BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
DEBRA BOWEN, CHAIRWOMAN
SB 83XX - Johnson Hearing Date:
July 10, 2001 S
As Amended: June 25, 2001 FISCAL B
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8
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DESCRIPTION
Current law authorizes the Department of Water Resources (DWR) to
issue up to $13.4 billion in bonds. These bonds may be used to
pay for electricity purchases and reimburse the General Fund for
money used to buy electricity.
This bill requires the California Public Utilities Commission
(CPUC) to require every electrical corporation that has included
in its retail rates a component dedicated to repayment of those
bonds to provide a statement on their monthly bills which says
that, 1) this bill component is a result of specific legislation;
and, 2) lists the legislators who voted "no" on that legislation.
BACKGROUND
California's electricity crisis required the state to step in on
behalf of the utilities to purchase electricity for customers.
At the time (January and February 2001), wholesale electricity
prices were at astronomical levels with the state budget
providing funds to cover the substantial difference between
retail electric rates and the actual cost of electricity. AB 1X
(Keeley), Chapter 4, Statutes of 2001, which authorized the state
to enter into the power procurement business, also authorized the
state to issue bonds to help finance those purchases.
Subsequently, SB 31X (Burton), Chapter 9, Statutes of 2001,
clarified that DWR could issue $13.4 billion in bonds to
reimburse the General Fund and pay for power. The bill also
expedited the judicial review process for challenges to DWR's
bond issuance.
COMMENTS
1)The True Cost of Electricity . Had the state not begun buying
electricity on behalf of investor-owned utility (IOU)
ratepayers earlier this year, it's highly likely that
Californians would have had to pay for the full price for
electricity, resulting in far higher electric prices than
they're paying today.
Had the state not been authorized to issue bonds, the state
would have had difficulty entering into long-term power
contracts, which have contributed to price stability and supply
adequacy. Financing electricity costs with bonds requires
ratepayers to pay for those costs over a number of years.
While financing an operational expense generally isn't an
attractive option or a particularly wise fiscal move, the
alternative of exposing customers to sharply higher electric
rates and supply uncertainty is even less attractive.
2)Out Of Context? While the bill is accurate as far as it goes,
it doesn't trace back the genesis of the bonds far enough. SB
31X is only the most recent measure dealing with DWR bonds - AB
1X is where the bond idea originated and SB 7X (Burton),
Chapter 3, Statutes of 2001, is the bill that allowed DWR to
begin buying power (albeit not with the use of bonds).
It might also be observed that California would, in all
likelihood, not be suffering through the current electricity
crisis if the Legislature and the Governor had not approved AB
1890 (Brulte), Chapter 854, Statutes of 1996, to deregulate the
state's electricity marketplace.
Furthermore, by specifically calling out one component on the
ratepayer's bill and noting the lawmakers who opposed the
creation of that component, this measure has the effect of
presenting an out of context picture to the ratepayer. As
noting above, had the state not entered into the power buying
business in the first place and not authorized the issuance of
the bonds, consumers likely would have faced rate hikes that
were much more drastic and severe than those imposed by the
CPUC in May. The author and committee may with to consider
whether it's appropriate to present ratepayers with only a
portion of the history of electricity on their monthly bills.
3)This Program Brought To You (Or Opposed) By . . . Electricity
bills (and for that matter, natural gas and telephone bills)
have a number of charges on them for that were imposed by the
Legislature. For example, electricity bills contain charges on
them (which are either hidden in the overall rates charged or
identified separately) to pay for the 10% rate reduction bonds,
to subsidize service to low-income recipients, and to fund
alternative energy programs. On telephone bills, the
Legislature has authorized charges to fund a "911" emergency
system, to provide subsidies for low-income phone users, and to
help pay to provide services for the hearing impaired. None of
those items are identified on the customer's monthly bill as
being placed there or opposed by a specific list of lawmakers
based on their votes on the implementing legislation. The
author and committee may with to consider whether it's
appropriate to start down that path, as this bill proposes to
do.
POSITIONS
Sponsor:
Author
Support:
None on file
Oppose:
None on file
Randy Chinn
SB 83XX Analysis
Hearing Date: July 10, 2001