BILL ANALYSIS AB 583 Page A CONCURRENCE IN SENATE AMENDMENTS AB 583 (Leslie) As Amended June 19, 2003 Majority vote ----------------------------------------------------------------- |ASSEMBLY: |73-0 |(April 24, |SENATE: |37-0 |(July 7, 2003) | | | |2003) | | | | ----------------------------------------------------------------- Original Committee Reference: U. & C. SUMMARY : Exempts the sale of specified electric generation facilities by public utilities from a temporary ban imposed by law. The Senate amendments further narrow the scope of the exemption by providing that an electric generation facility located outside the state may be disposed of if, among other things, it is not necessary to serve that utility's customers 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. AS PASSED BY THE ASSEMBLY , this bill authorized the sale, transfer or other disposition of an interest in an electric generation facility that is located outside of California, and is owned exclusively by a public utility that serves 60,000 or fewer connections in California. FISCAL EFFECT : Minor absorbable special fund costs for PUC to provide orders authorizing the sale on any generating facilities. AB 583 Page B COMMENTS : Among other things, the electricity restructuring law, AB 1890 (Brulte), Chapter 854, Statutes of 1996, separates the major functions of electric service (i.e., generation, transmission, and distribution) in order to create a competitive generation market. Decisions of PUC, D.95-12-063, modified in D.96-01-009, required the investor-owned utilities (IOUs) to divest at least 50% of their fossil-fuel electric generating assets. 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 2000-01, the Legislature enacted AB X1 6 (Dutra), Chapter 2, Statutes of the 2001-02 First Extraordinary Session, 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. 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. AB 583 exempts the companies from the moratorium, but they would AB 583 Page C continue to be required to obtain an order from PUC<1> authorizing the sale of the asset before consummating the sale. Previous legislation: AB 1235 (Leslie), Chapter 840, Statutes of 2002, provides an exemption for the divestiture of several specified out of state assets owned by PacifiCorp and Sierra Pacific. AB 583 simply exempts any out of state generation facility owned by these entities from the moratorium. Analysis Prepared by : Paul Donahue / U. & C. / (916) 319-2083 FN: 0002154 --------------------------- <1> 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. Public Utilities Code Section 853 also allows the PUC to exempt a public utility from the laws governing utilities if the public interest so requires.