on their bill, including public entities that use
electricity. However, under the terms of SB 1194 and AB 995
from last year, those entities won't be able to have access
(as of January 1, 2002) to the $0.01/kwh customer credit
subsidy that all other direct access customers who use
renewable energy can tap, even though they'll still be
required to pay into the fund. The author and committee may
wish to consider the fundamental equity (or lack thereof) of
the law as it will take effect on January 1, 2002, and whether
it would be appropriate to permit certain public entities to
make "withdrawals" from this fund.
3). . . And Justice (Not) For All . While this bill proposes to
cure one inequity, it inadvertently creates another inequity
in the process. The measure only allows public entities that
have been buying renewable energy since January 1, 2001, and
are currently receiving the $0.01/kwh customer credit to
continue receiving it after January 1, 2002. Consequently,
any public entity that wants to enter into a contract to buy
renewable energy right now, or more likely in a year or two
when the marketplace may return to normal, won't be able to
receive the credit.
As such, the author and committee may wish to consider
eliminating that inequity by deleting Page 5, Lines 1-4, which
bar any new municipal entity from participating in the
customer credit program.
ASSEMBLY VOTES
Assembly Floor (50-25)
Assembly Appropriations Committee (14-7)
Assembly Utilities and Commerce Committee
(11-5)
Assembly Natural Resources Committee
(9-2)
POSITIONS
Sponsor:
City of Santa Monica
Support:
Berkeley City Council
Oppose:
None on file
Randy Chinn
AB 1724 Analysis
Hearing Date: June 26, 2001