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