BILL ANALYSIS
AB 428
Page 1
ASSEMBLY THIRD READING
AB 428 (Richman and Canciamilla)
As Amended June 2, 2003
Majority vote
UTILITIES AND COMMERCE 11-0 APPROPRIATIONS 24-0
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|Ayes:|Reyes, Richman, Calderon, |Ayes:|Steinberg, Berg, Kehoe, |
| |Campbell, Canciamilla, | |Corbett, |
| |Diaz, | |Daucher, Diaz, Firebaugh, |
| |La Malfa, Levine, Maddox, | |Goldberg, |
| |Nunez, Ridley-Thomas | |Haynes, Leno, Maldonaldo, |
| | | |Nation, Chan, Nunez, |
| | | |Pacheco, Pavley, |
| | | |Ridley-Thomas, Runner, |
| | | |Samuelian, Simitian, |
| | | |Wiggins, Yee, Laird |
| | | | |
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SUMMARY : Defines bundled core customers and non-core
electricity customers and establishes a process for non-core
customers to obtain the electricity through direct access
purchases with suppliers other than the investor-owned
utilities. Specifically, this bill :
1)Defines "bundled core customers" as those customers of an
electrical corporation whose peak demand is less than either
500kW or a maximum peak demand determined by the Public
Utilities Commission (PUC) and who are not purchasing
electricity from another source (through direct access
contracts).
2)Defines "non-core customers" as those whose peak demand is
greater than either 500kw or the maximum peak demand
determined by PUC.
3)Requires PUC, by January 1, 2005, to adopt regulatory criteria
for electrical corporations to determine the appropriate
composition of electricity supplies for their bundled core
customers, for those noncore customers who stay with the
electrical corporation for at least one year, and for
providing adequate reserve capacity.
4)Requires PUC to adopt rules protecting core customers from any
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shifting of cost, as a result of direct transactions or
departures from investment owned utility (IOU) service to a
publicly-owned utility, for Department of Water Resources
(DWR) electricity bonds and electricity purchase contracts and
for past IOU undercollections and electricity purchase
contracts.
5)Requires PUC, by January 1, 2005, to adopt rules for a tariff
on non-core customers, including: a) a requirement to decide
by July 1, 2005, whether to choose direct access or remain
with the IOU for at least one year; b) giving six months
notice to the IOU prior to going direct access; insuring
recovery of DWR and IOU cost obligation described in 4) above;
and, d) requirement that a non-core customer returning to IOU
service pay either IOU's actual costs of supplying power for
that customer or the current tariffed rate, whichever is
higher.
6)Specifies that from January 1, 2006, electricity corporations
have no obligation to serve any noncore customer except by
contract, for a term not less than one year, and on terms
approved by PUC that reimburse the electrical corporation for
all costs of providing electrical service.
7)Stipulates that, starting January 1, 2006, non-core customers
may not be served from IOU's core service power portfolio
established pursuant to 3) above.
8)Requires PUC, in a preceding to be completed by December 31,
2007, to, beginning on January 1, 2009, reduce the maximum
peak demand threshold for defining noncore customers by
converting those current bundled core customers with the
largest peak demand prior to noncore customers in sufficient
amounts so that forecast load attributable to converted
customers meets (a) the forecasted five-year growth in
electricity demand plus; and, b) any reduction in supply
attributable to Department of Water Resources electricity
purchase contracts.
9)Specifies that PUC may not reduce the maximum peak demand
threshold below 250kw for the purpose of moving customers from
core to noncore.
10) Requires PUC, by January 1, 2006, to adopt rules
that allow residential bundled core customers to elect to be
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served by direct transactions, and to adopt similar rules for
nonresidential bundled core customers before January 1, 2012.
FISCAL EFFECT : Requires PUC to undertake several new activities
over a multi-year period resulting in additional staff
resources. The additional cost to PUC would be around $250,000.
COMMENTS : The core/noncore concept is derived from natural gas
service, where customers are divided into core and noncore
classes. Gas utilities are required to procure and deliver a
portfolio of gas supplies sufficient to service their core
customers. Noncore customers must arrange for procurement and
transportation of their own gas supplies.
As part of restructuring of the electric industry, AB 1890
(Brulte), Chapter 856, Statutes of 1996, authorized retail
customers to purchase energy directly from suppliers. Under AB
1890 customers were allowed to choose alternate providers of
energy but IOUs obligation to serve all remained in place. The
obligation to serve provided customers the choice to remain
with, or return to, bundled IOU service which included a rate of
return for energy provided by IOUs from their retained
generation, power purchase contracts and spot market purchases.
In 2001, the Legislature enacted AB X1 1 (Keeley) in response to
the electricity crisis, during which Pacific Gas & Electric
(PG&E) and Southern California Edison (SCE) became financially
unable to continue purchasing electricity due to extraordinary
increases in wholesale energy prices. AB X1 1 required DWR to
procure electricity on behalf of the customers in the service
territories of IOUs. Among other things, AB X1 1 also called on
PUC to suspend the right of customers to acquire electricity
directly from suppliers other than IOUs. DWR began purchasing
electricity for the state on or about February 1, 2001.
In September 2001, PUC issued an order suspending the right to
acquire direct access (DA) electricity, effective September 21,
2001. In later proceedings, PUC determined that bundled service
customers of IOUs should not be burdened with additional costs
due to cost shifting from the significant migration of customers
from bundled to DA load prior to September 2001. PUC stated a
goal to prevent cost shifting, which meant, "bundled service
customers are indifferent" to the departure of these customers.
PUC initiated proceedings to impose charges on DA load in order
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to prevent cost shifting. These charges have been known
interchangeably as a "cost responsibility surcharge" or "exit
fees." Included among the surcharge categories are bond-related
costs and electricity contract costs associated with procurement
of power by DWR.
What this bill does is to provide for the construction of
electric generation capacity to meet the needs of a growing
state and replace this state's most polluting and inefficient
generation plants by phasing in retail market for the largest,
most financially stable customers. The main idea behind this
bill is based on the theory that moving large end users off the
core portfolio, which is defined as 500kw or less, will provide
a jump-start to the ailing energy market and spur capital
investment by energy service providers and investor owned
utilities.
Analysis Prepared by : Daniel Kim / U. & C. / (916) 319-2083
FN: 0001611