BILL ANALYSIS
AB 425
Page 1
ASSEMBLY THIRD READING
AB 425 (Richman)
As Amended May 29, 2003
Majority vote.
UTILITIES AND COMMERCE 13-0 APPROPRIATIONS 20-0
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|Ayes:|Reyes, Richman, Campbell, |Ayes:|Steinberg, Bates, |
| |Canciamilla, Diaz, | |Calderon, Lowenthal, |
| |Longville, | |Daucher, Diaz, Firebaugh, |
| |La Malfa, La Suer, | |Haynes, Maldonado, |
| |Levine, Maddox, Nunez, | |Nation, |
| |Ridley-Thomas, Wolk | |Negrete McLeod, Nunez, |
| | | |Pacheco, |
| | | |Ridley-Thomas, Runner, |
| | | |Samuelian, Simitian, |
| | | |Wiggins, Yee, Chu |
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SUMMARY : Extends the statutory authority for interruptible or
curtailable service programs administered by the investor-owned
utilities (IOUs). Specifically, this bill :
1)Requires each IOU to continue the availability of optional
interruptible or curtailable electric service, for customers
with demand in excess of 500 kilowatts, through 2008.
2)Requires the Public Utilities Commission (PUC) to initially
set the rate for interruptible or curtailable service at a
level equal to the incentive level currently authorized by
PUC. PUC may subsequently adopt a different cost based
pricing incentive.
3)Establishes an initial penalty of $9.30 per kilowatt hour for
excess power taken by interruptible or curtailable service
customers that do not shed electrical load when called upon by
an IOU. PUC may subsequently adopt a different noncompliance
penalty.
4)Requires an IOU to remove from interruptible or curtailable
service a customer who fails to substantially comply with its
commitment to shed load on two consecutive occasions.
5)Requires IOUs to eliminate any incentive that is included in
AB 425
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an optional interruptible or curtailable service that PUC has
not set the cost based pricing for after January 1, 2004.
IOUs shall eliminate these optional incentives before January
1, 2005 or at the date of the next PUC final decision on the
IOUs general rate case proceeding.
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 : According to the Assembly Appropriations
Committee, minor absorbable special fund costs to PUC.
COMMENTS : California's three IOUs have interruptible programs
targeted mainly at industrial and large commercial customers.
The Independent System Operator (ISO) activates these
interruptible or curtailable programs when electric generation
reserves fall below 5%. The activation of the programs reduces
demand on the electric grid and helps prevent the need for
rolling blackout. 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 specified customers agree to interrupt electric
service for up to 6 hours per event, and up to 150 hours per
year. The participating customers get roughly a one-cent per
kilowatt-hour rate incentive in return.
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
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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), Chapter 7, Statutes of 2001 First Extraordinary
Session, 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.
Analysis Prepared by : Edward Randolph / U. & C. / (916)
319-2083
FN: 0001620