BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
DEBRA BOWEN, CHAIRWOMAN
SB 25XX - Knight Hearing Date:
June 12, 2001 S
As Introduced: May 17, 2001 FISCAL B
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DESCRIPTION
Under existing law , established by AB 1X (Keeley), Chapter 4,
Statutes of 2001, the right of retail customers of investor-owned
utilities (IOUs) to acquire electric power service from non-IOU
providers (direct access) may be suspended upon the determination
of the California Public Utilities Commission (CPUC) until the
Department of Water Resources (DWR) no longer procures power for
IOU customers. The CPUC has not yet made this determination.
This bill would prohibit the CPUC from suspending the right of a
military base to acquire direct access service.
BACKGROUND
In 1996, the Legislature passed AB 1890 (Brulte), Chapter 854,
Statutes of 1996, to restructure the electric industry. One of the
key features of electrical restructuring was the authorization of
retail competition within IOU service areas. AB 1890 ended the
service monopoly of utilities and authorized retail customers to
purchase energy directly from suppliers. These transactions are
known as "direct access."
AB 1890 and subsequent legislation established certain consumer
protections to prevent unauthorized service changes, or "slamming."
For example, each customer in a group aggregated by a direct
access provider must make a positive written declaration to be
switched from IOU service. In addition, service changes for
residential and small commercial customers are subject to detailed
confirmation procedures.
To ensure that obligations for the IOUs' historic investments were
not avoided by customers choosing direct access, AB 1890 provided
that these customers would continue to pay their share of the IOU's
transition costs on a "non-bypassable" basis, according to their
electricity consumption.
AB 1X, as part of the scheme to authorize DWR to purchase
electricity for utility customers, authorized the CPUC to prohibit
additional direct access. AB 1X permits the issuance of
ratepayer-backed revenue bonds to finance DWR purchasing costs. To
ensure the predictable revenue stream necessary for the issuance of
bonds, the CPUC was authorized to prevent additional migration of
IOU customers.
This bill prevents the CPUC from suspending direct access for
military bases. The bill makes no provision for payment to DWR for
money spent to serve these military bases.
COMMENTS
1)Direct access and military bases. There are about 40 military
bases within the service areas of the three IOUs, with a combined
peak demand of about 450 megawatts. Many of these bases buy some
or all of their power from federally-owned hydropower projects
through contracts with the Western Area Power Administration.
Few, if any, are currently served under typical direct access
service.
According to the author, military bases need a reliable and
consistent supply of energy in order to fulfill their defense
mission. While direct access may allow military bases to obtain
better prices, it is not likely to improve reliability.
Purchasing power from a direct access provider is a financial
arrangement which doesn't in itself result in any reliability
benefit for the customer. The power is still delivered via the
same grid, at the same standard of reliability, as if it is
purchased from an IOU.
2)Why allow military bases to shift power costs to other
ratepayers? It's unclear why military bases in particular should
be exempted from the provision that authorizes the CPUC to
suspend direct access. This provision was intended to prevent
customers from leaving IOU service without paying DWR's power
costs, which would jeopardize the bond sale and shift these costs
to remaining IOU customers.
Military bases have purchased little, if any, power from direct
access providers under the current rules which do not limit
direct access. Presumably, these bases, like many other
customers, have found IOU service, with a portion of the power
provided by DWR at below-cost rates, is a better deal than any
direct access alternative.
3)Related Legislation. The committee has already approved a
measure which make this bill moot by repealing the provision of
law that this bill seeks to exempt military bases from. SB 27XX
(Bowen) repeals the direct access provision of AB 1X and enacts
provisions which allow IOU customers currently served by DWR to
obtain service from alternate power providers, subject to payment
of any outstanding obligations incurred by DWR to serve the
departing customer. SB 27XX is pending on the Senate Floor.
In addition, AB 42XX (Kelley) also repeals the section of law
allowing the CPUC to end direct access and provides for direct
access subject to payment of DWR obligations, with some
exceptions. AB 42XX is pending before this committee.
POSITIONS
Sponsor:
Author
Support:
None on file
Oppose:
None on file
Lawrence Lingbloom
SB 25XX Analysis
Hearing Date: June 12, 2001