BILL ANALYSIS
SB 7 X1
Page 1
Date of Hearing: January 18, 2001
ASSEMBLY COMMITTEE ON ENERGY COSTS AND AVAILABILITY
Roderick D. Wright, Chair
SB 7 X1 (Burton) - As Amended: January 18, 2001
SUBJECT : Public utilities
SUMMARY : Authorizes, through February 1, 2001, the Department
of Water Resources (DWR) to buy and sell electric power, and
appropriates $400 million from the General Fund to DWR for that
purpose. Specifically, this bill :
1)Finds and declares an urgent, short-term need for the state to
assist in meeting the public's electricity needs.
2)Authorizes, for a period not to exceed 12 days, DWR to
purchase electric power from any party and make that electric
power available at the cost of its purchase, plus any
administrative costs, transmission and scheduling costs, and
other related costs, incurred by DWR, to the California
Independent System Operator (CAISO), public utility electrical
corporations, or retail end-use customers.
3)Provides that administrative costs are not to exceed $1
million.
4)Provides that no purchases of electric power shall be entered
into pursuant to these provisions after February 1, 2001, and
that no purchases of electric power entered into pursuant to
these provisions may extend in duration past February 15,
2001.
5)Provides that purchases made pursuant to these provisions are
separate and apart from State Water Resources Development
System, and the obligations incurred and funding of those
contracts and arrangements shall be maintained by DWR,
separate and distinct from the State Water Resources
Development System.
6)Requires DWR to use any and all means feasible to secure the
state's interest in the recovery of funds expended.
7)Establishes the Department of Water Resources Electric Power
Fund.
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8)Requires the California Public Utilities Commission (CPUC) to
adopt and implement emergency regulations to effectuate
delivery and payment mechanisms relating to the sale of
electric power purchased by DWR directly or indirectly to the
California Independent System Operator (CAISO), public
utilities, or retail end-use customers.
9)Provides that in no event may a ratepayer be charged more than
their existing retail rate.
10)Transfers $400 million from the General Fund to DWR Electric
Power Fund.
11)Sunsets on February 2, 2001, and is repealed on January 1,
2002.
EXISTING LAW authorizes DWR, under such regulations and upon
such terms, limitations, and conditions as it prescribes, may
fix and establish the prices, rates, and charges at which the
resources and facilities made available by the Central Valley
Project shall be sold and disposed of, and enter into contracts
and agreements for the movement of water.
FISCAL EFFECT : One-time General Fund appropriation of $400
million.
COMMENTS :
Assembly Bill 1890 (Brulte), Chapter 854, Statutes of 1996,
restructured California's electric industry in order to
establish a competitive generation market. CPUC, in D.95-12-063
(as modified by D.96-01-009) required investor-owned utilities
(IOUs) to divest at least 50% of their fossil generating assets.
While IOUs have divested most of their generating assets, they
are still required to provide distribution service to all retail
customers, and to procure power for customers who do not choose
direct access (i.e., an alternate supplier).
Beginning last summer wholesale prices for electricity have
skyrocketed in California. The IOUs' power procurement costs
have been increased dramatically as a result. Customers of
Southern California Edison (SCE) and Pacific Gas and Electric
(PG&E) are currently protected by the AB 1890 rate freeze
(although CPUC recently approved an interim order increasing
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rates for 90 days), which means SCE and PG&E have to absorb the
financial costs of paying extremely high prices to buy wholesale
electric power without being able to recover those costs in
retail rates. The current uncollected out-of-pocket power
procurement costs for SCE and PG&E is currently estimated at
approximately $12 billion. SCE and PG&E have indicated that
they may be forced to declare bankruptcy if they do not receive
legislative, regulatory, or judicial relief. In recent weeks,
the utilities have found that their weakening financial
condition has jeopardized their ability to borrow money to cover
their procurement costs.
San Diego Gas and Electric (SDG&E) ratepayers, no longer
protected by the AB 1890 rate freeze, have seen their energy
bills increase substantially beginning last summer. AB 265
(Davis), Chapter 328, Statutes of 2000, established a "soft"
floating rate cap of 6.5 cents per kilowatt hour (kWh), with an
undercollection balancing account. Since enactment of AB 265, a
continued rise in wholesale electric prices has caused SDG&E's
undercollection to increase substantially, to $450 million.
Governor Gray Davis, on January 17, 2001, declared a state of
emergency to deal with the state's electricity crisis, a move
which he indicated will allow the state to buy power in the
short term. This bill would authorize DWR to buy and sell
electric power from any party and make that electric power
available at the cost of its purchase, plus any administrative
costs (not to exceed $1 million) transmission, scheduling, and
other related costs. This authorization is effective for a
12-day period.
Related Legislation : ABX1 1 (Keeley), currently in the Senate,
authorizes DWR to enter into long-term power purchase contracts
with electricity generators for a price not more than 5.5 cents
per kWh, and to sell the power, directly or indirectly, to
electric consumers in California.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file.
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Opposition
None of file.
Analysis Prepared by : Joseph Lyons / E. C. & A. / (916)
319-2083