BILL ANALYSIS
SB 1172
Page 1
SENATE THIRD READING
SB 1172 (Kuehl)
As Amended September 6, 2001
Majority vote
SENATE VOTE : 29-4
UTILITIES AND COMMERCE 12-0
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|Ayes:|Wright, Pescetti, | | |
| |Calderon, Bill Campbell, | | |
| |Canciamilla, Cardenas, | | |
| |Diaz, La Suer, Leonard, | | |
| |Maddox, Nation, Reyes | | |
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SUMMARY : Allows customers or local agencies owning or occupying
a contiguous property located in more than one service area, if
one area is served by the Los Angeles Department of Water and
Power (LADWP), to take electrical service for the entire
property from LADWP. Specifically, this bill authorizes the:
1)California Public Utilities Commission (CPUC) to limit the
right of a retail customer or local agency that purchases
power from an electrical corporation to purchase power from
LADWP, to ensure satisfaction of any power purchase obligation
or bond obligation incurred by Department of Water Resources
(DWR) to procure power to serve that customer.
2)Customer to elect service from LADWP through a direct
transaction at any time upon payment to DWR of any uncollected
amounts equivalent to DWR's net unavoidable cost of power
procurement.
3)Requires customers with their own distribution facilities to
pay all portions of a non-bypassable generation related charge
except that portion relating to qualifying facility costs,
EXISTING LAW : Allows municipalities or municipal corporations
to operate as public utilities to supply their own electric
service or to sell, lease, or distribute surplus power outside
of its corporate limits.
FISCAL EFFECT : Unknown
SB 1172
Page 2
COMMENTS : The author asserts that 15 businesses that currently
straddle the service areas of LADWP and Southern California
Edison (SCE) can benefit from this bill, which will allow them
to purchase power from LADWP, subject to certain terms, and upon
LADWP's authorization. Current law prevents municipal utilities
from providing electric service to retail customers of
investor-owned utilities, unless the customer confirms in
writing a commitment to pay a generation related transition
charge established by CPUC and unless the investor-owned utility
agrees to let the other utility sell to the retail customers.
This bill's sponsor, Universal Studios (US), seeks flexibility
to contract for LADWP's currently more reliable power supply.
US has experienced blackouts in the parts of its facility served
by SCE, causing financial damage to US's amusement park and
studio lot. Other customers are also in a position to shift
over to LADWP. The author contends this bill may have a
positive fiscal impact for the state by reducing the net short
position of SCE and releasing DWR from some of its power
procurement requirements. This bill limits customer eligibility
to 50 megawatts (LADWP's current daily load is about 1500
megawatts a day), and any new contracts would be at LADWP's
discretion.
The final prong of assurance of overall financial protection in
this bill is the requirement that businesses seeking to obtain
electricity from LADWP pay their fair share of the electricity
purchased by the state on their behalf. An exit fee is required
to take LADWP service through a direct transaction, and the fee
covers the difference between what was already paid out in rates
by the customer and what DWR actually paid to procure power for
the state. In its opposition letter to this bill TURN posits
that there will be a cost shift associated with customers moving
over to LADWP based on stranded distribution costs, with some of
the affordable net surplus of LADWP going not into the grid but
to customers leaving SCE. The exit fee required should
eliminate concerns with any cost shift, and the limitation of 50
megawatts for customers entering LADWP service should eliminate
concerns about any significant reduction in availability of
affordable generated electricity from LADWP to SCE.
Additionally, those customers with their own distribution
facilities have limited responsibility to pay stranded
distribution costs after exiting service from an electrical
corporation.
SB 1172
Page 3
The customers covered by this bill are uniquely positioned in
that properties they own straddle service areas of an investor
owned utility and LADWP. The current energy situation in
California dictates that LADWP, which self generates for its
customers, has a net surplus of power while SCE is in a net
short situation with DWR purchasing the full net short for SCE
customers. Blackouts have occurred in SCE service area but not
in LADWP service area. The customers who may opt to switch to
getting all of their electric service from LADWP would be
subject to both an exit fee and to LADWP's agreement to serve
them. This situation should ensure that the net result for the
state is full coverage for its costs of procuring power for
these customers and a reduced net short position for SCE going
forward, reducing the state's procurement burden.
Analysis Prepared by : Kelly Boyd / U. & C. / (916) 319-2083
FN: 0002989