BILL ANALYSIS
AB 1284
Page A
Date of Hearing: April 21, 2003
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Sarah Reyes, Chair
AB 1284 (Leslie) - As Amended: April 10, 2003
SUBJECT : Direct transactions: cost responsibility surcharges.
SUMMARY : Exempts fiber and particleboard manufacturers from
direct access exit fees. Specifically, this bill :
1)Provides that any 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 as
established under any decision of the California Public
Utilities Commission (PUC).
2)Sunsets on January 1, 2009.
EXISTING LAW :
1)Suspends the right of retail end use customers to acquire
electricity from providers other than the investor-owned
electric utilities (IOUs) until the Department of Water
Resources (DWR) no longer supplies power that it purchased on
behalf of IOUs during the energy crisis of 2000-2001.
2)Provides that various classes of customers who have purchased
electricity from a supplier other than an IOU are responsible
for a fair share of both the electricity purchase costs
incurred by DWR, and the purchase contract costs of the IOUs
from which they are departing.
FISCAL EFFECT : Unknown.
COMMENTS :
In early 2001, the Legislature passed AB X1 1 (Keeley), Chapter
4, Statutes of 2001. Among other things, AB X1 1 specified
that, after the passage of a period of time as determined by
PUC, the right of retail end use customers to acquire electric
service from providers other than the IOUs shall be suspended
until DWR no longer supplies power under the authority granted
in AB X1 1 for DWR to buy power on behalf of IOUs.
AB 1284
Page B
Subsequently, PUC permitted direct access customer contracts
entered into on or before September 20, 2001, to remain in
effect, but specified that bundled customers<1> shall not be
adversely impacted by shifting of costs caused by customers
migrating from bundled to direct access load.
Last year, AB 117 (Migden), Chapter 838, Statutes of 2002,
clarified the Legislature's intent concerning recovery of
DWR-related costs from retail end-use customers, stating that
those who have
"[p]urchased power from an electrical corporation on
or after February 1, 2001 should bear a fair share of
[DWR's] electricity purchase costs, as well as
electricity purchase contract obligations incurred ...
that are recoverable from electrical corporation
customers in commission-approved rates. It is further
the intent of the Legislature to prevent any shifting
of recoverable costs between customers."<2>
Thus, AB 117 (Migden) directs PUC to impose a "fair share" of
cost responsibility on all customers who took utility service on
or after February 1, 2001. The amount of the fair share is left
to PUC to determine.
In November 2002, a PUC decision<3> addressed direct access cost
responsibility surcharges or exit fees and related issues.
These costs are costs incurred by DWR on behalf of customers in
the service territories of the three major utilities, and costs
incurred by each of the utilities through their own resources
and contracts.
The charges are applicable to all direct access load that took
bundled service on or after February 1, 2001. The payment of
charges by direct access customers is currently subject to an
---------------------------
<1> Direct access customers purchase electricity from an
independent electric service provider (ESP), and receive only
distribution and transmission service from the IOU utility.
"Bundled" customers, however, rely on IOU for all these
services. Distribution and transmission charges are "bundled"
with a charge for the procurement of energy supplies.
<2> Public Utilities Code 366.2 (d)(1).
<3> D. 02-11-022.
AB 1284
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overall cap of 2.7 cents/kWh.
Continuous direct access customers that remained on direct
access both before and after February 1, 2001 are excluded from
the charges.
Sierra Pine
Sierra Pine is the sponsor of this bill, and has for the most
part been a continuous direct access customer, except for a 2-3
month period during the summer of 2001, when Enron, its electric
service provider, involuntarily returned it to bundled utility
service.
By taking bundled utility service after February 1, 2001 and
departing for direct access, Sierra Pine now pays exit fees
pursuant to PUC Decision 02-11-022.
This bill would exempt Sierra Pine from exit fees imposed by the
PUC at the direction of the Legislature.
Consistent Legislative Policy on Cost Shifting
In enacting AB 117 (Migden), the Legislature clearly stated its
preference that all parties pay a fair share of DWR's
electricity purchase costs, and that there be no cost-shifting
between customers.
This bill would enact a different policy, allowing an exception
to the rule or preference against cost shifting. It would also
run counter to recent PUC decisions establishing exit fees,
based on Legislative direction to avoid cost shifting.
Another issue raised by this bill, but not decided, is what
policy should be in place to govern those who return from direct
access to bundled electric service, whether voluntarily or not.
In order to encourage future stability in the markets, and in
the creditworthiness of utilities, the Legislature or the PUC
should establish a predictable policy governing the goings and
comings from direct access.
REGISTERED SUPPORT / OPPOSITION :
Support
AB 1284
Page D
Sierra Pine Ltd. (sponsor)
Opposition
None on file.
Analysis Prepared by : Paul Donahue / U. & C. / (916) 319-2083