BILL NUMBER: AB 2006 AMENDED
BILL TEXT
AMENDED IN SENATE JULY 6, 2004
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 to add Chapter 2.4 (commencing with
Section 400) to Chapter 2.3 of Part 1 of Division
1 of, and to repeal Section Sections 330 and
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.
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
authorize the commission to adopt rules and
regulations to implement 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 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 at least every 3 years , 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 initial capital investment
made pursuant to an approved long-term integrated resource plan.
The bill would require that no costs 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, and would
require the 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 authorize the commission to adopt 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.
Existing law states the intent of the Legislature and makes
various findings and declarations with respect to electrical
restructuring.
This bill would repeal that statement of intent and the
legislative findings and declarations.
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 new 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 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, 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, environmentally responsible, 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 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 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
(k) The Public Utilities Commission has an obligation to provide
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 330 of the Public Utilities Code is repealed.
330. In order to provide guidance in carrying out this chapter,
the Legislature finds and declares all of the following:
(a) It is the intent of the Legislature that a cumulative rate
reduction of at least 20 percent be achieved not later than April 1,
2002, for residential and small commercial customers, from the rates
in effect on June 10, 1996. In determining that the April 1, 2002,
rate reduction has been met, the commission shall exclude the costs
of the competitively procured electricity and the costs associated
with the rate reduction bonds, as defined in Section 840.
(b) The people, businesses, and institutions of California spend
nearly twenty-three billion dollars ($23,000,000,000) annually on
electricity, so that reductions in the price of electricity would
significantly benefit the economy of the state and its residents.
(c) The Public Utilities Commission has opened rulemaking and
investigation proceedings with regard to restructuring California's
electric power industry and reforming utility regulation.
(d) The commission has found, after an extensive public review
process, that the interests of ratepayers and the state as a whole
will be best served by moving from the regulatory framework existing
on January 1, 1997, in which retail electricity service is provided
principally by electrical corporations subject to an obligation to
provide ultimate consumers in exclusive service territories with
reliable electric service at regulated rates, to a framework under
which competition would be allowed in the supply of electric power
and customers would be allowed to have the right to choose their
supplier of electric power.
(e) Competition in the electric generation market will encourage
innovation, efficiency, and better service from all market
participants, and will permit the reduction of costly regulatory
oversight.
(f) The delivery of electricity over transmission and distribution
systems is currently regulated, and will continue to be regulated to
ensure system safety, reliability, environmental protection, and
fair access for all market participants.
(g) Reliable electric service is of utmost importance to the
safety, health, and welfare of the state's citizenry and economy. It
is the intent of the Legislature that electric industry
restructuring should enhance the reliability of the interconnected
regional transmission systems, and provide strong coordination and
enforceable protocols for all users of the power grid.
(h) It is important that sufficient supplies of electric
generation will be available to maintain the reliable service to the
citizens and businesses of the state.
(i) Reliable electric service depends on conscientious inspection
and maintenance of transmission and distribution systems. To
continue and enhance the reliability of the delivery of electricity,
the Independent System Operator and the commission, respectively,
should set inspection, maintenance, repair, and replacement
standards.
(j) It is the intent of the Legislature that California enter into
a compact with western region states. That compact should require
the publicly and investor-owned utilities located in those states,
that sell energy to California retail customers, to adhere to
enforceable standards and protocols to protect the reliability of the
interconnected regional transmission and distribution systems.
(k) In order to achieve meaningful wholesale and retail
competition in the electric generation market, it is essential to do
all of the following:
(1) Separate monopoly utility transmission functions from
competitive generation functions, through development of independent,
third-party control of transmission access and pricing.
(2) Permit all customers to choose from among competing suppliers
of electric power.
(3) Provide customers and suppliers with open, nondiscriminatory,
and comparable access to transmission and distribution services.
(l) The commission has properly concluded that:
(1) This competition will best be introduced by the creation of an
Independent System Operator and an independent Power Exchange.
(2) Generation of electricity should be open to competition.
(3) There is a need to ensure that no participant in these new
market institutions has the ability to exercise significant market
power so that operation of the new market institutions would be
distorted.
(4) These new market institutions should commence simultaneously
with the phase in of customer choice, and the public will be best
served if these institutions and the nonbypassable transition cost
recovery mechanism referred to in subdivisions (s) to (w), inclusive,
are in place simultaneously and no later than January 1, 1998.
(m) It is the intention of the Legislature that California's
publicly owned electric utilities and investor-owned electric
utilities should commit control of their transmission facilities to
the Independent System Operator. These utilities should jointly
advocate to the Federal Energy Regulatory Commission a pricing
methodology for the Independent System Operator that results in an
equitable return on capital investment in transmission facilities for
all Independent System Operator participants.
(n) Opportunities to acquire electric power in the competitive
market must be available to California consumers as soon as
practicable, but no later than January 1, 1998, so that all customers
can share in the benefits of competition.
(o) Under the existing regulatory framework, California's
electrical corporations were granted franchise rights to provide
electricity to consumers in their service territories.
(p) Consistent with federal and state policies, California
electrical corporations invested in power plants and entered into
contractual obligations in order to provide reliable electrical
service on a nondiscriminatory basis to all consumers within their
service territories who requested service.
(q) The cost of these investments and contractual obligations are
currently being recovered in electricity rates charged by electrical
corporations to their consumers.
(r) Transmission and distribution of electric power remain
essential services imbued with the public interest that are provided
over facilities owned and maintained by the state's electrical
corporations.
(s) It is proper to allow electrical corporations an opportunity
to continue to recover, over a reasonable transition period, those
costs and categories of costs for generation-related assets and
obligations, including costs associated with any subsequent
renegotiation or buyout of existing generation-related contracts,
that the commission, prior to December 20, 1995, had authorized for
collection in rates and that may not be recoverable in market prices
in a competitive generation market, and appropriate additions
incurred after December 20, 1995, for capital additions to generating
facilities existing as of December 20, 1995, that the commission
determines are reasonable and should be recovered, provided that the
costs are necessary to maintain those facilities through December 31,
2001. In determining the costs to be recovered, it is appropriate
to net the negative value of above market assets against the positive
value of below market assets.
(t) The transition to a competitive generation market should be
orderly, protect electric system reliability, provide the investors
in these electrical corporations with a fair opportunity to fully
recover the costs associated with commission approved
generation-related assets and obligations, and be completed as
expeditiously as possible.
(u) The transition to expanded customer choice, competitive
markets, and performance based ratemaking as described in Decision
95-12-063, as modified by Decision 96-01-009, of the Public Utilities
Commission, can produce hardships for employees who have dedicated
their working lives to utility employment. It is preferable that any
necessary reductions in the utility workforce directly caused by
electrical restructuring, be accomplished through offers of voluntary
severance, retraining, early retirement, outplacement, and related
benefits. Whether workforce reductions are voluntary or involuntary,
reasonable costs associated with these sorts of benefits should be
included in the competition transition charge.
(v) Charges associated with the transition should be collected
over a specific period of time on a nonbypassable basis and in a
manner that does not result in an increase in rates to customers of
electrical corporations. In order to insulate the policy of
nonbypassability against incursions, if exemptions from the
competition transition charge are granted, a firewall shall be
created that segregates recovery of the cost of exemptions as
follows:
(1) The cost of the competition transition charge exemptions
granted to members of the combined class of residential and small
commercial customers shall be recovered only from those customers.
(2) The cost of the competition transition charge exemptions
granted to members of the combined class of customers other than
residential and small commercial customers shall be recovered only
from those customers. The commission shall retain existing cost
allocation authority provided that the firewall and rate freeze
principles are not violated.
(w) It is the intent of the Legislature to require and enable
electrical corporations to monetize a portion of the competition
transition charge for residential and small commercial consumers so
that these customers will receive rate reductions of no less than 10
percent for 1998 continuing through 2002. Electrical corporations
shall, by June 1, 1997, or earlier, secure the means to finance the
competition transition charge by applying concurrently for financing
orders from the Public Utilities Commission and for rate reduction
bonds from the California Infrastructure and Economic Development
Bank.
(x) California's public utility electrical corporations provide
substantial benefits to all Californians, including employment and
support of the state's economy. Restructuring the electric services
industry pursuant to the act that added this chapter will continue
these benefits, and will also offer meaningful and immediate rate
reductions for residential and small commercial customers, and
facilitate competition in the supply of electric power.
SEC. 3. 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 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.
SEC. 3.
SEC. 4. Section 366 of the Public Utilities Code is
repealed.
SEC. 4. Article 17
SEC. 5. Chapter 2.4 (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
CHAPTER 2.4. RELIABLE ELECTRIC SERVICE ACT OF 2004
400. This article chapter 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 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 chapter
, "electric service" includes providing adequate and efficient
resources, including cost-effective energy efficiency and other
demand reduction resources, utility-owned and procured generation
resources, such as new and repowered generation resources,
cogeneration, and 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 meet resource
adequacy requirements for any customer that elects to enter into a
direct transaction. No costs incurred by the electrical corporation
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
energy efficiency and demand 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 454.4 454.5 .
(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 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 which is specified at the time of the
application for a certificate of public convenience and necessity, if
the initial capital investment is found reasonable by the
commission.
(c) In determining 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. or Article 16
(commencing with Section 399.11), the commission shall take into
account any collateral requirements and debt equivalence associated
with the contract, in a manner determined by the commission to
provide the best value to ratepayers.
(d) Nothing in this article chapter
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 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 and Article 16 (commencing with
Section 399.11) .
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 , at least
every three years, prepare a long-term 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 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 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 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 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 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 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.
.
(b) The long-term integrated resource plan shall accomplish all of
the following:
(1) Ensure that adequate resources are identified to serve the
utility's customers reliably.
(2) Provide for investments in resources proposed pursuant to
Section 454.5 and Article 16 (commencing with Section 399.11).
(3) Be consistent with Section 701.1 and Chapter 4 (commencing
with Section 25300) of Division 15 of the Public Resources Code.
(4) Achieve a diversified portfolio of efficient, cost-effective,
and environmentally responsible supply and demand resources to serve
the utility's customers.
(5) Provide for investments in all practicable and cost-effective
energy efficiency and load management resources.
(6) Provide for investments in, or procurement of, necessary
conventional generation resources, including extensions, renewals, or
renegotiations of contracts for existing generation resources, new
or repowered generation, and cogeneration projects.
(7) Provide that an electrical corporation meets 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 chapter, "electric load served by the electrical
corporation" does not include the electrical load of customers who
elect to enter into a direct transaction.
(8) Include demand and supply forecasts for 5- and 10-year
periods. The demand forecasts shall reflect all energy efficiency
and load management programs approved by the commission.
(c) The long-term integrated resource plan may provide for
investments in distributed generation that would improve electrical
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 retail customer or a third party, if the commission
finds that the investment in distributed generation would accomplish
each of the following:
(1) Result in overall cost savings for ratepayers due to deferral
or elimination of electric distribution projects.
(2) Provide the required reliability and operational
characteristics to support adequate service reliability to customers
in the affected area.
(3) If the distributed generation is provided under contract with
a retail customer or a third party to reduce distribution system
loads, the retail customer or third party shall maintain physical
assurance that the contracted load reduction will be available during
all required time periods.
400.11. The commission shall, after public hearing, review and
approve a long-term integrated resource plan for every electrical
corporation, including those revisions to the plan that the
commission determines are necessary to meet the requirements of
Section 400.10 and achieve best value for utility customers.
400.15. In accordance with an electrical corporation's
procurement plan approved pursuant to Section 454.5, and consistent
with Section long-term integrated resource plan
approved pursuant to Section 400.11, and consistent with Sections
454.5 and 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 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 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 from existing direct access
customers, on a schedule comparable to the recovery of
comparable costs from core customers , either through
refinancing the cost obligation, or otherwise relieving core
customers of the cost obligation .
(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 shall make a permanent
election 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 , or yearly transition caps, 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 chapter , 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). The commission shall establish an effective
mechanism to independently measure and verify acquisition of
cost-effective energy efficiency and demand reduction resources by
electric service providers, consistent with commission protocols for
electrical corporations as existing on January 1, 2005.
(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 chapter , 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 chapter , are
a prerequisite for the implementation of a core and noncore market
authorized pursuant to this article chapter
.
(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 454.5 400.11 .
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,
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, 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.
(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, provided that the mechanism
achieves all of the following:
(1) Adequate physical 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 chapter .
(i) For purposes of this article chapter
, "load serving entity" does not include a local publicly owned
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 chapter .
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. 5.
400.50. Nothing in this chapter shall alter or affect the
implementation of the California Renewables Portfolio Standard
Program pursuant to Article 16 (commencing with Section 399.11).
SEC. 6. 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. ____ CORRECTIONS Text
-- Pages 9, 10, and 14. ____