BILL ANALYSIS
AB 1284
Page 1
Date of Hearing: May 14, 2003
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Darrell Steinberg, Chair
AB 1284 (Leslie) - As Amended: May 8, 2003
Policy Committee:
UtilitiesVote:12-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill limits the amount of the cost recovery surcharge
imposed by the Public Utilities Commission (PUC) for specified
direct access customers. Specifically, this bill:
1)Limits, until January 1, 2009, the surcharge to the total of
(a) the charge imposed for recovery of the Department of Water
Resources' (DWR) energy purchase costs and (b) a tail
competition transition charge, but in no case allows the
charge to exceed $0.01 per kilowatthour.
2)Applies the above to corporations who:
a) Were in a direct access contract in effect before
January 1, 2000 through at least February 1, 2001.
b) Were involuntarily returned to an investor-owned utility
(IOU) after February 1, 2001, when their direct access
contract was terminated, but returned to direct access
status with another provider within 90 days.
c) Continuously participated in an interruptible or
curtailable service program.
d) For 1996 through 2000 had (1) average electricity costs
exceeding 8 percent of sales, (2) an average net profit
margin exceeding 2 percent, and (3) average electricity
costs as a percentage of sales exceeding average net profit
margin.
e) Submits a declaration from a director or an officer
AB 1284
Page 2
stating that without the limits provided in (1), the
corporation faces certain and imminent closure.
FISCAL EFFECT
Absorbable special fund costs for the PUC to amend its recent
decision regarding direct access cost responsibility surcharges.
COMMENTS
1)Background . AB X1 1 (Keeley)-Chapter 4, Statutes of 2001, in
part specified that, after the passage of a period of time as
determined by the PUC, the right of retail end use customers
to acquire electric service from providers other than the IOUs
was to be suspended until DWR no longer would be procuring
power on behalf of the IOUs under authority also granted in AB
X1 1. The PUC subsequently permitted direct access customer
contracts entered into on or before September 20, 2001, to
remain in effect, but specified that bundled customers (those
purchasing electricity from the IOUs) would not be adversely
impacted by shifting of costs caused by customers migrating
from bundled to direct access load.
AB 117 (Migden)-Chapter 838, Statutes of 2002, directed the
PUC to impose a "fair share" of cost responsibility on all
customers who took utility service on or after February 1,
2001. In November 2002, a PUC decision addressed direct
access cost responsibility surcharges or exit fees and related
issues. These are the 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 payment of charges by
direct access customers is currently subject to an overall cap
of 2.7 cents/kWh. The charges are applicable to all direct
access loads that took bundled service on or after February 1,
2001, but customers that remained on direct access both before
and after February 1, 2001 are excluded from the charges.
2)Purpose . This bill is sponsored by Sierra Pine, which uses
wood waste to manufacture particleboard and medium density
fiberboard, and currently employs about 450 people in Placer,
Sacramento, and Amador Counties. Sierra Pine has been a
direct access customer since 1997, except for a 2-1/2-month
period during the summer of 2001, when Enron, its electric
service provider, involuntarily returned the company to
AB 1284
Page 3
bundled utility service. By obtaining bundled utility service
after February 1, 2001 and departing for direct access, Sierra
Pine is now subject to the exit fees discussed above. Sierra
Pine indicates that, given the high energy demand of its
operations, it cannot remain in business under the burden of
this additional charge, for which it is subject because of
just 75-days of involuntary bundled service.
As first heard by the policy committee, the bill-narrowly
constructed towards Sierra Pine-fully exempted from the cost
recovery surcharge any company whose sole source of raw fiber
material is wood waste. Subsequent amendments, approved by
the committee, instead provide more general criteria as
described above in the summary, for a corporation to be
eligible for a reduced surcharge.
Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081