BILL ANALYSIS AB 583 Page A Date of Hearing: April 1, 2003 ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE Sarah Reyes, Chair AB 583 (Leslie) - As Amended: March 25, 2003 SUBJECT : Generation facilities: regulation. SUMMARY : Exempts the sale of specified electric generation facilities by public utilities from a temporary ban imposed by law. Specifically, this bill : Permits the sale, transfer or other disposition of an interest in an electric generation facility that is: a) located outside of California; and b) owned exclusively by a public utility that serves 60,000 or fewer connections in California. EXISTING LAW : 1)Prohibits any electricity generating facility owned by a public utility to be sold or otherwise disposed of prior to January 1, 2006. 2)Provides for the California Public Utilities Commission (PUC) regulation of electric generation facilities that are owned by a public utility. 3)Specifies a process whereby a public utility can seek to obtain PUC authorization to sell or dispose of ownership of an electric generation facility. FISCAL EFFECT : Unknown. COMMENTS : Among other things, the electricity restructuring law, AB 1890 (Brulte)<1> separated the major functions of electric service (generation, transmission, and distribution) in order to create a competitive generation market. --------------------------- <1> Chapter 854, Statutes of 1996. AB 583 Page B Decisions<2> of PUC required the investor-owned utilities (IOUs) to divest at least 50% of their fossil-fuel electric generating assets. The IOUs have divested most of their generating assets, including a large number of natural gas power plants. Under existing law, IOU generation assets are subject to rate regulation by PUC and shall continue to be subject to PUC regulation until the owner of those facilities has obtained approval of PUC to dispose of those facilities. During the energy crisis of 2000-2001, the Legislature enacted AB X1 6 (Dutra)<3>, which prohibits the sale or disposal of any electric generating facility owned by a public utility until January 1, 2006. The moratorium on the sale of generation assets for utility companies doing business in California was intended to halt any further divestiture of California assets during the energy crisis. Sale or transfer of out-of-state power plants The sponsors of this bill, Sierra Pacific Power Company and PacifiCorp, own electric generating assets outside the state of California, but are public utilities under California law because each serves electricity to retail customers within the state. PacifiCorp serves customers in the northernmost region of the state and Sierra Pacific serves customers in the Lake Tahoe region. Apparently neither company serves greater than 50,000 customers within California. Because the companies are under the jurisdiction of state public utilities laws, the moratorium on the sale or divestiture of electric generation assets applies to them despite the minimal nature of their contacts with the state and that the plants are located in other states. This bill exempts the companies from the moratorium, but they --------------------------- <2> D.95-12-063, modified in D.96-01-009. <3> Chapter 2, Statutes of 2001. AB 583 Page C would continue to be required to obtain an order from PUC<4> authorizing the sale or transfer of the asset before consummating the sale. Previous legislation Last year, AB 1235 (Leslie)<5> was signed in to law and it provided an exemption for the divestiture of several specified out of state assets owned by PacifiCorp and Sierra Pacific. This bill simply exempts any out of state generation facility owned by these entities from the moratorium. REGISTERED SUPPORT / OPPOSITION : Support PacifiCorp Sierra Pacific Power Company Opposition None on file. Analysis Prepared by : Paul Donahue / U. & C. / (916) 319-2083 --------------------------- <4> Public Utilities Code Section 851 requires a public utility to obtain PUC approval prior to selling utility property that is "necessary or useful" to the utility as it performs its duties to the public. <5> Chapter 840, Statutes of 2002.