BILL ANALYSIS 1
1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
DEBRA BOWEN, CHAIRWOMAN
AB 1169 - Bermudez Hearing Date:
July 8, 2003 A
As Amended: July 1, 2003 Non-FISCAL
B
1
1
6
9
DESCRIPTION
Existing law:
1.Authorizes retail competition (direct access) within the
service areas of the investor-owned utilities (IOUs) and
permits aggregation of direct access customers (AB 1890
(Brulte), Chapter 856, Statutes of 1996).
2.Requires the California Public Utilities Commission (CPUC) to
suspend the right of retail customers of IOUs to acquire
electric power service from non-IOU providers until the
Department of Water Resources (DWR) no longer supplies power
to IOU customers (AB 1X (Keeley), Chapter 4, Statutes of
2001). Pursuant to AB 1X, the CPUC has suspended direct
access as of September 20, 2001.
3.Establishes a general exemption from the direct access
suspension for community aggregation undertaken by cities and
counties serving customers within their jurisdictions, subject
to provisions to ensure cost recovery from customers departing
from IOU service (AB 117 (Migden), Chapter 838, Statutes of
2002).
4.Establishes a limited exemption from the direct access
suspension permitting two cities (Cerritos and San Marcos) to
provide direct access service to deliver their share of the
Magnolia power plant project output to customers within their
jurisdictions, subject to provisions to ensure cost recovery
from customers departing from IOU service (AB 80 (Havice),
Chapter 837, Statutes of 2002).
This bill modifies the statute enacted by AB 80 to limit its
application to one city (Cerritos), to permit Cerritos to offer
direct access service to specified school facilities outside its
jurisdiction, and to provide that the statute doesn't require
Cerritos to rely solely on output of the Magnolia power plant.
BACKGROUND
As part of the restructuring of the electric industry, AB 1890
authorized direct access. To avoid the dysfunctional spot
market that financially decimated the IOUs and threatened
catastrophic rate increases, AB 1X established a structure to
permit DWR to buy needed electricity for IOU customers under
long-term contracts. To ensure the predictable revenue stream
necessary for long-term contracts, the issuance of
ratepayer-backed revenue bonds, and prevent cost-shifting from
direct access to bundled service customers, the CPUC was
directed to suspend direct access to prevent additional
migration of IOU customers. After a seven-month delay, the CPUC
suspended direct access on September 20, 2001.
Last year, two bills (AB 80 and AB 117) were enacted to
authorize conditional exemptions from the direct access
suspension for community aggregation. Community aggregation is
a form of direct access where, for example, a city may act as a
purchasing agent on behalf of its residents. AB 80 was enacted
to facilitate the sale of the output of a planned power plant
(Magnolia) to the residents of two cities which had an existing
interest in the project (Cerritos and San Marcos, which has
since dropped out of the project). The operative provisions of
AB 80 were accompanied by the following intent section:
SECTION 1. (a) It is the intent of the Legislature, in
enacting the act adding this section, to recognize
contributions made in response to California's need for the
expedited investment in and development of new
environmentally superior electrical generation projects.
(b) It is further the intent of the Legislature to avoid
the potential delay in adding new electrical generating
capacity that might be caused if certain project
participants are not allowed to utilize community
aggregation to deliver their share of the project output to
customers within their jurisdiction.
AB 117 revised and supplemented the procedures governing
community aggregation to, among other things, allow cities to
aggregate on an "opt-out" basis, rather than an "opt-in" basis.
In both bills, service was limited to customers within the
aggregating city's jurisdiction.
Implementation of both bills is also contingent on CPUC adoption
of a comprehensive mechanism to recover costs incurred by IOUs
and DWR from each customer taking IOU service on or after
February 1, 2001, including customers departing for community
aggregation, direct access, customer generation, or new
municipal utility service. The CPUC has yet to adopt a cost
recovery mechanism for community aggregation customers, or
otherwise initiate implementation of the community aggregation
bills, and its cost recovery mechanisms for other customers may
not satisfy the statutory conditions in AB 80 or AB 117. In
addition, Cerritos' authority under AB 80 to serve as a
community aggregator depends on the completion of the Magnolia
power plant, which is scheduled for mid-2005.
COMMENTS
1.Should "community aggregation" extend beyond the community's
boundaries? Last year's community aggregation bills
intentionally limited service to customers within the
jurisdiction of the community to limit their scope and ensure
accountability of the aggregator to its customers/voters. To
the extent it authorizes Cerritos to serve ABC school district
accounts outside Cerritos, this bill is inconsistent with last
year's agreements. The author and the committee may wish to
consider whether the provisions authorizing Cerritos to serve
"all electric service accounts of the ABC Unified School
District" should be deleted.
2.What is Cerritos' intent? The provision of this bill
providing that Cerritos isn't required to rely solely on
output of the Magnolia power plant in serving its customers is
characterized as a clarification of AB 80, but it raises
questions about the purpose of the special statute authorizing
an exemption from the direct access suspension for Cerritos.
While it would be impractical to rely solely on a single
resource to provide reliable electric service, the language
proposed by this bill can be read to nullify the amendment to
AB 80 adopted in this committee making construction of
Magnolia, and delivery of the power to the cities, a condition
of the cities' exemption from the direct access suspension.*
If the Legislature's intent in enacting AB 80 was to provide a
limited exemption to the direct access suspension to enable
the completion of the Magnolia power plant, as is suggested by
AB 80's intent language and the provision referenced above,
the author and the committee may wish to consider clarifying
that Cerritos must deliver its share of Magnolia's output to
customers within its jurisdiction before it buys any needed
power from other sources.
* Excerpt from Senate Energy, Utilities and Communications
Committee Analysis of AB 80 (June 11, 2002):
The bill contains no requirement that the cities use
power from Magnolia as a condition of their exemption
from the direct access suspension, only that they are
partners in the power plant's development, a condition
they have already met. If enacted, the bill would allow
the cities to offer direct access whether or not they
deliver power from Magnolia, before Magnolia is
constructed, or even if Magnolia never is constructed.
If the possibility of furthering the construction of
Magnolia is viewed as a compelling reason for the bill,
the author and the committee may wish to consider making
construction of Magnolia, and delivery of the power to
the residents of Cerritos and San Marcos, a condition of
the cities' exemption from the direct access suspension.
3.Should AB 80 be revisited in light of enactment of AB 117? AB
80 was passed by this committee prior to AB 117, recognizing
that AB 117's eventual enactment was not assured. Now that AB
117 has been enacted to provide a general framework for
community aggregation by cities, the author and the committee
may wish to consider whether a separate statute with different
standards, applicable only to Cerritos, is warranted.
If a separate statute for Cerritos is warranted, certain
provisions of existing law which would have been applicable to
Cerritos when AB 80 passed this committee, but were later
amended or replaced by new provisions in AB 117, should be
restored to apply to Cerritos. For example, when AB 80 passed
this committee, Section 366 of the Public Utilities Code
required public agencies offering service to any residential
customers to offer service to all residential customers within
its jurisdiction. This universal service requirement was
repealed by AB 117, which replaced it with a universal service
requirement applicable to the AB 117 process. The author and
the committee may wish to consider applying a similar
universal service requirement to Cerritos in this bill, as
follows:
If a public agency seeks to serve as a community
aggregator, it shall offer the opportunity to purchase
electricity to all residential customers within its
jurisdiction.
ASSEMBLY VOTES
Assembly Floor (77-0)
Assembly Utilities and Commerce Committee
(11-0)
POSITIONS
Sponsor:
City of Cerritos
Support:
None on file
Oppose:
None on file
Lawrence Lingbloom
AB 1169 Analysis
Hearing Date: July 8, 2003