BILL ANALYSIS
AB 816
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Date of Hearing: May 28, 2003
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Darrell Steinberg, Chair
AB 816 (Reyes) - As Amended: May 6, 2003
Policy Committee:
UtilitiesVote:11-1
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill requires municipal electric utilities that begin to
serve customers within an investor-owned utility's (IOU's)
service area to pay specific costs or "exit fees" and reinstates
the right of large retail customers to acquire electricity from
suppliers other than an IOU after specific conditions have been
met. Specifically, this bill:
1)Requires a local publicly owned electric utility that, after
February 1, 2004, begins serving electricity to existing or
new load in the current service territory of an IOU to be
responsible for the proportionate share of the following
charges as determined by the Public Utilities Commission
(PUC):
a) Department of Water Resources' (DWR) bond-related costs
for electricity purchases and the net unavoidable costs for
electricity contract obligations.
b) The IOU's past undercollections for its electricity
purchases and unavoidable going forward electricity
purchase contract costs.
2)Requires the municipal utility to determine the method by
which to recover the applicable costs from its customers and
to remit those cost to DWR and the appropriation IOU.
3)Provides that a municipality that, after February 1, 2001,
annexes adjoining territory within the service area of an IOU
or a new customer of the municipality within that territory is
not responsible for the above charges if the municipality:
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a) Operates its own publicly utility.
b) Was serving all customers within its boundaries before
February 1, 2001.
c) Provides all municipal services to residents of the
annexed area.
4)Reinstates the right of those IOU customers with a load
requirement of at least 500kw to directly acquire electricity
from suppliers other than an IOU once the following conditions
are met:
a) The PUC has established a cost responsibility surcharge
for customers that opt for direct transactions.
b) IOUs are procuring electricity pursuant to commission
approved plans and as required by legislation enacted last
year.
c) The PUC has resolved outstanding issues in the direct
access phase of an outstanding rulemaking.
d) The commission has adopted rules, for direct access
customers that voluntarily or involuntarily return to IOU
bundled service, including that there be no cost shifting
to IOU bundled service customers.
5)Requires the PUC to limit the amount of direct access in order
to minimize the risk that IOUs will procure excessive
electricity supply.
FISCAL EFFECT
1)Minor absorbable costs to the PUC.
2)Publicly-owned utilities annexing IOU territory will incur
costs to develop a mechanism for recovering the required
charges from customers in that territory. These public
utility costs are unknown, but should be recoverable through
fees.
COMMENTS
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1)Background . As part of restructuring the electric industry,
AB 1890 (Brulte), Chapter 856, Statutes of 1996, authorized
retail customers to purchase electricity either from the
investor-owned utilities or directly from other electricity
suppliers. In response to the electricity crisis in 2001, AB
X1 1 (Keeley) in part called on the PUC to suspend direct
access purchases, which the PUC did in a September 2001
decision.
In later proceedings, the PUC determined that bundled service
customers of the IOUs should not be burdened with additional
costs due to cost shifting from the significant migration of
customers from bundled to direct access prior to September
2001. The PUC subsequently imposed charges on direct access
load, known 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.
2)Local Public Utilities . Last year, the governor signed AB 117
(Migden), which expressly made exit fees applicable to any
retail customer that purchases electricity from a "community
choice aggregator," which is similar to a municipal electric
utility except that the former continues to use IOU
transmission and distribution infrastructure. This bill is
intended to clarify that electric load leaving IOU service for
a municipal utility is also subject to the same surcharge set
forth in AB 117.
3)Direct Access . Last year, the governor signed AB 57 (Wright),
which provided an electricity procurement framework for IOUs
that allows for long term electricity procurement with up
front approval of the procurement plans by PUC. The author
states that this is the appropriate time to reinstate the
right of retail customers to begin or to continue receiving
some or all of their power from electricity providers other
than an IOU. The author and proponents note that many direct
access customers are nearing the expiration of their contract
for electricity service with their providers. These customers
may be forced back to IOU bundled service, upsetting load
predictions that may have been made by the IOU, if the right
to choose electricity suppliers is called into question when
the existing customers attempt to renew the contracts.
4)Opposition . The California Municipal Utilities Association
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(CMUA) believes that the bill imposes certain fees under
inappropriate circumstances, i.e. charges for previous IOU or
DWR power purchases to someone who moves into a new
development served by a publicly-owned utility and for which
there was never any IOU service. CMUA also maintains that,
DWR's energy contracts were based on energy demand forecasts
that accounted for some level of IOU load departing to
municipal utilities through "normal annexations." CMUA
believes that such annexations should not trigger exit fees.
The California Coalition of Utility Employees (CUE) opposes
the bill's direct access provisions, asserting that allowing
direct access will not allow the IOUs to maintain a stable
customer base that is needed to make long-term commitments
from procuring generation.
5)Concern . The exemption from exits fees applies only to
annexations by "municipalities"-not publicly-owned
utilities-and to new customers in annexed land, meeting the
other conditions specified in the bill, including that the
municipality provides "all municipal services." Given the
concerns expressed by the CMUA, these provisions seem overly
narrow and somewhat vague.
It should be noted that the PUC is currently considering a
pending decision regarding exist fees for IOU load departing
to municipal utilities that, consistent with CMUA's concern,
would provide an exemption for new utility customers in
annexed land.
6)Related Legislation . AB 428 (Richman), pending on the
committee's Suspense agenda, defines non-core customers as all
retail end-use customers of an electrical corporation whose
peak demand is greater than either 500kw or the maximum peak
demand determined by PUC, and gives these customers until July
1, 2005 to decide to stay with the electrical corporation or
choose another electricity supplier.
SB 888 (Dunn), currently pending in the Senate Appropriations
Committee, generally repeals the electrical restructuring of
AB 1890, including direct access provisions. At the time this
analysis was written, the author was intending amend the bill
to, in part, require the PUC to prepare a core/non-core
proposal for consideration by the Legislature in 2004.
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Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081