BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
DEBRA BOWEN, CHAIRWOMAN
SB 102 - Johannessen Hearing Date:
April 24, 2001 S
As Introduced: January 22, 2001 FISCAL B
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DESCRIPTION
This bill provides the Department of Water Resources (DWR) with
authority to issue up to $10 billion in revenue bonds. Up to $2
billion may be issued to create pipeline facilities and electric
transmission lines (neither of which are defined in the bill).
Up to $8 billion may be expended for water storage facilities
and as loans to private entities to construct powerplants.
This bill requires charges for water, power, and the use of
pipeline and transmission facilities to be set by DWR. Those
charges shall be sufficient to recover principal and interest on
the bonds, operation and maintenance expenses, and to establish
adequate reserves. Power generated by the water storage
facilities shall only be sold for use in California until the
operating reserve capacity within the state exceeds 10%.
This bill establishes the California Natural Gas Pipeline and
Electric Transmission Board (Board). The board consists of five
members - three of whom would be appointed by the Governor, one
by the Senate Rules Committee, and one by the Speaker of the
Assembly. Board members serve four-year terms, receive a daily
per diem of $100 for each day spent discharging their duties,
and select their own chair. Board meetings are in Sacramento,
open to the public, and subject to the Bagley-Keene Open meeting
Act.
This bill requires the Board to:
1) Approve all DWR plans to build pipelines or
transmission lines;
2) Establish the conditions for DWR to loan revenue
bond funds to private entities to build powerplants; and,
3) Approve or disapprove all DWR resolutions for
issuance of revenue bonds for purposes of pipelines,
transmission lines, and loans to private entities to
construct powerplants.
This bill requires DWR to plan, construct, and operate water
storage facilities, pipelines, and transmission lines.
BACKGROUND
California's incredibly high electricity prices have focused
attention on how the state can better control its own electric
destiny. This has resulted in initiatives to become more energy
efficient (SB 5X (Sher), Chapter 7, Statutes of 2001, and AB 29X
(Kehoe), Chapter 8, Statutes of 2001), streamline the process
for private power producers to build new powerplants (AB 970
(Ducheny), Chapter 329, Statutes of 2000, and SB 28X (Sher) of
2001, pending in the Assembly), and authorize a division of the
state to generate power where the private sector fails to do so
(SB 6X (Burton) of 2001, pending in the Assembly).
This bill is conceptually similar to, though somewhat
duplicative of, those efforts.
SB 6X, which is pending on the Assembly floor, creates a
California Power Authority (CPA) which can own, operate, and
finance the construction of powerplants. The CPA could also opt
to finance necessary natural gas projects, should the California
Public Utilities Commission (CPUC) determined such projects are
needed.
COMMENTS
1) Overlap With SB 6X . The thrust of this bill is to
create more public power and state ownership of essential
utility facilities, such as powerplants, natural gas
lines, and transmission lines. However, some provisions
of this bill are already contained in, or conflict with,
SB 6X.
While this bill authorizes DWR to provide financing for
private power producers, SB 6X is more comprehensive in its
approach to supply. More importantly, this bill effectively
puts DWR into the pipeline, transmission line, and thermal
powerplant construction and operation business - businesses
DWR arguably has little expertise in conducting.
Consequently, the author and committee may wish to consider
deleting these duplicative provisions.
2) Conflict With SB 6X - Hydroelectric . SB 6X
specifically bars investment in new hydroelectric
facilities without first receiving specific statutory
authority to do so. This bill specifically authorizes
financing of new, unspecified hydroelectric facilities.
The author and committee may wish to consider how this
conflict with SB 6X should be resolved.
3) Conflict With SB 6X - Natural Gas Pipelines .
Natural gas pipelines are regulated at the state and
federal level, though questions have been raised about
the adequacy of federal regulation given inexplicably
high prices for natural gas imported into Southern
California. Clearly, there are questions about the
adequacy of natural gas service, including storage and
transmission. SB 6X permits the proposed CPA to finance
the construction of new natural gas pipelines in
consultation with the CPUC. This bill requires DWR to
plan, construct, and operate natural gas pipelines. As
this is well beyond DWR's expertise the author and
committee may wish to consider whether to delete this
provision. Alternatively, it may be worth tasking a
state agency, such as the CPUC, to study how other states
deal with natural gas infrastructure issues.
4) Water Storage Facilities . The remainder of this
bill establishes a revenue bond for water storage
facilities. It requires all power generated by those
facilities to be sold in California, unless the operating
reserve capacity within the state is 10% or greater.
This level of reserve is unlikely to be met for several
years at least, though the Governor's stated goal is to
achieve a 15% operating reserve. The bill does not
address the price at which power from these facilities is
sold. It would seem to be a fair bargain that in return
for state revenue bond financing the power from these
facilities be sold to the state or its designees at cost
plus a fair return on investment, and the author and
committee may wish to consider including such a revision.
5) California Only? As noted above, this bill requires
power generated from water storage facilities constructed
as a result of this bill to be sold for use in
California. Whether such a requirement would be deemed
constitutional is an open question.
6) Lack of Definitions . This bill lacks a number of
key definitions. Page 2, Lines 16-22, denotes five
specific water storage facilities that may be built under
this bill, yet the names of the facilities aren't
specified. Page 2, Line 23 lacks a definition of
"pipeline facilities" and it's unclear whether the author
intends to limit this to natural gas pipelines or to also
include water pipelines, petroleum pipelines, etc. Page
2, Line 24 lacks a definition for "electric transmission
lines." The author and committee may wish to consider
how these items should be defined in the bill.
7) Related Legislation . SB 6X (Burton), pending on the
Assembly floor, proposes to create a California Power
Authority to perform many of the functions proposed by
this bill.
SB 33X (Machado), which is pending in the Assembly, proposes
to allow a natural gas corporation to exercise the power of
eminent domain to condemn property without having to go
through a specific CPUC hearing process.
SB 316 (Oller), which is pending before the Senate Agriculture
& Water Resources Committee, proposes to enact the Auburn Dam
Power Generation, Water Supply, And Water Quality Protection
Bond Act Of 2001 which, if adopted by the voters, would
authorize an unspecified amount of bonds to finance the
construction of the Auburn Dam Project.
AB 60X (Hertzberg), which is pending before this committee,
requires, as a condition of certification by the California
Energy Commission, that an applicant offer to sell electricity
to a California utility or DWR at terms not less favorable
than the terms of the next offer that the applicant makes for
the sale of electrical power generated by that facility.
8) Return To Sender . . . Address Known . The Senate
Rules Committee has asked that should this bill pass the
committee, it be returned to the Rules Committee.
POSITIONS
Sponsor:
Author
Support:
None on file
Oppose:
American Rivers
Bay Institute
California League of Conservation Voters
California Outdoors
California Sportfishing Protection Alliance
California Trout
Conception Coast Project
Defenders of Wildlife
Endangered Habitats League
Foothill Conservancy
Friends of the Santa Clara River
Gray Panthers
Matilija Coalition
Pacific Coast Federation of Fishermen Association
Planning and Conservation League
Protection American River Canyons
Sacramento River Preservation Trust
Santa Clara Valley Audubon Society
Sierra Club
South Yuba River Citizens League
Surfrider Foundation
The Wilderness Society
1 individual
Randy Chinn
SB 102 Analysis
Hearing Date: April 24, 2001