BILL ANALYSIS                                                                                                                                                                                                    




                                                                  AB 425
                                                                  Page A
          Date of Hearing:  April 1, 2003

                    ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
                                 Sarah Reyes, Chair
                 AB 425 (Richman) - As Introduced:  February 14, 2003
           
          SUBJECT  :  Electric service: rates: interruptible programs.

           SUMMARY  :  Extends the statutory authority for interruptible or  
          curtailable service programs administered by the investor-owned  
          utilities (IOUs).  Specifically,  this bill  :  

          Requires the California Public Utilities Commission (PUC) to  
          direct each IOU to continue the availability of optional  
          interruptible or curtailable electric service until December 31,  
          2008. 

           EXISTING LAW  :

          1)Authorizes PUC to establish rates for public utilities,  
            including electrical corporations or IOUs. 

          2)Requires PUC to maintain efforts to reduce the rates charged  
            heavy industrial customers to a level competitive with other  
            states, and to do so without shifting recovery of costs to  
            other customer classes.  

          3)Specifies that PUC shall continue the availability of optional  
            interruptible or curtailable service at least until March 31,  
            2002. 

           FISCAL EFFECT  :  Unknown.

           COMMENTS  :   

          California's three IOUs have interruptible programs targeted  
          mainly at industrial and large commercial customers.  Customers  
          participating in these programs receive a discount off their  
          electric rates in exchange for agreeing to be interrupted up to  
          a specified number of hours each year.

          The Independent System Operator (ISO) activates these  
          interruptible or curtailable programs when electric generation  
          reserves fall below 5%.  The specified customers agree to  
          interrupt electric service for up to 6 hours per event, and up  









                                                                  AB 425
                                                                  Page B
          to 150 hours per year.  The participating customers get roughly  
          a one-cent per kilowatt-hour rate incentive in return.

          These demand reduction programs have been regarded as a valuable  
          resource to the overall operation of the grid during peak demand  
          hours, and were particularly useful during periods of supply  
          shortages.  

          The statutory authority under which IOUs operate these programs  
          expired March 31, 2002.  PUC extended these programs and is  
          currently considering the continuation of the demand reduction  
          programs administered by IOUs as a component of their respective  
          general rate cases, which are expected to be complete by the end  
          of this year. 

          The author and the sponsor wish to ensure that the statutory  
          directive to continue these programs continues, at least until  
          December 31, 2008. 

          Opponents object to continuation of a "multi-billion dollar  
          subsidy" which provides poor and expensive insurance against  
          blackouts.  

           Real Time Meters  

          Opponents also believe that the program conflicts with the goal  
          of encouraging a price-responsive demand response from large  
          customers, such as real time metering.  In SB X1 5 (Sher)<1> the  
          Legislature appropriated $35 million from the General Fund to  
          install real time meters for large industrial customers.  Real  
          time meters are designed to elicit a demand response from  
          customers who pay electric rates according to a real time tariff  
          tying the rates to changes in the on the spot market price of  
          electricity. 

          Opponents object to the fact that large industrial customers are  
          proposing to continue the interruptible rate program while  
          supporting only a voluntary real time billing program during  
          current PUC proceedings. 

           REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           



          ---------------------------
          <1> Chapter 7, Statutes of 2001.








                                                                  AB 425
                                                                  Page C
          California Large Energy Consumers Association (CLECA) - sponsor
          Schnitzer Steel Products Co.
          California Manufacturers & Technology Association

           Opposition 
           
          The Utility Reform Network (TURN)
           

          Analysis Prepared by  :    Paul Donahue / U. & C. / (916) 319-2083