BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 18XX|
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UNFINISHED BUSINESS
Bill No: SB 18XX
Author: Burton (D)
Amended: 9/6/01
Vote: 27 - Urgency
SENATE ENERGY, U.&C. COMMITTEE : 10-0, 7/19/01
AYES: Bowen, Alarcon, Battin, Dunn, Murray, Poochigian,
Sher, Speier, Vasconcellos, Vincent
SENATE APPROPRIATIONS COMMITTEE : 11-0, 7/19/01
(Roll call not available at time of writing)
SENATE FLOOR : 35-2, 7/20/01
AYES: Ackerman, Alarcon, Alpert, Battin, Bowen, Burton,
Chesbro, Costa, Dunn, Escutia, Figueroa, Haynes,
Johannessen, Johnson, Karnette, Kuehl, Machado, Margett,
McPherson, Monteith, Morrow, Murray, O'Connell, Ortiz,
Perata, Polanco, Poochigian, Romero, Scott, Sher, Soto,
Speier, Torlakson, Vasconcellos, Vincent
NOES: McClintock, Oller
ASSEMBLY FLOOR : Not available
SUBJECT : Department of Water Resources: electricity:
bond financing
order
SOURCE : Author
DIGEST : This bill requires the revenue bond repayment
mechanism for electrical power to include a State
CONTINUED
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Department of Water Resources Bond Set-Aside, as specified.
Assembly Amendments (1) clarify what is included in the
costs related to issuing, serving, and retiring the bonds,
(2) require the California Public Utilities Commission to
provide an analysis of revenue requirements, (3) add
legislative findings, and (4) make technical corrections.
ANALYSIS : Existing law, AB 1X, authorizes the State
Department of Water Resources (DWR) to contract with an
electrical corporation to transmit or provide for the
transmission of, and distribute the power and provide
billing, collection, and other related services, as the
agent of DWR, on terms and conditions that reasonably
compensate the electrical corporation for its services, and
requires the California Public Utilities Commission (PUC),
at the request of DWR, to order such actions. Existing law
authorizes DWR to issue revenue bonds for certain purposes
not to exceed a certain amount, containing specified terms
and conditions, upon authorization by written determination
of DWR and with the approval of the Director of the State
Department of Finance and the State Treasurer. Existing
law permits DWR to have the PUC issue finance orders to
recover revenue requirements, and delegates to DWR the
authority to determine if the revenue requirements are just
and reasonable. Existing law requires DWR, before the
issuance of bonds, to establish a mechanism to ensure that
the bonds will be sold at investment grade ratings and
repaid on a timely basis from pledged revenues. Certain of
these provisions enacted by Senate Bill 31 of the 2001-02
First Extraordinary Session become effective on August 13,
2001.
There were three reasons for allowing this. First, this
provision was created when the state had to assume the
utilities' power procurement role. At the time the state
had to issue bonds to finance costly wholesale purchases.
Without an agreement to pass the costs without thorough PUC
review, lenders would not finance those purchases. Second,
a utility is a for-profit entity which, without PUC review,
would be an unregulated monopoly with no incentive to keep
costs down. In contrast, DWR is a non-profit entity which
would have no reason to increase costs. Third, as a
non-profit entity, DWR has an elected boss (the Governor)
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who could be held accountable for DWR's performance, just
as any municipal utility.
In order to complete the financing of the DWR costs,
lenders are requiring a rate agreement with the PUC. The
rate agreement contains provisions requiring the PUC to
pass through the costs of DWR's power purchase contracts
without review and in an expedited manner. The agreement
also contains provisions for passing through costs of
specified demand management programs (i.e., the 20/20
program), as well as expenses for legal, consulting, and
technical review.
This bill requires that the bond repayment mechanism
specified for DWR procurement financing be fixed by an
irrevocable PUC bond financing order. Specifically, this
bill:
1.Requires that the financing order be sufficient to pay
costs of issuing, servicing and retiring DWR bonds.
2.Provides for adjustment to the repayment mechanism, as
required.
3.Requires the bond set-asides to be designated as a
separate rate component on an electrical corporation's
retail end-user's bill.
4.Requires that a DWR set-aside rate component consist of
and be derived from a portion of rate levels already
established and in effect on September 30, 2001.
5.Establishes DWR Bond Repayment Fund continuously
appropriated to DWR and available for the purpose of
payment of bond financing costs.
6.Entitles the PUC to review the revenue requirements of
DWR and requires the PUC to conduct at least one public
hearing and provide for public comment prior to adoption
of revenue requirements.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: Yes
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NC:cm 9/14/01 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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