BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
DEBRA BOWEN, CHAIRWOMAN
SB 500 - Torlakson Hearing
Date: April 24, 2001 S
As Amended: March 26, 2001 FISCAL B
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DESCRIPTION
This bill provides electric customers located within "close
proximity" of a powerplant capable of producing more than
50 megawatts of electricity that was licensed on or after
January 1, 1999 with a 20% discount on their electricity
rates and exempts them from blackouts, or rotating outages.
This bill defines "close proximity" as a circle with a
circumference of 20 miles with the facility at its center.
Using the formula whereby the circumference is equal to two
multiplied by pi multiplied by the radius, it's estimated
this bill will provide benefits to people who live within
approximately 3.18 miles of the powerplants described in
this bill.
BACKGROUND
Under current law, the California Public Utilities
Commission (CPUC) establishes retail electric rates for
customers of the three investor-owned utilities (IOUs).
For those customers who choose to buy electricity from a
third party, the CPUC controls the cost of distributing the
electricity while the cost of the electricity itself is
subject to an agreement between the customer and the third
party. Those customers who are served by a publicly-owned
utility have their rates set by their elected or appointed
board.
When blackouts are ordered, utilities institute rotating
outages on a circuit basis. That is, the utility
interrupts electricity to an entire circuit, rather than on
a customer-by-customer basis. Those circuits aren't
necessarily confined to a specific geographic area, such as
within 3.18 miles of a powerplant.
There are about 5,000 essential customers who are exempted
from rotating outages (i.e. hospitals, police, fire
departments). Because of the circuit-based nature of
rotating outages, exempting those 5,000 essential customers
means that almost 6 million non-essential customers are
exempted from rotating outages because they have the good
fortune of sharing circuits with the essential customers.
Under current law, property taxes from powerplants remain
in the county where the powerplant is located with
approximately 10% going to the city, 50%-60% to schools in
the county, 20% to the county, and 10% to county special
districts.
COMMENTS
1)Why Only Newer Plants? The author's goal for this bill
is to provide some compensation to the communities and
citizens who bear the most significant detriments
associated with living near new powerplants, including
noise, air emissions, and visual blight. However, the
bill only applies to powerplants licensed after January
1, 1999. Customers who live near powerplants licensed
before that time have suffered from the detriments of a
nearby powerplant but aren't compensated under the
proposal put forth in this bill.
2)Municipal Power Customers Not Affected . The provisions
of the bill don't apply to powerplants located in the
territory of municipal utilities or irrigation districts,
which are governed by their own elected board of
directors and not by the CPUC. However, powerplants
built in investor-owned utility (IOU) territories may
provide power to municipal utilities, while plants built
in municipal utility territories may provide power to IOU
customers. Providing a 20% bill discount and an outage
exemption only to customers located with 3.18 miles of an
IOU-territory plant sets up some interesting, and some
would say unfair, cost-shifting dynamics.
3)Who Pays For The Rate Reductions? To the extent
customers within 3.18 miles of an IOU-territory power
plant get a 20% rate discount, those discounts will have
to be made up from other ratepayers. That means the
electricity rate hikes recently announced by the CPUC
will be even larger for those customers who don't live
within "close proximity" of a power plant capable of
producing more than 50 megawatts of electricity that was
licensed on or after January 1, 1999.
4)Rotating Outages - A Zero-Sum Game . Exempting customers
within 3.18 miles of a powerplant from rotating outages
means the other customers in the service territory will
face an increased likelihood of being blacked out - and
for longer periods of time.
Given the circuit-based nature of blackouts, many
customers outside of the "close proximity" circle created
by this bill who are on circuits covering people inside
of the "close proximity" circle will wind up as "free
riders" and will also be exempted from blackouts, further
exacerbating the inequities created by this bill.
It's not known how many customers may be affected by this
bill, but with 32 powerplants - each capable of producing
over 50 megawatts of electricity - either recently
approved by or in the review process at the California
Energy Commission (CEC), the number is likely to be
significant.
5)Another Mitigation Benefit . When powerplant projects are
approved, the project proponents are required to mitigate
the impact of the plant on the surrounding community.
This mitigation requirement actually applies to most
every type of new construction, whether it's a new
shopping center or a residential housing development.
Mitigation measures can include such things as buying
pollution offsets, paying for street improvements,
restoring damaged natural resources, and much more.
By requiring those people within 3.18 miles of a
newly-licensed power plant to receive a 20% discount on
their bills and be exempted from rotating outages, this
bill creates another mitigation benefit and an ongoing
benefit at that. Furthermore, this is an ongoing benefit
that's financed by the other "customers" of the
powerplant and not by the powerplant owners themselves.
6)Retroactive Benefit . By providing the benefit created by
this bill to plants that have been licensed on or after
January 1, 1999, this bill provides a retroactive benefit
to people who live near 17 powerplants that have been
licensed by the CEC since that date.
7)Related Legislation . SB 30X (Brulte), which is pending
in the Senate Appropriations Committee, requires property
tax revenues derived from locally-approved new electrical
generation property to be allocated exclusively to the
county or city in which the property is located.
AB 37X (Simitian), which is pending in this committee,
requires an IOU to exempt a circuit sub-block from
rotating service outages in any month that sub-block
achieves a 10% or greater reduction in electricity use
from the same month in calendar year 2000.
POSITIONS
Sponsor:
Author
Support:
California Association of Health Facilities (if amended)
Pittsburg Chamber of Commerce (if amended)
Oppose:
None on file
Randy Chinn
SB 500 Analysis
Hearing Date: April 24, 2001