BILL NUMBER: AB 2006 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 12, 2004
INTRODUCED BY Assembly Member Nunez
FEBRUARY 13, 2004
An act to add Article 17 (commencing with Section 400) to Chapter
2.3 of Part 1 of Division 1 of the Public Utilities Code, relating to
electricity.
LEGISLATIVE COUNSEL'S DIGEST
AB 2006, as amended, Nunez. Electrical restructuring: Reliable
Electric Service Act of 2004.
Under existing law, the Public Utilities Commission has regulatory
authority over public utilities, including electrical corporations,
and authorizes the commission to fix just and reasonable rates and
charges. Under existing law, a public utility has a duty to serve,
including furnishing and maintaining adequate, efficient, just and
reasonable service, instrumentalities, equipment, and facilities as
are necessary to promote the safety, health, comfort, and convenience
of its patrons and the public. The existing Public Utilities Act
requires the commission, pursuant to electrical restructuring, 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.
This bill would establish a core and noncore model under which the
utility's duty to serve would extend to core customers and
those noncore customers that may
elect to receive bundled electric service
from the electrical corporation or from an electric service
provider . The utility's duty to serve noncore
customers that elect to purchase electricity through a direct
transaction would exist for transmission and distribution electric
service. An electrical corporation would have no
obligation to procure electricity or otherwise meet resource adequacy
requirements for noncore customers that elect to enter into a direct
transaction for the purchase of electricity. The bill would
require electrical corporations to file, and for the commission to
approve, an integrated a long-term
resource investment plan, as specified, sufficient
to fulfill the utility's duty to serve while achieving best
value for ratepayers . The bill would provide for the recovery
of costs and investments made pursuant to an approved
integrated long-term resource
investment plan. The bill would require that a
utility's bundled service customers be indifferent to
no costs be shifted to the utility's core customers as a result of
the election by noncore customers to purchase electricity
through direct transactions. The bill would require the commission,
in consultation with the Independent System Operator, to establish
resource adequacy requirements to ensure adequate reserves
of physical generating capacity are
to meet peak demand plus requisite planning and operating reserves
is available to reliably serve all customers and would require
the Independent System Operator , consistent with federal
law, to implement and enforce these resource adequacy
and reserve requirements in a nondiscriminatory
manner on all load serving entities , excluding a local publicly
owned electric utility . The bill would require the commission
to adopt implementing rules and regulations.
A violation of the Public Utilities Act or an order of the
commission is a crime under existing law.
Because a violation of the bill's provisions would be a violation
of the act, the bill would impose a state-mandated local program by
creating a new crime.
The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. The Legislature finds and declares all of the
following:
(a) An adequate and reliable supply of electricity is essential to
the health, safety, and welfare of all California consumers.
(b) Safe, reliable, and affordable , electric service
that is environmentally sustainable, electric service
is of utmost importance to the consumers of this state and its
economy.
(c) Electrical corporations have an obligation to serve
provide their customers with reliable electric
service at just and reasonable rates.
(d) In order to provide safe, reliable, and affordable electric
service to consumers, electrical corporations must invest in
provide needed resources, including
cost-effective energy efficiency and other demand reduction measures,
utility-owned and procured generation, new and repowered
generation, high-efficiency cogeneration,
renewable generation, transmission, distribution, and energy
efficiency and other demand reduction measures an
adequately sized, well trained workforce , in a manner that
produces the best value for ratepayers.
(e) In order to ensure that investments in resources are made in a
manner that produces the best value for ratepayers, electrical
corporations should prepare an integrated resource
investment a long-term resource plan for
commission review and approval, that achieves a diversified
, reliable, and environmentally sustainable portfolio of
efficient, cost-effective supply and demand resources.
(f) In order to ensure that an integrated resource investment
(f) In order to ensure that the long-term resource plan achieves a
diversified portfolio of efficient, cost-effective supply and demand
resources, resource adequacy requirements shall be met first through
cost-effective energy efficiency and other demand reduction
measures.
(g) In order to ensure that a long-term resource plan will
result in investments in resources sufficient to provide reliable
electric service to customers of an electrical corporation without
stranding costs or shifting costs, a stable and predictable customer
base is necessary and essential.
(g)
(h) In order to attract sufficient capital to make
investments in needed resources, there must be assurance that
reasonable costs and investments, including a return of and on direct
investments, and investments made by
payments made to third parties under contract with an
electrical corporation for non-utility-owned generation ,
are recovered in rates.
(h)
(i) California consumers will not receive reliable and
affordable electric service, nor will consumers avoid repetition of
past problems with volatile excessive
wholesale electricity prices, rolling blackouts, and long-term supply
contracts that threaten consumers with billions of dollars in
above-market electricity costs, unless a durable framework is enacted
to support investment in needed resources , as soon as
possible .
SEC. 2. Article 17 (commencing with Section 400) is added to
Chapter 2.3 of Part 1 of Division 1 of the Public Utilities Code, to
read:
Article 17. Reliable Electric Service Act of 2004
400. This article shall be known, and may be cited, as the
Reliable Electric Service Act of 2004.
400.1. (a) An electrical corporation has an obligation to
serve provide the utility's
bundled customers with reliable electric service at just
and reasonable rates, pursuant to Section 451. For purposes
of this article, the utility's "bundled customers" means core
customers and those noncore customers that commit to bundled service
pursuant to this article.
(b) The obligation to serve the utility's bundled customers
includes the obligation to plan for, invest in, and provide adequate,
efficient, and environmentally sustainable resources, including
(b) For purposes of this article, "electric service" includes
providing adequate and efficient resources, including cost-effective
energy efficiency and other demand response resources,
utility-owned and procured generation resources, new and repowered
generation resources, high-efficiency
cogeneration, renewable generation resources, transmission and
distribution resources, energy efficiency and demand
response resources, and to employ an adequately sized, well trained
utility workforce to provide these resources.
(c) An electrical corporation has an obligation to serve noncore
customers that elect to enter into direct transactions, with electric
transmission and distribution service at just and reasonable rates,
pursuant to Section 451. metering, billing, and
employing an adequately sized, well trained utility workforce.
(c) Notwithstanding subdivisions (a) and (b), an electrical
corporation has no obligation to procure electricity or otherwise
meet resource adequacy requirements for any customer that elects to
enter a direct transaction. No costs incurred by the
electrical corporation to serve noncore customers with
electric transmission and distribution service
customers that have entered into a direct transaction ,
shall be shifted to the utility's bundled customers.
400.5. (a) To ensure that adequate investments are made in
resources necessary to provide consumers
customers with reliable electric service, the commission shall
authorize an electrical corporation to make investments in
provide efficient, cost-effective resources,
including cost-effective energy efficiency and demand response
resources, utility-owned and procured generation resources, new
and repowered generation resources, high-efficiency
cogeneration, renewable generation resources, transmission resources,
and cost-effective energy efficiency and demand response resources,
consistent with the electrical corporation's approved integrated
resource investment plan. cogeneration, and renewable
generation resources, consistent with the electrical corporation's
procurement plan adopted pursuant to Section 454.4.
(b) The commission shall, after public hearing, approve and
thereafter maintain just and reasonable rates sufficient to ensure
that reasonable investments the electrical
corporation fully recovers the cost of investments found reasonable
by the commission in the resources necessary to provide
consumers customers with reliable
electric service, including a reasonable return of and on
investment, are fully recovered opportunity to fully
recover a reasonable return on investment over the life of the
resource, and that in addition to costs
reasonably incurred to operate and maintain those resources
are fully recovered , on a timely basis.
(c) The cost recovery assurance for investments in resources
applies to both of the following:
(1) Direct investments made by an electrical corporation.
(2) The electrical corporation's full costs of contracting
for generation resources with another entity, including the
cost of any collateral requirements and debt equivalence.
(d) Nothing in this article alters the requirements of Section
455.5, 463, or 1005.5.
400.10. (a) To ensure that adequate investments necessary to meet
the electrical corporation's obligation to serve bundled
customers are made, each electrical corporation shall, no later than
July 1, 2005, and at least every three years thereafter, prepare an
integrated resource investment plan to achieve a diversified,
environmentally sustainable provide reliable electric
service are made, every electrical corporation shall prepare a
long-term resource plan in accordance with Section 454.5 to achieve a
diversified portfolio of efficient cost-effective supply and
demand resources to serve the utility's bundled customers.
The integrated resource investment customers. The
plan shall include demand and supply forecasts for 5-, 10-, and
15-year periods, and shall ensure that adequate resources are
available to reliably serve the utility's bundled customers.
The process for utility selection and commission approval of these
resources shall be designed to achieve best value for the utility's
bundled customers, by considering reliability, efficiency,
cost-effectiveness, system impacts, resource diversity, and risk.
The commission shall review and approve, with such revisions as the
commission deems necessary to implement the provisions of this
article, an electrical corporation's integrated resource investment
plan within 120 days of receipt.
(b) The integrated resource investment plan shall provide for
customers. The demand forecasts shall reflect energy
efficiency programs approved by the commission. The commission shall,
after public hearing, review and approve a long-term resource plan
for every electrical corporation consistent with Section 454.5,
including those revisions to the utility filed plan that the
commission determines are necessary.
(b) The plan shall provide for investments in all
practicable and cost-effective energy efficiency and demand response
resources, including load management, that offer equivalent or better
system reliability, equivalent or better environmental improvements,
and equivalent or lower costs to ratepayers than supply
alternatives.
(c) The integrated resource investment plan shall provide for
investments in renewable generation consistent with Article 16
(commencing with Section 399.11), provided that investments in
renewable generation are made in furtherance of the goal of supplying
20 percent of an electrical corporation's retail sales from eligible
renewable energy resources, no later than December 31, 2010.
(d) (1) The integrated resource investment plan shall provide for
investments, including extensions, renewals, or renegotiations of
existing contracts, in new or repowered generation and
high-efficiency cogeneration projects. These resources may be
obtained through investment by independent generators under contract
with the electrical corporation, through a competitive procurement
process or other process approved by the commission, consistent with
Section 454.5, or from direct utility investment. To the maximum
extent permissible under law, repowering and high-efficiency
cogeneration projects that offer equivalent or better system
reliability, equivalent or better environmental benefits, and
equivalent or lower costs to ratepayers than new generation, shall be
given first consideration.
(2) For purposes of this chapter, "high-efficiency cogeneration
projects" means a cogeneration project that can achieve thermal
efficiencies greater than 75 percent and are used to meet the thermal
requirements of continuous industrial or commercial processes.
(3) For purposes of this chapter, "repowered generation" means a
project for the modification of an existing generation unit of a
thermal powerplant that meets all of the following criteria:
(A) The project complies with all applicable requirements of
federal, state, and local laws.
(B) The project is located on the site of, and within the existing
boundaries of, an existing thermal facility.
(C) The project will not require significant additional
rights-of-way for electrical or fuel-related transmission facilities.
(D) The project will result in significant and substantial
increases in the efficiency of the production of electricity,
including, but not limited to, reducing the heat rate, reducing the
use of natural gas, reducing the use and discharge of water, and
reducing air pollutants emitted by the project, as measured on a per
kilowatthour basis.
(e) The integrated resource investment plan shall provide for
investments in new or expanded transmission facilities and control
systems that are needed to ensure efficient use and reliable
operation of the electric grid for core and noncore customers, to
facilitate the development of new, repowered, or renewable generation
facilities, or to accommodate load growth. With respect to any new
or expanded electrical transmission facility for which the
Independent System Operator has made a determination that the project
is needed to meet applicable reliability standards or to promote
economic efficiency, that determination shall be conclusive for
purposes of determining whether to issue a certificate of public
convenience and necessity pursuant to Chapter 5 (commencing with
Section 1001), and shall be included in the approved integrated
resource investment plan.
(f) (1) The integrated resource investment plan may provide
(c) The plan shall provide for investments in necessary generation
resources, including extensions, renewal, or renegotiations of
contracts for existing generation resources, new or repowered
generation and cogeneration projects.
(d) (1) The plan may provide for investments in distributed
generation to that would improve system
reliability, thereby deferring or eliminating investments in
distribution facilities that are otherwise
would otherwise be needed to improve system reliability, by
either direct investment by the electrical corporation or under
contract with a third party, provided the electrical corporation
finds that the investment in distributed generation would accomplish
each of the following:
(A) Result in overall cost savings for ratepayers due
to deferral or elimination of electric distribution projects.
(B) Provide the required reliability and operational
characteristics to support adequate service reliability to customers
in the affected area.
(2) In cases where the distributed generation is provided under
contract with a third party to reduce distribution system loads, the
third party must maintain physical assurance that the contracted load
reduction will be available during all required time periods.
(g) The integrated resource investment
(e) The plan shall provide for the continuation of the
self-generation incentive program authorized pursuant to Section
379.5 379.6 for ultraclean distributed
generation, as defined in Section 353.2.
(h) The integrated resource investment
(f) The plan shall provide that an electrical corporation
shall meet the resource adequacy requirements, owning or
procuring sufficient electric by owning or contracting
for sufficient physical generating capacity to meet 100
percent of annual peak demand, plus requisite operating and planning
reserve margins as determined by the commission, for the electric
load served by the electrical corporation. For purposes of this
article, "electric load served by the electrical corporation" does
not include the electrical load of customers who elect to enter into
a direct transaction.
400.15. (a) An electrical corporation's procurement plan approved
by the commission pursuant to Section 454.5, shall ensure that the
resource selection process for generation resources necessary to meet
resource adequacy requirements achieves best value for ratepayers by
considering price, reliability, stability, efficiency,
cost-effectiveness, system impacts, resource diversity, and risk.
(b) In accordance with an electrical corporation's procurement
plan approved pursuant to Section 454.5, to meet resource adequacy
requirements each electrical corporation shall manage a diversified
portfolio of non-utility-owned generation under contract with the
utility, and utility-owned generation, combining the potential
benefits of a competitive wholesale market, including operating
efficiencies and lower prices, with the stability of cost-of-service
generation resources, to achieve best value for ratepayers.
(c) In order to meet resource adequacy requirements, each
electrical corporation shall recommend for commission approval
generation resources that provide the best value for ratepayers,
consistent with all the following:
(1) The electrical corporation shall conduct competitive
solicitations for nonutility generation, consistent with the
electrical corporation's procurement plan approved pursuant to
Section 454.5.
(2) The electrical corporation may enter into a bilateral contract
for nonutility generation, consistent with the electrical
corporation's procurement plan approved pursuant to Section 454.5.
Prior to approving a bilateral contract for nonutility generation,
the commission shall find that the contract is reasonably priced
relative to a market-based benchmark.
(3) The electrical corporation may file for a certificate of
public convenience and necessity for utility-owned generation,
consistent with the electrical corporation's procurement plan
approved pursuant to Section 454.5. Prior to approving the
certificate of public convenience and necessity, the commission shall
find that the utility-owned generation is reasonably priced relative
to a market-based benchmark.
(d) For purposes of this article, "nonutility generation" means
facilities for the generation of electricity, owned and operated by
an entity other than an electrical corporation or an affiliate of an
electrical corporation.
400.18. An electrical corporation shall invest in new or expanded
transmission facilities and control systems that are needed to
ensure efficient use and reliable operation of the electrical grid
for customers. With respect to any new or expanded electrical
transmission facility for which the Independent System Operator has
made a determination that the project is needed to meet reliability
standards or to promote economic efficiency, that determination shall
be conclusive for purposes of determining whether to issue a
certificate of public convenience and necessity pursuant to Chapter 5
(commencing with Section 1001).
400.20. (a) The Legislature finds and declares all of the
following:
(1) To ensure that an electrical corporation can properly plan for
and invest in provide resources to
reliably serve its customers without stranding costs or shifting
costs among customers, a stable and predictable customer base is
necessary and essential.
(2) A core and noncore electric service model, under which an
electrical corporation is required to provide bundled
electric service to all core customers with a maximum
peak demand of less than 500 kilowatts on a cost-of-service
basis, while noncore customers with a maximum peak demand of at least
500 kilowatts, can elect to enter into a direct transaction to
purchase electricity from a nonutility electric service provider,
will, if properly structured, provide this stability.
(3) Under a properly structured core and noncore electric service
model, a utility's bundled service core
customers are indifferent to whether or not a noncore customer
elects to purchase electricity from an electrical corporation or
through a direct transaction.
(4) To ensure indifference, the commission is required to prevent
any shifting of costs to a utility's customers receiving
bundled service core customers , from noncore
customers that elect to purchase electricity through direct
transactions.
(5) It is in the public interest to allow noncore customers that
elect to purchase electricity through direct transactions, a safe
harbor of limited duration during which they can receive electricity
from an electrical corporation, provided the utility's
bundled service core customers are indifferent
to whether a noncore customer purchases electricity from an
electrical corporation during the safe harbor period. To ensure
indifference, a noncore customer should pay the higher of the
incremental costs of additional short-term spot electricity procured
or generated to serve them or the otherwise applicable tariff rate.
400.21. On or before December 31, 2005, the commission shall
adopt rules and regulations to implement a core and noncore model
that accomplish all of the following:
(a) An electrical corporation shall remain obligated to provide
reliable bundled electric service to core customers that have a
maximum peak demand of less than 500 kilowatts on a cost-of-service
basis.
(a) Core customers, and noncore customers that do not elect to
enter into a direct transaction pursuant to this section, shall
receive reliable electric service from an electrical corporation on a
cost-of-service basis.
(b) Noncore customers with a maximum peak demand of at
least 500 kilowatts may elect to enter into a direct
transaction with a nonutility electric service provider. The
electric service provider shall be fully responsible for meeting
the resource adequacy requirements of the electricity load
of established by the commission for
the customers it serves, and the integrated resource
investment long-term resource plan of the
electrical corporation shall exclude the resource adequacy
requirements of the electricity load serviced by an electric service
provider.
(c) A noncore customer that elect to take bundled service
from the electrical corporation does not elect to
enter into a direct transaction with a nonutility electric service
provider shall be subject to a five-year rolling commitment to
the electrical corporation.
(d) A noncore customer that elects to purchase
electricity through enter into a direct
transaction may thereafter receive default electric commodity service
from the electrical corporation under terms established by the
commission to ensure that the utility's bundled service
customers are indifferent to whether the noncore customer purchases
electricity from the electrical corporation during this safe harbor
period. To ensure indifference, a noncore customer shall
pay the higher of the incremental costs of additional short-term spot
electricity procured or generated to serve the noncore customer or
the otherwise applicable tariff rate.
(e) To ensure indifference, the commission shall adopt rules
sufficient to avoid a shifting of costs to the utility's bundled
(e) The commission shall adopt rules sufficient to avoid any
shifting of costs to the electrical corporation's core
customers that would result from noncore customers electing to
purchase electricity through direct transactions. Noncore customers
shall continue to pay those costs recoverable pursuant to
subdivisions (d), (e), (f), and (g) of Section 366.2.
(f) The commission shall adopt rules that defer new elections to
enter into direct transactions for the purchase of electricity by
noncore customers until the commission has approved a cost recovery
mechanism that ensures that new elections by noncore customers to
purchase electricity through direct transactions will not result in
the under recovery of any costs attributable to those noncore
customers.
(g) Customers that are purchasing electricity pursuant to a direct
transaction as of January 1, 2005, including customers that qualify
as core customers, pursuant to rules adopted by the
commission, may choose to continue to purchase electricity
pursuant to direct transaction or to return to bundled
a direct transaction or to return to service
provided by the electrical corporation.
(h) For purposes of this article, "core customer" means any
customer with a maximum peak demand of less than 500 kilowatts.
(i) For purposes of this article, "non-core customer" means any
customer with a single meter with a maximum peak demand of at least
500 kilowatts.
(j) In designating the earliest possible date for
implementation of a community choice aggregation program, the
commission shall ensure that there will be no cost-shifting or
stranding of investments made pursuant to an integrated
resource investment a long-term resource plan of
the electrical corporation that has been approved by the commission
pursuant to Section 454.5 .
400.22. (a) All electrical load serving entities, including
nonutility electric service providers and community choice
aggregators, shall be subject to the same requirements for resource
adequacy, resource diversity, and the renewable portfolio
standard, and demand response resources as
applicable to electrical corporations.
(b) The commission, in consultation with the Independent System
Operator, shall establish resource adequacy requirements to ensure
adequate reserves of physical generating capacity are
physical generating capacity to meet peak demand and
planning and operating reserves, is available to serve all
customers reliably. Consistent with federal law, the
The Independent System Operator shall implement
and enforce these resource adequacy and reserve
requirements in a nondiscriminatory manner on all load serving
entities. Load serving entities may procure physical generating
capacity through a market-based mechanism. For purposes of this
article, "load serving entity" does not include a local publicly
owned electrical utility as defined in Section 9604.
400.30. To ensure that the utility's obligation to serve
bundled provide customers with reliable
electric service at just and reasonable rates is met by an electrical
corporation, the
commission shall adopt rules and regulations consistent with the
policies and provisions of this article. Subject to judicial
review as provided in this act, those actions undertaken by the
commission pursuant to the provisions of this article are binding
upon the commission, and modify, amend and supercede any other
provisions of law, including Section 1708.
400.40. Nothing in this chapter shall alter or affect any outcome
of a competitive procurement process conducted by an electrical
corporation pursuant to any other law, including Section 454.5, prior
to January 1, 2005.
SEC. 3. No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.