BILL NUMBER: AB 428 AMENDED
BILL TEXT
AMENDED IN SENATE JUNE 16, 2003
AMENDED IN ASSEMBLY JUNE 2, 2003
AMENDED IN ASSEMBLY APRIL 23, 2003
INTRODUCED BY Assembly Members Richman and Canciamilla
FEBRUARY 14, 2003
An act to add Section 367.6 to the Public Utilities Code, relating
to energy resources.
LEGISLATIVE COUNSEL'S DIGEST
AB 428, as amended, Richman. Electrical corporations: core
supply portfolio: core bundled , noncore, and
core-elect customers.
(1) Under existing law, the Public Utilities Commission regulates
electrical corporations. The Public Utilities Act requires the
commission to authorize direct transactions between electricity
suppliers and end-use customers. However, other existing law
suspends the right of retail end-use customers to acquire direct
access service from certain electricity suppliers after a period of
time to be determined by the commission until the Department of Water
Resources no longer supplies electricity under a certain provision
of law. Existing law requires the commission to review and
adopt a procurement plan for each electrical corporation. The
commission is required to establish procurement balancing accounts to
track the differences between recorded revenues and costs to ensure
that each electrical corporation timely recovers prospective
procurement costs pursuant to their procurement plan.
The bill would require the commission, on or before January 1,
2005, to adopt regulatory criteria for the appropriate and
reasonable composition of a core portfolio of electricity supplies to
be established by each electrical corporation to meet the needs of
the electrical corporation's bundled core customers, as defined,
noncore customers electing to remain with the electrical corporation
for at least one year, and to provide an adequate reserve capacity.
Under the bill, commencing January 1, 2006, an electrical corporation
would have no obligation to procure electric commodity for a noncore
customer, as defined, except by contract for a term of no less than
1 year and on terms approved by the commission that reimburse the
electrical corporation for all costs of providing electrical service.
Commencing on that date, noncore customers could not be served from
the core portfolio, except as specified, and would be served either
by direct transactions or by contract with an electrical corporation.
The bill would require the commission, on or before January 1,
2006, to adopt rules to allow residential bundled core customers to
elect to be served by direct transactions in a manner that fully
compensates the electrical corporation and the Department of Water
Resources for the customers' proportionate shape of specified
categories of costs. The bill would also require the commission to
adopt rules to ensure that the returning residential bundled core
customers are charged the full costs incurred by the electrical
corporation to provide them with electric commodity procurement
service, including a minimum one year contractual obligation to take
bundled electric service from the electrical corporation, unless the
customer leaves the electrical corporation's service territory. The
bill would require the commission to adopt corresponding rules for
nonresidential bundled core customers on or before January 1, 2012.
rules under which noncore customers, as defined, by a
date certain on or before June 30, 2005, elect whether to procure
electricity service (commodity service) from an electric service
provider, elect to receive commodity service from the electrical
corporation under a procurement plan for a minimum period of 3 years,
or receive default commodity service from the electrical
corporation. Beginning January 1, 2006, an electrical corporation's
obligation to provide commodity service from its procurement plan
would extend only to core and core-elect customers, as defined, and
to provide default commodity service to noncore customers. Default
commodity service would be provided at the higher of the electrical
corporation's costs of spot electricity purchases, or the tariff rate
for core-elect customers purchasing commodity service pursuant to
the electrical corporation's procurement plan. The commission would
be required to establish rules to ensure that the costs of providing
default commodity service to noncore customers are paid solely by
those noncore customers, without impacting the rates and charges of
core customers. The bill would require the commission, on or before
July 1, 2004, to establish tariffs for noncore customers that include
all applicable transmission, distribution, public goods, and cost
recovery surcharge costs otherwise paid by noncore customers for
certain purposes. Noncore customers that begin taking commodity
service from an electric service provider on or after January 1,
2006, would be required to pay certain costs consistent with those
costs that customers of a community choice aggregator are required to
pay under existing law. The bill would require the commission to
establish rules or tariffs that provide an option for residential
customers to receive commodity service through direct transactions
from renewable resources beginning January 1, 2006, consistent with
cost recovery requirements applicable to community aggregators.
Because a violation of a rule or order of the commission is a
crime, this bill would create a new crime, thereby imposing a
state-mandated local program.
(2) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. It is the intent of the Legislature to do all of the
following:
(a) Establish a market structure in which the
To establish a market structure in which electrical
corporations have an obligation to provide bundled electric
commodity procurement service only to core retail end-use customers.
(b) Allow noncore retail end-use customers to elect to have their
electricity commodity procured by the electrical corporations for a
fixed term at rates that fully compensate the electrical corporations
for the incremental costs of procuring the commodity.
(c) Require the electrical corporations to serve as a default
provider of electric commodity procurement service to noncore retail
end-use customers that voluntarily or involuntarily return to the
electrical corporation for that service.
(d) Provide a market structure for electric
commodity service to core customers, and core-elect customers, from a
combined portfolio of generation resources allocated on a
nondiscriminatory, cost-of-service basis.
(b) To affirm the electrical corporation's obligation to provide
transmission, distribution, and resource adequacy services for all
customers.
(c) To allow noncore customers to elect, on prescribed terms, to
receive commodity service from the electrical corporation or from an
electric service provider without shifting costs to other customer
classes.
(d) To require an electrical corporation to serve as default
provider of commodity service, in a manner that will not increase
costs of commodity service to core and core-elect customers, and to
noncore customers that voluntarily or involuntarily return to the
electrical corporation for service.
(e) To encourage the retention of existing and development of new,
cogeneration resources to serve the state's electricity demand in a
clean and efficient manner.
(f) To provide for and expedite the construction of electric
generation capacity to meet the needs of a growing state and replace
this state's most polluting and inefficient electric
generation plants by phasing in a competitive retail electric
commodity market for the largest, most financially stable retail
end-use customers of the electrical corporation.
(e) Ensure the protection of core retail end-use customers against
payment of stranded costs by requiring departing customers to pay
for power and other services provided on their behalf by the state
and the electrical corporations. electric generation
plants by phasing in a retail market for the most efficient and
financially stable customers.
SEC. 2. Section 367.6 is added to the Public Utilities Code, to
read:
367.6. (a) As used in this section, the following terms have the
following meanings:
(1) "Bundled core customers" include all retail end-use customers
of an electrical corporation with a maximum peak demand of less than
500 kilowatts, or a maximum peak demand as determined by the
commission pursuant to subdivision (b), who are not being served, or
who elect not to be served, through direct transactions.
(2) "Noncore customers" include all retail end-use customers of an
electrical corporation with a maximum peak demand of 500 kilowatts
or greater, or a maximum peak demand as determined by the commission
pursuant to subdivision (b). For the purposes of this section,
noncore customers may aggregate their peak demand from multiple
meters located anywhere in an electrical corporation's service
territory. Customers receiving service from electricity suppliers on
January 1, 2006, shall be considered noncore customers, except any
customers exempt from any direct access surcharge paid by other
noncore customers, shall retain that exemption until the time they
return to bundled utility service.
(b) Commencing January 1, 2009, the commission shall reduce the
maximum peak demand threshold for defining noncore customers in
subdivision (a), by converting the bundled core customers with the
largest peak demand prior to reduction of the threshold to noncore
customers, in sufficient amounts, so that the forecast load
attributable to converted customers is forecast to meet all growth in
electricity demand forecasted by the State Energy Resources
Conservation and Development Commission during the following
five-year period and any reduction in the aggregate supply of
electricity provided by Department of Water Resources contracts
pursuant to Division 27 (commencing with Section 80000) of the Water
Code. The commission shall complete its proceeding in this matter no
later than December 31, 2007, and may not lower the threshold beyond
250 kilowatts maximum peak demand.
(c) On or before January 1, 2005, the commission shall adopt
regulatory criteria for the appropriate and reasonable composition of
a core portfolio of electricity supplies to be established by each
electrical corporation to meet the needs of the electrical
corporation's bundled core customers and noncore customers electing
to remain with the electrical corporation for at least one year
pursuant to subdivision (e) and to provide an adequate reserve
capacity. The commission shall include a minimum renewable energy
component and demand-side management programs, including, but not
limited to, time-of-use rates and reserve requirements consistent
with existing law.
(d) (1) The core supply portfolio shall also include the following
components:
(A) Output of the generation assets retained by the electrical
corporation under commission regulation.
(B) The total amount of Department of Water Resources contract
electricity purchased pursuant to Division 27 (commencing with
Section 80000) of the Water Code and allocated to the core customers
of the electrical corporation.
(C) Other supplies purchased by the electrical corporation under
contracts to serve the needs of its core customers.
(D) Any spot market supplies required to serve core customers.
(2) The commission shall adopt rules that protect the core
customer of an electrical corporation from cost shifting resulting
from direct transactions, customers who depart the electrical
corporation's system in order to be served by a competing publicly
owned utility, or undercollections of utility costs of service or
costs incurred by the Department of Water Resources to serve
customers who are no longer core customers. These rules shall ensure
that a retail end-use customer purchasing electricity from another
electric service provider or electricity supplier shall reimburse the
electrical corporation that previously served that customer, or had
the obligation to serve that customer, on a nonbypassable basis for
the categories of costs described in subdivisions (d), (e), (f), and
(g) of Section 366.1.
(3) The commission shall ensure that no customer moving from core
to noncore will have any obligation for any future costs incurred by
the electrical corporation or Department of Water Resources
associated with the core supply portfolio that are not recovered from
core customers, and that costs of the core supply portfolio shall be
recoverable only from core customers and noncore customers served by
electrical corporations as described in subdivision (e).
(e) Commencing January 1, 2006, an electrical corporation has no
obligation to procure electric commodity for any noncore customer
except by contract for a term of not less than one years and on terms
approved by the commission that reimburse the electrical corporation
for all costs of providing electrical service. On or before January
1, 2005, the commission shall adopt rules, as it deems necessary to
establish a nondiscriminatory tariff for noncore customers. These
rules shall include all of the following:
(1) A time certain, no later than July 1, 2005, by which a noncore
customer currently receiving electric commodity procurement service
from the electrical corporation shall either elect to be served by an
electricity supplier other than the electrical corporation or agree
to be served by the electrical corporation for a minimum of one year.
Noncore customers electing to remain with the electrical
corporation on or before July 1, 2005, may be served from the core
customer portfolio described in paragraph (1) of subdivision (d).
(2) Notice requirements of not less than six months for noncore
customers to provide notice to their electrical corporation and the
Department of Water Resources of their intent to obtain service from
an electricity supplier other than the electrical corporation or
voluntarily contract with the electrical corporation for bundled
noncore electric commodity procurement service pursuant to this
subdivision.
(3) Provisions for ensuring prompt and full recovery of costs that
the electrical corporation and Department of Water Resources have
incurred to serve customers pursuant to paragraph (2) of subdivision
(d) and in meeting the obligation to serve. Rates and tariffs that
require noncore customers who choose to return to bundled utility
electric commodity procurement service to pay the actual costs
incurred by the electrical corporation to procure electric commodity
for that returning customer on a basis separately tariffed from the
costs of the noncore portfolio of the electrical corporation for a
period of not less than one year or the tariffed rate under this
section, whichever is higher.
(f) Commencing January 1, 2006, noncore customers may not be
served from the core portfolio, except as provided in paragraph (1)
of subdivision (e). Noncore customers shall be served by direct
transactions, as described in Section 365, or by contract with an
electrical corporation as described in subdivision (e). In
coordination with the resource planning and procurement process
defined in Section 454.5, the commission shall annually establish the
appropriate mix and level of long-term, medium-term, and short-term
resource commitments to be made by the electrical corporation
consistent with the utility procurement obligations defined in this
section.
(g) (1) On or before January 1, 2006, the commission shall adopt
rules to allow residential bundled core customers to elect to be
served by direct transactions in a manner that fully compensates the
electrical corporation and the Department of Water Resources for the
customers' proportionate share of the categories of costs described
in subdivisions (d), (e), (f), and (g) of Section 366.1. The
commission shall also adopt rules to address the return of those
residential bundled core customers being served by direct
transactions to bundled service that ensure that the returning
customers are charged the full costs incurred by the electrical
corporation to provide them with electric commodity procurement
service, including a minimum one year contractual obligation to take
bundled electric service from the electrical corporation, unless the
customer leaves the electrical corporation's service territory.
(2) On or before January 1, 2012, the commission shall adopt rules
to allow nonresidential bundled core customers to elect to be served
by direct transactions in a manner that fully compensates the
electrical corporation and the Department of Water Resources for the
customers' proportionate share of the categories of costs described
in subdivisions (d), (e), (f), and (g) of Section 366.1. The
commission shall also adopt rules to address the return of those
nonresidential bundled core customers being served by direct
transactions to bundled service that ensure that the returning
customers are charged the full costs incurred by the electrical
corporation to provide them with electric commodity procurement
service, including a minimum one year obligation to take bundled
electric service from the electrical corporation, unless the customer
leaves the electrical corporation's service territory.
(h) A noncore customer shall not be responsible for any new
transition costs or procurement-related obligations incurred on
behalf of the core portfolio during the period when the customer is
served by direct transactions, except to the extent that the costs
were incurred during the period when the noncore customer had elected
to receive core portfolio service pursuant to paragraph (1) of
subdivision (e) and the costs cover the actual cost of electricity
used by the customer.
(1) "Commodity service" means electricity used by the customer or
a supply of electricity available for use by the customer, and does
not include services associated with the transmission and
distribution of electricity.
(2) "Core customers" means small retail end-use customers of an
electrical corporation that are unable as a result of economies of
scale, to efficiently enter into direct transactions, including
customers with a maximum peak demand of less than 500 kilowatts.
(3) "Noncore customers" means larger retail end users of
electricity that as a result of economies of scale, can efficiently
enter into direct transactions, including end users with a maximum
peak demand of 500 kilowatts, or as reduced by the commission. On or
before January 1, 2009, the commission may reduce the noncore
customer maximum peak demand threshold to accommodate load growth and
reduction of procurement obligations under Department of Water
Resources power contracts being managed by the electrical
corporations. When considering a reduction in the noncore threshold,
the commission shall not strand generation costs in the electrical
corporation's procurement plan portfolio, shift costs between core
and noncore customers, or lower the threshold below 200 kilowatt
maximum peak demand. On or before January 1, 2009, the Commission
may additionally establish rules allowing customers to aggregate
demand to meet the noncore threshold.
(4) "Core-elect customer" means a noncore customer that makes an
election, to be served pursuant to the electrical corporation's
procurement plan.
(b) Beginning January 1, 2006, an electrical corporation's
obligation to provide commodity service from the electrical
corporation's procurement plan portfolio, shall extend only to core
and core-elect customers. The electric corporation's obligation to
provide commodity service to noncore customers shall be limited to
the provision of default service pursuant to subdivision (d). The
electrical corporation's obligation to provide transmission,
distribution and resource adequacy services shall extend to all
customers.
(c) Beginning January 1, 2006, an electrical corporation shall
have no obligation to procure electricity for noncore customers
pursuant to a procurement plan, but shall have an obligation to
procure electricity for core-elect customers that elect to receive
commodity service for a minimum term of three years pursuant to the
electrical corporation's procurement plan.
(d) The electrical corporation shall serve as a default provider
of commodity service for all noncore customers. The electrical
corporation shall provide default commodity service to noncore
customers that, on or after January 1, 2006, voluntarily or
involuntarily return to the electrical corporation for commodity
service and have not elected to take commodity service as described
in subdivisions (c) and (e). Default commodity service shall be
provided at the higher of the electrical corporation's cost of spot
electricity purchases, or the tariff rate for core-elect customers
purchasing commodity service pursuant to the electrical corporation's
procurement plan. The commission shall establish rules to ensure
that the costs of providing default commodity service to noncore
customers are paid solely by those noncore customers, without
impacting the rates and charges of core customers.
(e) On or before January 1, 2005, the commission shall adopt
rules, to implement this section. These rules shall include:
(1) A date certain, on or before June 30, 2005, by which noncore
customers must make an election to be served by the electrical
corporation for a minimum of three years as a core-elect customer, or
to receive service from an electric service provider. Noncore
customers failing to make an affirmative election shall receive
default commodity service.
(2) Terms and condition under which noncore customers may take
default service, including the time period after which a customer
must select core-elect service or return to non-utility service.
(3) Provisions to ensure prompt recovery of reasonable costs an
electrical corporation incurs to serve customers pursuant to this
section, and in meeting its obligation to serve, and provisions to
ensure there is no cost shifting between customer classes.
(4) A method for determining the rates and charges for core and
core-elect customers, and the default commodity service price,
including estimated prices to be in effect as of January 1, 2006.
(5) Rules for the aggregation of customer load at multiple meters
for purposes of determining the core or noncore status of a customer,
including the use of appropriate meters.
(6) Provisions to ensure that no cost-shifting occurs between core
and core-elect customers.
(7) A six-month notice requirement to begin receiving or to cancel
core-elect service upon completion of the three year commitment.
(f) On or before July 1, 2004, the commission shall establish
tariffs for a noncore customer that include all applicable
transmission, distribution, public goods, and cost recovery surcharge
costs otherwise paid by noncore customers for the following
purposes:
(1) To transmit over nondedicated electrical corporation
facilities, electricity generated by a corporation or person at one
location for consumption by the same corporation or person, or an
affiliated corporation, or person at a separate location.
(2) To procure electricity from new or expanded generation
facilities.
(3) To procure electricity from a cogeneration facility that sold
power to the electrical corporation on or after June 1, 2003.
(g) In coordination with the resource planning and procurement
process established in Section 454.5, the commission shall annually
establish the appropriate mix and level of long-term, medium-term,
and short-term commitments to be made by an electrical corporation,
consistent with the electrical corporation procurement obligations
established in this section, and ensure the flexibility needed to
minimize stranded procurement costs.
(h) Noncore customers that begin taking commodity service from an
electric service provider on or after January 1, 2006, shall be
required to pay the costs described in subdivisions (d), (e), (f),
and (g) of Section 366.1, to the extent such costs continue to be
incurred by the electrical corporations, as determined by the
commission. Any customer receiving service under a direct
transaction prior to September 20, 2001, shall not incur any
additional obligations under this requirement unless they become
core-elect customers.
(i) In consultation with the State Energy Resources Conservation
and Development Commission and the Independent System Operator, the
commission shall establish resource adequacy requirements that ensure
the availability of planning reserves sufficient to serve all
customers of the electrical corporation, including noncore and
community choice aggregation customers. The resource adequacy
requirements shall ensure cost recovery by the electrical corporation
for acquired reserves through a nonbypassable component of the
electrical corporation's transmission and distribution charges.
(j) The commission shall ensure that noncore customers moving from
core-elect to noncore commodity service at the end of a three-year
term, shall not have an obligation for any future costs incurred by
the electrical corporation or Department of Water Resources
associated with the electrical corporation's procurement plan, and
that costs of the electrical corporation's procurement plan shall be
recoverable only from core and core-elect customers served by the
electrical corporation pursuant to subdivision (c).
(k) The commission shall ensure that all electric service
providers and community choice aggregators meet the renewable
portfolio standard and support demand side management programs,
either directly or through in-lieu arrangements approved by the
commission.
(l) The commission shall establish rules or tariffs that provide
an option for residential customers to receive commodity service
through direct transactions from renewable resources beginning
January 1, 2006, that fully compensates the electrical corporation
and the Department of Water Resources for the customer's
proportionate share of costs consistent with subdivisions (d), (e),
(f), and (g) of Section 366.1.
SEC. 3. No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.