BILL NUMBER: AB 1284 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 24, 2003
AMENDED IN ASSEMBLY APRIL 10, 2003
INTRODUCED BY Assembly Member Leslie
FEBRUARY 21, 2003
An act to add and repeal Section 80110.2 of the Water Code,
relating to energy resources.
LEGISLATIVE COUNSEL'S DIGEST
AB 1284, as amended, Leslie. Direct transactions: cost
responsibility surcharges.
Under existing law, the Public Utilities Commission regulates
electrical corporations. The Public Utilities Act requires the
commission to authorize direct transactions between electricity
suppliers and retail end-use customers. However, other existing law
suspends the right of retail end-use customers to acquire service
from certain electricity suppliers after a period of time to be
determined by the commission until the Department of Water Resources
no longer supplies electricity under that law. Under existing law,
the commission has imposed certain surcharges on retail end-use
customers that continue to receive service in a direct transaction.
This bill, until January 1, 2009, would exempt a qualifying
exempt direct transaction customer, as defined, from those
surcharges an entity whose sole source of raw fiber material
is recycled or reclaimed wood waste used in a manufacturing process
that does not permit flexible energy consumption .
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. The Legislature finds and declares all of the
following:
(a) SierraPine is the only company remaining in California that
manufactures fiberboard and is one of two companies producing
particleboard.
(b) The sole source of raw fiber material is recycled or reclaimed
wood waste. SierraPine takes in 371,000 dry tons per year of wood
residuals from sawmills, millworks, furniture companies, and other
woodworks companies, and 31,000 dry tons per year of urban wood waste
from discarded or dismantled sites.
(c) These wood waste products are made into particleboard and
fiberboard. SierraPine provides this state with 29 percent of its
particleboard and 35 percent of its fiberboard. About 85 percent of
the boards are used to manufacture retail products, such as
furniture, shelving, cabinets, countertops, molding, and flooring,
which can be found in nearly every home and office in this state.
The remaining 15 percent is used in actual housing construction in
the state.
(d) Few alternatives exist for disposal of these wood wastes:
(1) Burning, which has serious air quality implications.
(2) Landfill, which overburdens county landfill sites, and should
be used only as a last resort. Recycling is favored.
(3) Use in other industries, although no other industry can use
this large volume of waste on a continuous basis.
(e) All SierraPine production in this state is certified to be
from 100 percent recovered and recycled fiber content.
(f) SierraPine is a 2001 and 2002 recipient of the California
Waste Reduction Award Program (WRAP), which recognizes businesses
that develop innovative and aggressive programs to reduce the amount
of waste sent to landfills.
(g) Ongoing research by SierraPine will enable greater use of
material currently being disposed of in different ways.
(h) The manufacturing processes use large amounts of electricity
to operate equipment.
(i) As a volume-driven business with plants that require lengthy
shut down and startup times, these process lines must operate
continuously; 24 hours per day, 7 days per week, all year, which does
not allow for electric load shaping or flexible operating schedules.
(j) Historically, SierraPine averages a single digit earning
margin (about 5 percent) with a double digit electric cost component
(nearly 10 percent).
(k) Due to this extreme sensitivity to electricity costs, an
increase in that cost component significantly affects the earning
margin and the ability to remain competitive. Competitors are
outside of California where electricity costs are significantly
lower. The addition of surcharges on top of higher market prices for
electricity has caused the plants to curtail operations due to high
costs. In the worst case, these costs have made the fiberboard plant
unable to compete in California, even though it is the only such
plant in the state.
(l) SierraPine has taken significant steps in attempting to
control its electrical cost structure: it has been an interruptible
end user for over eight years with full compliance, has participated
in demand response programs during critical energy periods for
California, has installed energy efficient motors and equipment in
facilities, and has elected to use direct transactions from the
beginning of electrical restructuring. SierraPine was involuntarily
returned to bundled utility service but moved back to direct access
before July 1, 2001.
(m) For every job created by SierraPine, 2.2 nonmanufacturing jobs
are created in this state. For every dollar earned by a SierraPine
employee, two dollars and 30 cents ($2.30) are added to the total
pool of income earned by the employees in other employment sectors
throughout the state. Based on the above factor, SierraPine's
California facilities are providing a labor earnings impact of
forty-seven million five hundred thousand dollars ($47,500,000)
annually.
(n) SierraPine provides excellent pay and benefits, which fills
the critical gap between service and high-tech jobs. The
least-skilled job pays thirteen dollars and seventy-nine cents
($13.79) per hour. Employees receive full healthcare benefits,
including medical, dental, and vision which cost the company an
average of between five hundred fifty dollars ($550) per employee per
month. Employees have retirement plans that include company
contributions through 401(k) and defined benefit plans. Other
benefits such as life insurance, short-term and long-term disability,
and Section 125 plans are also provided. Unskilled workers can hold
year-round steady employment.
(o) The SierraPine particleboard plant is one of the largest
employers in Amador County with 150 employees and an annual payroll
of six million dollars ($6,000,000). It has complete emissions
compliance, spends about forty million dollars ($40,000,000) annually
on the cost of their product, pays about two hundred fifty thousand
dollars ($250,000) annually in property taxes, and has operated at
its present location for 31 years.
(p) The SierraPine fiberboard plant has over 200 employees at its
Placer County facility, with an annual payroll of eight million four
hundred thousand dollars ($8,400,000). It has state-of-the-art
emissions control providing for full compliance in a residential
neighborhood, it spends about sixty million dollars ($60,000,000)
annually on the cost of their product, pays about five hundred
seventy-five thousand dollars ($575,000) annually in property taxes,
and has operated at its present location for 29 years.
SEC. 2.
SECTION 1. Section 80110.2 is added to the Water Code, to
read:
80110.2. (a) Notwithstanding Section 80110, an entity
whose sole source of raw fiber material is recycled or reclaimed wood
waste used in a manufacturing process that does not permit flexible
energy consumption shall be exempt from cost recovery surcharges
under commission Decision 02-11-022, or any subsequent commission
decision, order, or regulation.
(b) This section shall remain in effect only until January 1, 2009,
and as of that date is repealed, unless a later enacted statute,
that is enacted before January 1, 2009, deletes or extends that date.
a qualifying exempt direct transaction customer
shall, not pay a direct access cost recovery surcharge, but will pay
any charge imposed to enable the Department of Water Resource to
recover its bond-related costs, along with a tail competition
transition charge, not to exceed $0.01 per kilowatthour on the actual
kilowatthours used.
(b) For purposes of this section, a "qualifying exempt direct
transaction customer" means any corporation that meets each of the
following requirements:
(1) The corporation entered into a direct transaction with an
electric service provider for electric service for a plant or
facility in California, by executing a contract prior to January 1,
2000, that extended service through at least February 1, 2001.
(2) The plant or facility was, after February 1, 2001,
involuntarily returned to the electrical corporation for electrical
service, as a result of the electric service provider terminating
electrical service under the direct transaction contract.
(3) The plant or facility returned to receiving electric service
from an electric service provider pursuant to a direct transaction
within 90 days.
(4) The plant or facility continuously participated in an
interruptible or curtailable service program.
(5) The corporation had an average total cost for all aspects of
electric service, as a percentage of sales, in excess of 8 percent,
for the five years beginning January 1, 1996, and continuing to
December 31, 2000.
(6) The corporation had an average net profit margin as a
percentage of sales of greater than 2 percent, for the five years
beginning January 1, 1996, and continuing to December 31, 2000.
(7) The average total electric service cost as a percentage of
sales, exceeded the average net profit margin for the corporation,
for the five years beginning January 1, 1996, and continuing to
December 31, 2000.
(8) The corporation submits a declaration from an officer,
director, or owner stating that unless relieved of the expense of the
direct access cost recovery surcharge, the plant or facility of the
corporation that purchases electric service under the direct
transaction contract, faces certain and imminent closure.
(c) It is the intent of the Legislature that no costs be shifted
between customer classes as a result of this section.
(d) This section shall remain in effect only until January 1, 2009,
and as of that date is repealed, unless a later enacted statute,
that is enacted before January 1, 2009, deletes or extends that date.