BILL ANALYSIS
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THIRD READING
Bill No: SB 1519
Author: Bowen (D)
Amended: 4/18/02
Vote: 21
SENATE ENERGY, U.&C. COMMITTEE : 8-0, 4/23/02
AYES: Bowen, Alarcon, Battin, Murray, Sher, Speier,
Vasconcellos, Vincent
SENATE APPROPRIATIONS COMMITTEE : 7-0, 5/13/02
AYES: Alpert, Battin, Bowen, Johannessen, Karnette,
Murray, Perata
SUBJECT : State Department of Water Resources: power
SOURCE : Author
DIGEST : This bill requires the Public Utilities
Commission (PUC) to establish a mechanism by which
customers of an electrical corporation for whom direct
access has been suspended, to purchase renewable power.
The mechanism must include a provision for the customer to
reimburse the State Department of Water Resources for
specified costs related to the department's power
purchasing program, as specified.
ANALYSIS : Existing law (AB 1X, Keeley, Chapter 4,
Statutes of 2001) requires the California Public Utilities
Commission (PUC) to suspend the right of retail customers
of investor-owned utilities (IOUs) to acquire electric
power service from non-IOU providers (direct access) until
CONTINUED
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the State Department of Water Resources (DWR) no longer
supplies power to IOU customers. Pursuant to AB 1X, the
PUC has suspended direct access as of September 20, 2001.
This bill requires the PUC to establish a mechanism to
allow electrical corporation customers to purchase
renewable power.
This bill allows, notwithstanding the suspension of direct
access, IOU customers to obtain renewable power service
from alternate power providers, subject to payment of any
outstanding obligations incurred by DWR to serve the
departing customer. This provision is contingent on the
PUC's resolution of the cost obligations of existing direct
access customers.
This bill authorizes DWR or the CPUC to assess a "re-entry
fee" on non-residential customers returning to IOU service
from direct access if the customer's return would otherwise
impose costs on other IOU customers, or the State. This
bill requires the customer's provider to pay any such fee
if the customer is involuntarily returned to IOU service.
Existing law requires non-IOU electric service providers
(ESPs) to register
with the PUC, but only if they serve residential and small
commercial customers.
This bill requires all ESPs to register with the CPUC.
Background
In 1996, the Legislature passed AB 1890 (Brulte), Chapter
856, Statutes of 1996, to restructure the electric
industry. One of the key features of electrical
restructuring was the authorization of retail competition
within IOU service areas. AB 1890 ended the service
monopoly of utilities and authorized retail customers to
purchase energy directly from suppliers. These
transactions are known as "direct access."
AB 1X, as part of the structure to authorize DWR to
purchase electricity for utility customers, authorized the
PUC to prohibit additional direct access. AB 1X permits
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the issuance of ratepayer-backed revenue bonds to finance
DWR purchasing costs. To ensure the predictable revenue
stream necessary for the issuance of bonds and prevent
cost-shifting from direct access to bundled service
customers, the PUC was authorized to prevent additional
migration of IOU customers by suspending direct access.
Pursuant to AB 1X, the PUC issued a proposed decision
establishing July 1, 2001, as the date of suspension of
direct access. After postponing its initial proposed
decision, on September 20, 2001, the PUC issued an order
establishing September 20, 2001, as the suspension date and
reserving the right to establish July 1, 2001, as the
suspension date pending further investigation.
Between January and June 2001, the vast majority of
customers previously served by direct access providers
returned to IOU service, benefiting from retail rates which
were lower and more stable than market prices. Between
July 1, 2001, and September 20, 2001, thousands of
predominantly large industrial customers of investor-owned
utilities, who had taken service from the State at
below-market rates, departed for direct access as market
conditions improved. During the July 1 to September 20
period, direct access increased from approximately two
percent to approximately 13 percent of the total IOU load.
On January 25, 2002, following its investigation, a PUC
administrative law judge proposed to establish July 1 as
the suspension date to, among other things, prevent the
cost shifting created by a later suspension date. On March
22, 2002, the PUC instead adopted an alternate decision
confirming September 20 as the suspension date and
contemplating future PUC action to impose "exit fees" to
recover the costs owed by direct access customers.
This bill requires the PUC to establish a mechanism to
allow IOU customers to choose to purchase renewable power,
including the option of requiring IOUs to offer renewable
power service, or allowing customers to leave IOU service
to purchase renewable power via direct access. This bill
mitigates cost-shifting to remaining IOU customers by
requiring departing customers to pay DWR for any
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uncollected costs associated with serving them.
Related Legislation
SB 27xx (Bowen) of 2001 would have allowed customers of
electrical corporations, also being served by DWR, to
obtain renewable power from an alternate provider. It died
in the Assembly when special session ended.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
PURA revenues are derived from an annual fee imposed on
electrical, gas, telephone, and water corporations and
every other public utility providing service directly to
customers. Therefore, any increased costs to the PUC
should be offset by fee revenues.
DWR's costs related to the publication should be recovered
through its revenue requirement. DWR's stranded costs, if
any, resulting from customers obtaining renewable energy
from alternate providers, rather than DWR, are intended to
be recovered by the PUC mechanism, rather than being
shifted to remaining ratepayers.
SUPPORT : (Verified 5/14/02)
Clean Power Campaign
Independent Energy Producers Association
Sierra Club California
OPPOSITION : (Verified 5/14/02)
Coalition of California Utility Employees
NC:kb 5/15/02 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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