BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 1172|
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THIRD READING
Bill No: SB 1172
Author: Kuehl (D)
Amended: 5/24/01
Vote: 21
SENATE ENERGY, U.&C. COMMITTEE : 5-1, 5/8/01
AYES: Morrow, Alarcon, Battin, Murray, Vincent
NOES: Bowen
SENATE APPROPRIATIONS COMMITTEE : 7-1, 6/7/01
AYES: Battin, Escutia, Johannessen, Karnette, McPherson,
Murray, Perata
NOES: Bowen
SUBJECT : Municipally owned electric utilities
SOURCE : Universal Studios
DIGEST : This bill permits retail customers or local
agencies whose property straddles the service area of the
Los Angeles Department of Water and Power to take electric
service for the entire property from a single electrical
service provider, up to a limitation of 50 megawatts, and
only through July 1, 2002.
Senate Floor Amendments of 5/24/01 reduce the potential for
stranded costs resulting from purchases by the State
Department of Water Resources on behalf of customers of
Southern California Edison.
ANALYSIS : Current law bars municipal utilities from
CONTINUED
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providing electric service to retail customers of
investor-owned utilities (IOUs) unless the customer
confirms in writing an obligation to pay a
generation-related transition charge established by the
California Public Utilities Commission (PUC).
Current law bars one utility from selling to the customers
of another utility unless the first utility agrees to let
the second utility sell to the retail customers of the
first.
This bill permits any customer whose property straddles the
service area of the Los Angeles Department of Water and
Power (LADWP) and any other electricity provider (and that
takes electrical service from the State Department of Water
Resources [DWR] and another electrical service provider) to
take electric service on that entire property from a single
provider. The ability to exercise this authority ends July
1, 2002.
This bill precludes LADWP from entering into a direct
transaction contract with those customers if the total
amount of electricity contracts exceeds 50 megawatts (MW)
per day.
This bill requires that a customer electing to do this must
pay DWR for the difference between DWR's actual cost of
providing electricity and the rate charged by DWR for that
electricity, if any, as determined by DWR. This difference
results from the fact that DWR's costs for electricity
currently exceed the revenues it receives. That difference
will be financed by customers through the sale of bonds
which have already been authorized by the Legislature.
The bill also allows the PUC to limit the right of these
customers to obtain service form LADWP to the extent such
limitation is necessary to ensure DWR's ability to meet its
obligation to repay the bonds.
The effect of these provisions is to ensure that the
customers eligible to leave Southern California Edison
(SCE) and obtain service from LADWP pursuant to this bill
leave fewer stranded costs for remaining SCE customers.
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Comments
Background . Interest in municipal utilities has risen with
the ongoing price and reliability concerns of customers of
IOUs. LADWP has become popular in recent months because it
has surplus electricity and relatively low rates. When
electric markets were restructured in 1996, many felt LADWP
would be one of the losers precisely because it had
expensive, surplus capacity.
Who Can Take Advantage Of This Bill ? According to LADWP,
there are approximately 150 properties that straddle the
LADWP service territory line, but only about 15 would be
eligible for service under the terms of this bill.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
Fiscal Impact (in thousands)
Major Provisions 2001-02 2002-03
2003-04 Fund
DWR Potential unknown costs,
probably Special*
offset by fee revenues
PUC Unknown, probably not
substantial costs Special**
*Electrical Power Fund
**Public Utilities Reimbursement Account
SUPPORT : (Verified 5/24/01)
Universal Studios (source)
Target Stores
OPPOSITION : (As of prior amended version)
TURN
ARGUMENTS IN SUPPORT : Proponents argue they believe by
switching electric service from Southern California Edison
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(SCE) to LADWP, they will realize sizeable savings and be
better assured of uninterruptible service. Universal
Studios and Target have submitted letters of support
stating this bill will allow them to "re-distribute
electrical energy it now receives from LADWP to the
remainder of its" property that is located contiguous to it
in Los Angeles County that's now served by SCE.
ARGUMENTS IN OPPOSITION : Opponents argue they are
concerned the bill will lead to cost-shifting and a greater
cost burden on small ratepayers. They also argue that
power that otherwise would have been available at
reasonable cost to SCE customers will now flow to Universal
and the customers on the border of LADWP. They argue the
bill sets a precedent for municipal utility districts which
runs counter to current law.
NC:cm 6/13/01 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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