BILL NUMBER: AB 2006 AMENDED
BILL TEXT
AMENDED IN SENATE JUNE 24, 2004
AMENDED IN ASSEMBLY MAY 24, 2004
AMENDED IN ASSEMBLY APRIL 12, 2004
INTRODUCED BY Assembly Member Nunez
FEBRUARY 13, 2004
An act to amend Sections 365 and 366 of, and to add
Article 17 (commencing with Section 400) to Chapter 2.3 of Part 1 of
Division 1 of , and to repeal Section 366 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 . Existing law 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 repeal the requirement that the commission
authorize direct transactions between electricity suppliers and
retail end-use customers and would instead establish a core and
noncore model under which the utility's noncore customers may elect
to receive electric service from the electrical corporation or from
an electric service provider. 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, a long-term integrated resource
plan, as specified, sufficient to fulfill the utility's duty to serve
while achieving best value for ratepayers at just and
reasonable rates . The bill would provide for the recovery of
costs and investments initial capital
investment made pursuant to an approved long-term
integrated resource plan. The bill would require that 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 incurred by the electrical
corporation to implement direct transactions on behalf of direct
access customers, shall be recovered from the utility's bundled
customers. The bill would require the commission, by July 1, 2005,
to prepare and submit to the Governor and the Legislature, a
comprehensive plan to streamline the transmission siting process
. The bill would require the commission, in consultation with
the Independent System Operator, to establish resource adequacy
requirements to ensure adequate physical generating capacity is
available, dedicated to serve all load requirements to meet
peak demand plus requisite planning and operating reserves
is available to reliably serve all customers , and would
require the Independent System Operator
commission to implement and enforce these resource adequacy
requirements in a nondiscriminatory manner on all load serving
entities, excluding a local publicly owned electric utility ,
the State Water Project, and customer generation, as defined.
The bill would require that the cost of meeting resource
adequacy requirements, including the costs associated with system
reliability and local area reliability, be equitably borne and
recoverable from all customers on a pro rata, fully compensatory
basis. The bill would require
authorize the commission to adopt implementing
rules and regulations implementing a core and noncore
model for retail electric service meeting certain requirements, by
December 31, 2005, and would require the commission to adopt rules
and regulations to ensure that electrical corporations meet their
obligation to provide customers with reliable electric service at
just and reasonable rates.
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
crimes .
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 is of utmost
importance to the consumers of this state and its economy.
(c) Electrical corporations have an obligation to 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 provide needed
resources, including cost effective
cost-effective energy efficiency and other demand reduction
measures, utility-owned and procured generation, new and repowered
generation, cogeneration, renewable generation, transmission,
distribution, and an adequately sized, well-trained workforce, in a
manner that produces the best value for ratepayers at just and
reasonable rates .
(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 a long-term integrated
resource plan for commission review and approval, that achieves a
diversified portfolio of efficient, cost effective
cost-effective, environmentally responsible supply and
demand resources.
(f) In order to ensure that the long-term
integrated resource plan achieves a diversified portfolio of
efficient, cost effective cost-effective
, environmentally responsible, supply and demand resources,
resource adequacy equirements shall be met first through
cost effective cost-effective energy efficiency
and other demand reduction measures.
(g) In order to ensure that a long-term integrated
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.
(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
payments made to third parties under contract with an electrical
corporation for non-utility-owned generation, are recovered in rates.
(i) California consumers will not receive reliable and affordable
electric service, nor will consumers avoid repetition of past
problems with 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.
SEC. 2. provide regulatory certainty and market
stability in support of investment in needed efficient,
cost-effective, environmentally responsible resources at just and
reasonable rates.
(j) Protecting the interests of consumers by ensuring that
investments are prudent and cost effective, should be the highest
priority of California regulatory policy and action.
(k) It is the intent of the Legislature in enacting this act to
pursue the goal of providing an open regulatory forum where all
persons affected by public utility service and rates, can observe and
participate in the decisionmaking process.
SEC. 2. Section 365 of the Public Utilities Code is amended to
read:
365. The actions of the commission pursuant to this chapter shall
be consistent with the findings and declarations contained in
Section 330. In addition, the commission shall do all of
the following:
(a) Facilitate facilitate the efforts of the
state's electrical corporations to develop and obtain authorization
from the Federal Energy Regulatory Commission for the creation and
operation of an Independent System Operator and an independent Power
Exchange, for the determination of which transmission and
distribution facilities are subject to the exclusive jurisdiction of
the commission, and for approval, to the extent necessary, of the
cost recovery mechanism established as provided in Sections 367 to
376, inclusive. The commission shall also participate fully in all
proceedings before the Federal Energy Regulatory Commission in
connection with the Independent System Operator and the independent
Power Exchange, and shall encourage the Federal Energy Regulatory
Commission to adopt protocols and procedures that strengthen the
reliability of the interconnected transmission grid, encourage all
publicly owned utilities in California to become full participants,
and maximize enforceability of such protocols and procedures by all
market participants.
(b) (1) Authorize direct transactions between electricity
suppliers and end use customers, subject to implementation of the
nonbypassable charge referred to in Sections 367 to 376, inclusive.
Direct transactions shall commence simultaneously with the start of
an Independent System Operator and Power Exchange referred to in
subdivision (a). The simultaneous commencement shall occur as soon
as practicable, but no later than January 1, 1998. The commission
shall develop a phase-in schedule at the conclusion of which all
customers shall have the right to engage in direct transactions. Any
phase-in of customer eligibility for direct transactions ordered by
the commission shall be equitable to all customer classes and
accomplished as soon as practicable, consistent with operational and
other technological considerations, and shall be completed for all
customers by January 1, 2002.
(2) Customers shall be eligible for direct access irrespective of
any direct access phase-in implemented pursuant to this section if at
least one-half of that customer's electrical load is supplied by
energy from a renewable resource provider certified pursuant to
Section 383, provided however that nothing in this section shall
provide for direct access for electric consumers served by municipal
utilities unless so authorized by the governing board of that
municipal utility.
SEC. 3. Section 366 of the Public Utilities Code is repealed.
366. (a) The commission shall take actions as needed to
facilitate direct transactions between electricity suppliers and
end-use customers. Customers shall be entitled to aggregate their
electrical loads on a voluntary basis, provided that each customer
does so by a positive written declaration. If no positive declaration
is made by a customer, that customer shall continue to be served by
the existing electrical corporation or its successor in interest,
except aggregation by community choice aggregators, accomplished
pursuant to Section 366.2.
(b) Aggregation of customer electrical load shall be authorized by
the commission for all customer classes, including, but not limited,
to small commercial or residential customers. Aggregation may be
accomplished by private market aggregators, special districts, or on
any other basis made available by market opportunities and agreeable
by positive written declaration by individual consumers, except
aggregation by community choice aggregators, which shall be
accomplished pursuant to Section 366.2.
SEC. 4. 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
provide the utility's plan for and provide
its customers with reliable electric service at just and
reasonable rates, pursuant to Section 451.
(b) For purposes of this article, "electric service" includes
providing adequate and efficient resources, including cost
effective cost-effective energy efficiency and
other demand response reduction
resources, utility-owned and procured generation resources, such
as new and repowered generation resources, cogeneration,
renewable generation resources, transmission and distribution
resources, 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 into a direct transaction.
No costs incurred by the electrical corporation to serve
customers that have entered into a direct transaction, shall be
shifted to to implement direct transactions on behalf
of direct access customers, shall be recovered from the utility'
s bundled customers.
400.5. (a) To ensure that adequate investments are made in
resources necessary to provide customers with reliable electric
service, the commission shall authorize an electrical corporation to
provide efficient, cost effective resources, including cost
effective cost-effective resources, including
cost-effective energy efficiency and demand response
reduction resources, utility-owned and procured
generation resources, such as new and repowered generation
resources, 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 the electrical corporation fully recovers the cost of
investments initial capital investment found
reasonable by the commission in the resources necessary to provide
customers with reliable electric service, including a reasonable
opportunity to fully recover a reasonable return on investment over
the life of the resource, in addition to costs reasonably incurred to
operate and maintain those resources, 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 in accordance with
Section 454.5 , including the reasonable costs, as determined
by the commission, for any collateral requirements and debt
equivalence.
(d) Nothing in this article alters the requirements of Section
454.5, 455.5, 463, or 1005.5.
(e) It is the intent of the Legislature in enacting this section
to affirm, without requiring revision, California's
traditional doctrine regarding an electrical corporation's reasonable
opportunity to fully recover reasonable costs and investments, as
reflected in regulatory and judicial decisions prior to 1994.
reaffirm California's traditional regulatory compact,
under which an electrical corporation has the obligation to provide
reliable electric service at just and reasonable rates, and the
commission ensures that the electrical corporation is afforded the
means to carry out this obligation, specifically including a
reasonable opportunity to fully recover from all customers, in a
manner determined by the commission pursuant to this code, a return
of, and a reasonable return on, reasonable investments in
utility-owned generation, transmission, and distribution resources
that are necessary to meet the utility's obligation, the utility's
reasonable costs to operate and maintain those resources, and the
utility's reasonable costs for nonutility generation resources
procured in accordance with Section 454.5.
400.10. (a) To ensure that adequate investments necessary to meet
the electrical corporation's obligation to provide reliable electric
service are made, every electrical corporation shall prepare a
long-term resource plan in accordance with Section 454.5
integrated resource plan in accordance with Sections
454.5 and 701.1, and Article 16 (commencing with Section 399.11),
to achieve a diversified portfolio of efficient cost
effective cost-effective supply and demand
resources to serve the utility's customers. The plan shall include
demand and supply forecasts for 5-, 10-, and 15-year periods, and
shall ensure that adequate resources are available
identified to reliably serve the utility's 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
Sections 454.5 and 701.1, and Article 16 (commencing
with Section 399.11) , 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 cost-effective
energy efficiency and load management resources , that offer
equivalent or better system reliability, equivalent or better
environmental improvements, and equivalent or lower costs to
ratepayers than supply alternatives.
(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 that would improve system reliability, thereby deferring
or eliminating investments in distribution facilities that 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
commission 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.
(e) The plan shall provide for the continuation of the
self-generation incentive program authorized pursuant to Section
379.6 for ultraclean and low-emission distributed generation, as
defined in Section 353.2.
(f) The plan shall provide that an electrical corporation shall
meet the resource adequacy requirements, 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 that an
electrical corporation shall meet resource adequacy requirements
established by the commission pursuant to Section 400.22, 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.
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 necessity when the
commission determines 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 provide resources to reliably serve its customers without
incurring stranded 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 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 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 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 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) 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 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 established by the commission
for the customers it serves, and the 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 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 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 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) 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 underrecovery 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, may choose to continue to purchase electricity
pursuant to 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, "noncore customer" means any
customer with a single meter with a maximum peak demand of at least
500 kilowatts.
(j)
400.15. In accordance with an electrical corporation's
procurement plan approved pursuant to Section 454.5, and consistent
with Section 701.1 and Article 16 (commencing with Section 399.11),
to meet resource adequacy requirements, each electrical corporation
shall manage a diversified, efficient, cost-effective,
environmentally responsible portfolio of nonutility-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 at just and reasonable rates.
400.18. The commission shall, on or before July 1, 2005, prepare
and submit to the Governor and the Legislature, a comprehensive plan
to streamline the transmission siting process. The plan shall, at a
minimum, include recommendations to eliminate regulatory overlap and
duplication, and recommendations to reduce the time needed to process
a request for transmission improvements. The commission shall
consult with the State Energy Resources Conservation and Development
Commission, the Independent System Operator, electrical corporations,
and interested parties in the development and preparation of the
plan.
400.21. (a) On or before December 31, 2005, the commission may
adopt rules and regulations to implement a core and noncore model for
retail electric service, whereby core customers shall receive
reliable electric service from an electrical corporation on a
regulated basis and noncore customers may choose to assume the full
price risk of purchasing electricity from the retail electric market.
The commission may implement a core and noncore model on or after
January 1, 2006, provided the commission has implemented rules and
regulations that achieve all
of the following:
(1) Permit specified electrical corporation customers with a
single anchor meter with a maximum peak demand of at least ____
kilowatts to choose to become noncore customers and to purchase
electricity directly from nonutility electric service providers.
Aggregation of additional meters on contiguous property under the
same ownership as the anchor meter may be permitted.
(2) Provide that noncore customers forgo both the benefits and
future incurred costs of receiving bundled electricity service from
the electrical corporations.
(3) Provide that the remaining core customers are served by the
electrical corporation's electricity resource portfolio.
(4) Require each electrical corporation to manage its electricity
resource portfolio for the benefit of its core customers.
(5) Ensure electrical corporations and core customers fully
compensatory and timely recovery of costs, including investments in
long-term resource additions to the system, originally incurred to
serve departing customers.
(6) Provide for the full recovery of existing direct access
customers' energy cost obligations on a schedule comparable to the
recovery of comparable costs from core customers.
(7) Provide for an election process whereby a customer with a
single anchor meter with a maximum peak demand of at least ____
kilowatts may choose to become a noncore customer. The election
process shall be phased in over no fewer than five years, and shall
include maximum annual megawatt limits on the amount of load
available to noncore customers for direct transactions (hereafter,
yearly transition cap). The yearly transition cap shall be based on
annual load growth and the Department of Water Resources contract
expirations. The commission may establish these annual megawatt
limits in equal annual amounts.
(8) Require that, at the end of the transition period, each
customer with a single anchor meter with a maximum peak demand of at
least ____ kilowatts, who has not yet elected to purchase electricity
directly from nonutility electric service provider, must make a
permanent election to either remain with the electrical corporation
or to purchase electricity from a nonutility electric service
provider.
(9) Require nonutility electric service providers to comply with
the resource adequacy requirements established by the commission
pursuant to this article, to ensure that there is no adverse effect
on the reliability, cost, or availability of electricity for core
customers.
(10) Require electric service providers to meet resource adequacy
requirements by first acquiring all available cost-effective energy
efficiency and demand reduction resources, and comply with the
requirements established pursuant to Article 16 (commencing with
Section 399.11).
(11) Provide for a competitively bid, provider-of-last-resort
default electric service, for noncore customers.
(12) Restrict the ability of a noncore customer to return to
electric service from the electrical corporation. In the event that
the retail market fails, and is no longer providing reliable electric
service to noncore customers, electrical corporation service to a
returning noncore customer shall be provided at a fully compensatory
rate, subject to standard contractual return conditions that prevent
any cost shifting.
(13) Demonstrate that a core and noncore model will support, and
not be detrimental to, system reliability and future investments in
electricity infrastructure and the objective of acquiring all
cost-effective energy efficiency and demand reduction resources.
(14) Provide that customers that are purchasing electricity
pursuant to a direct transaction as of January 1, 2005, including
customers that qualify as core customers, may choose to continue to
purchase electricity pursuant to a direct transaction or to return to
electric service provided by the electrical corporation. Those
customers who choose to continue to purchase electricity under a
direct transaction shall be subject to the rules established for a
noncore customer pursuant to this section. The commission may
authorize customers that are purchasing electricity pursuant to a
direct transaction as of January 1, 2005, and who choose to continue
to purchase electricity under a direct transaction pursuant to this
article, to aggregate additional meters located on contiguous
property under the customer's same ownership.
(15) Provide that the adoption of rules and regulations required
by this section, and the adoption of resource adequacy requirements
pursuant to this article, are a prerequisite for the implementation
of a core and noncore market authorized pursuant to this article.
(b) The commission shall annually prepare and submit to the
Legislature and the Governor a report detailing the status of the
noncore retail market established pursuant to this section,
including, but not limited to, the following:
(1) The number, type, size, and location of noncore customers,
including the total load electing to purchase electricity through
direct transactions.
(2) The amount of new generation capacity built to serve the
noncore retail market.
(3) The prices paid by noncore customers for electricity.
(c) The report shall be reviewed by an independent auditor each
year, who shall report to the commission, the Legislature, and the
Governor on any impacts on the price, availability, or reliability of
electricity for core customers resulting from the implementation of
a noncore retail market. The commission shall consider the report of
the independent auditor, and shall take all actions necessary to
ensure that core customers continue to receive reliable electric
service at just and reasonable rates, including, but not limited to,
deferring further phase in of the noncore retail market until new
generating capacity is built to serve the retail market.
(d) 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 a long-term integrated
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,
as applicable to electrical corporations that
are applicable to electrical corporations pursuant to this section,
as required by other law, or as required by order or decision of the
commission .
(b) The commission, in consultation with the Independent System
Operator, shall establish resource adequacy requirements to ensure
adequate physical generating capacity dedicated to serve all
load requirements is available to meet peak demand and planning
and operating reserves, is available to serve all customers
reliably. The Independent System Operator at a
location and at a time as may be necessary to ensure local area
reliability and system reliability, on a least-cost-to-ratepayers
basis.
(c) The commission shall implement and enforce these
resource adequacy requirements in a nondiscriminatory manner on all
load serving entities. Load
(d) The cost of meeting resource adequacy requirements, including
the costs associated with system reliability and local area
reliability, shall be equitably borne by and recoverable from all
customers on a pro rata, fully compensatory basis pursuant to rates
that are just and reasonable, as determined by the commission.
(e) Resource adequacy requirements established by the commission
shall provide for all of the following:
(1) Grid reliability.
(2) Adequate physical generating capacity dedicated to serve all
load requirements, including planning and operating reserves, where
and when it is needed.
(3) Investment in new generating capacity.
(4) Market power mitigation.
(5) Deliverability.
(f) Load serving entities may procure physical generating
capacity through a market-based mechanism . For
, provided that the mechanism achieves all of the following:
(1) Adequate generating capacity dedicated to serve all load
requirements when and where the electricity is needed, including
planning and operating reserves.
(2) Adequate investment in new generating capacity.
(3) Electricity that is purchased through the market is
deliverable to the load for which it is purchased.
(4) Reliability of the electrical grid is not impaired.
(5) A prospective market monitoring process is in place that is
sufficient to ensure a well-functioning wholesale electricity market.
(g) The commission shall adopt rules and regulations necessary to
enforce resource adequacy requirements established pursuant to this
section. Pursuant to its authority to revoke or suspend registration
pursuant to Section 394.25, the commission shall suspend the
registration for a specified period or revoke the registration, of an
electric service provider that fails to comply with the rules and
regulations adopted by the commission to enforce resource adequacy
requirements.
(h) The commission's implementation of resource adequacy
requirements in accordance with this section shall be a prerequisite
for the implementation of a core and noncore market authorized
pursuant to this article.
(i) For purposes of this article, "load serving entity" does
not include a local publicly owned electrical
electric utility as defined in Section 9604 , the
State Water Resources Development System commonly known as the State
Water Project, or customer generation. For purposes of this
subdivision, "customer generation" means cogeneration, renewable
technologies, or any other type of generation that is dedicated
wholly or in part to serve a specific customer's load and that relies
on nonutility or dedicated utility distribution wires, rather than
the utility grid, to serve the customer, the customer's affiliates,
or the customer's tenants, or not more than two other persons or
corporations. Those two persons or corporations must be located
onsite or adjacent to the real property on which the generator is
located. "Customer generation" includes distributed energy resources
as defined in Section 353.1 and ultraclean and low-emission
distributed generation as defined in Section 353.2.
400.30. To ensure that the utility's obligation to 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.
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.
SEC. 5. 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.