BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
DEBRA BOWEN, CHAIRWOMAN
SB 1511 - Morrow Hearing Date:
April 23, 2002 S
As Introduced: February 20, 2002 FISCAL B
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DESCRIPTION
Current law provides a process for the undergrounding of
overhead electric lines. Generally, ratepayer money is used to
underground lines that are identified by local governments
according to rules specified by the California Public Utilities
Commission (CPUC). Current regulations require that only the
public utility can perform the undergrounding, though utilities
have the option of contracting out some functions of a job as
workload dictates.
This bill allows competitive bidding for the undergrounding work
by allowing cities and counties to select bids from either the
utility or other non-regulated contractors to design or install
the underground facilities.
This bill requires the utility to provide a cost-based bid which
the city or county can then take to competitors to see if they
can beat that price. If the selected bidder is the
non-regulated contractor, the amount that is added to the
ratebase is the lower of the utility's bid or the verified
actual cost. The utility shall initially inspect the work of
the non-regulated contractor without charge.
Amendments . The author will offer amendments in committee to
delete Section 2 of the bill, from Page 4, Line 5 through Page
7, Line 7, and make relevant changes to the intent language on
Page 2. Those sections of the bill are therefore not analyzed.
BACKGROUND
Rule 20 of the electric utility tariffs governs the replacement
of overhead electric lines with underground facilities. The
CPUC allows the utilities in the aggregate to spend about $150
million annually on undergrounding, which is all recoverable
from ratepayers. This money doesn't go far, since the cost of
undergrounding is reportedly as much as $1 million per mile.
There are several types of Rule 20 undergroundings, the most
common of which is the Rule 20A undergrounding. Under this
rule, each utility allocates its share of the total $150 million
budget to the cities and counties it serves on a basis which is
generally proportionate to each entity's percentage of the
meters served by overhead lines. The city or county then
determines where the undergrounding should occur based on a
public interest finding. Rule 20 specifies that an
undergrounding is in the public interest if it eliminates an
unusually heavy concentration of overhead electric facilities,
the adjacent street is extensively used by the public and
carries a heavy volume of traffic, or the street passes through
a civic area or public recreation area or an area of unusual
scenic interest.
Rule 20 undergroundings are complex undertakings in that they
require coordination of many parties and the effect of the
construction is very public. Police and fire services must be
notified because traffic patterns are disturbed as streets are
dug up and street signals are displaced, businesses are
disrupted as electric service is interrupted in the immediate
area, grid coordination is required to ensure that areas outside
of the immediate area retain their electric service, and
telecommunications and cable utilities with overhead lines must
time their efforts with those of the electric utility. The Rule
20 work is currently performed exclusively by utilities, though
they may subcontract some of that work as workload dictates.
Other types of utility installations can be performed by
non-utility contractors. Since 1983, the CPUC has allowed
non-utility contractors to install and, later, design line
extensions, which are the wires, conduit, trenches, and poles
necessary to bring electric service from the utility facility at
the street to the customers electric meter on the side of his
house.
Responding to concerns about utility reconstruction following
the fires in the Oakland hills, the Legislature passed AB 1149
(Aroner), Chapter 844, Statutes of 1999, to require the CPUC to
study ways to revise its rules governing the replacement of
overhead electric and communications lines with underground
facilities. After public hearings, the CPUC issued a decision
on amending the undergrounding rules (D.01-12-009). A second
phase of the proceeding was opened to explore issues needing
evidentiary hearings, such as whether competitive bidding of
undergrounding work is in the public interest. That second
phase isn't expected to conclude until next year.
COMMENTS
1.Historical Perspective . Utilities have been resistant to the
idea of competitive bidding for Rule 20 projects, noting the
complexity of the work, the need for coordination, worker
safety issues, cost recovery issues, and the general notion
that building transmission and distribution lines is at the
core of the utility business. Utilities are responsible for
the operation and maintenance of the lines, a responsibility
made more problematic if those lines are installed by someone
else.
2.Contracting Out of Certain Utility Functions Not New . As
noted above, the precedent for allowing non-utility
contractors to design and build utility plant has been in
place since the early 1980s in the form of line extensions.
However, the utilities note that line extensions are much
smaller and simpler projects than Rule 20 undergroundings.
Further, Rule 20 undergroundings effect many customers, while
line extensions effect only the customer to which the line is
being extended.
3.Short Term Savings or Long Term Costs? The goal of the bill
is to reduce the costs to ratepayers by utilizing competitive
forces to reduce the cost of Rule 20 undergroundings. While
reducing ratepayer costs is a universally shared goal, it
isn't clear that competition in the Rule 20 undergrounding
process will achieve that goal without doing harm to other
competing goals of safe and reliable service. For example,
requiring a utility to use a contractor that the city or
county selects solely on the basis of cost forces the utility
to work with an entity that it didn't select and may never
have worked with before. While there may be savings on the
undergrounding project, those savings will be wiped out should
the low bid contractor selected by the city or county damage
electrical lines or rupture a sewer line as it attempts to
coordinate its efforts with the utility and other entities
involved in the undergrounding project.
4.The CPUC Is On The Case . Pursuant to AB 1149 (Aroner) of
1999, the CPUC is opening a proceeding specifically to address
the question of whether competitive bidding of undergrounding
work is in the public interest with a scoping memo due out in
May. Given that the issue is teed up before the CPUC, the
author and committee may wish to consider whether it would be
preferable to let it work through the issues and render a
decision. Alternatively, the author and committee may wish to
consider requiring the CPUC to consider whether and under what
conditions non-utility contractors should be permitted to
compete in Rule 20 projects, thereby assuring the CPUC
addresses the issue.
POSITIONS
Sponsor:
Author
Support:
City of Oakland
City of San Carlos
UDI-TETRAD Consulting Engineers, Inc.
Oppose:
Coalition of California Utility Employees
Sempra Energy
Randy Chinn
SB 1511 Analysis
Hearing Date: April 23, 2002