BILL NUMBER: AB 2006 AMENDED
BILL TEXT
AMENDED IN SENATE JULY 29, 2004
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, to add Chapter 2.4
(commencing with Section 400) to Part 1 of Division 1 of, and to
repeal Sections 330 and 366 Section 330
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
authorize the commission on or before December 31, 2005,
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 , or
competitive service from a provider of last resort. Upon full
implementation of these rules and regulations, existing law would
become inoperative that (1) requires the commission to authorize
direct transactions between electricity suppliers and retail and
end-use customers and (2) requires specified commission participation
in certain Federal Energy Regulatory Commission matters . 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 costs incurred by an electrical corporation
to implement transactions on behalf of direct-access customers to be
recovered from those customers. The bill would require
electrical corporations , commencing January 1, 2006, 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 by an electrical corporation and found reasonable
by the commission. The bill would also provide for the recovery of
an electrical corporation's full cost of contracting for generation
resources . 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
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
, and to submit a prescribed report concerning siting and
authorization of upgrades, improvements, and additions to each
electrical corporation's transmission system infrastructure .
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 and their customers , 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.
The bill would authorize the commission to order electrical
corporations to procure, schedule, and dispatch capacity to meet
resource requirements on behalf of all customer load, subject to
prescribed conditions, including standards for Independent System
Operator instructions, market power mitigation measures to ensure the
recovery of costs of meeting resource adequacy requirements, and
standards for the allocation and recovery of those costs.
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 a long-term integrated resource
plan will result in investments in physical generating capacity
dedicated to serving all load requirements is available to meet peak
demand and planning and operating reserves, at locations and at times
as may be necessary to ensure local area reliability and system
reliability, the commission shall adopt resource adequacy
requirements.
(g) 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)
(h) 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)
(i) 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)
(j) 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)
(k) Protecting the interests of consumers by ensuring that
investments made to provide safe, reliable electric service
are prudent and cost effective, should be the highest priority
of California regulatory policy and action.
(k)
(l) The Public Utilities Commission has an obligation to
provide an open regulatory forum where all persons affected by public
utility service and rates or otherwise affected by decisions
made by the commission , can observe and participate in the
decisionmaking process.
SEC. 2. Section 330 of the Public Utilities Code is repealed.
SEC. 3. Section 365 of the Public Utilities Code is amended to
read:
365. 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 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 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. 4. Section 366 of the Public Utilities Code is repealed.
This section shall become inoperative upon full implementation of
Section 400.21. The commission shall report to the Legislature when
Section 400.21 is fully implemented.
SEC. 4. Section 366 of the Public Utilities Code is amended to
read:
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.
(c) This section shall become inoperative upon full implementation
of Section 400.21. The commission shall report to the Legislature
when Section 400.21 is fully implemented.
SEC. 5. Chapter 2.4 (commencing with Section 400) is added to Part
1 of Division 1 of the Public Utilities Code, to read:
CHAPTER 2.4. RELIABLE ELECTRIC SERVICE ACT OF 2004
400. This 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 ,
and shall, plan for and provide its customers with reliable
electric service at just and reasonable rates, pursuant to Section
451 , including those customers that purchase standby service
from the electrical corporation .
(b) For purposes of this 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 plan
for or procure, or to bill or meter, electricity or meet
resource adequacy requirements for any customer that elects to enter
into a direct transaction. No costs 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 those
direct access 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 which
may include, among other resources, new and repowered
generation resources, cogeneration, and renewable generation
resources, consistent with the electrical corporation's procurement
plan adopted pursuant to Section 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 in the resources necessary to provide customers
with reliable electric service, 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 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) both of the following:
(1) The electrical corporation's initial capital investment found
reasonable by the commission pursuant to Section 1005.5.
(2) The electrical corporation's full cost of contracting for
generation resources with another entity in accordance with Sections
454.5 and Article 16 (commencing with Section 399.11) of Chapter 2.3,
including the reasonable costs for any collateral requirements and
debt equivalence, in a manner determined by the commission to provide
the best value to ratepayers.
(c) Nothing in this chapter alters the requirements of
Section 454.5, 455.5, 463, or 1005.5. Section
451, 454.5, 455.5, 463, or 1005.5.
(e)
(d) 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 of
the electrical corporation , 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,
commencing on January 1, 2006, and at least every three years
thereafter , prepare a long-term integrated resource plan.
(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 , or procurement of,
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 and may include 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 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. (a) 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.
(b) On or before December 31, 2005, the commission shall prepare
and transmit a report to the Legislature summarizing the status of
proceedings for each site for authorization of construction of all
upgrades, improvements, or additions to the transmission system
infrastructure determined by the electrical corporation to be
necessary to ensure reliability and for which the electrical
corporation has filed an application for a certificate of public
convenience and necessity. The report shall include action that the
commission has taken or proposes to take to facilitate the siting and
authorization of those facilities and the schedule for completion in
order to address the reliability needs identified by the electrical
corporation. To the extent that the commission determines that the
transmission upgrade, improvement, or addition is not needed, the
commission shall identify the alternative it intends to pursue in
order to ensure reliability. The commission shall update its report
on January 1, 2006, and annually on January 1 thereafter.
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 or to receive competitive service from a
provider of last resort, consistent with the objectives set forth in
this subdivision . 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
or to receive competitive service from a provider of last resort
pursuant to paragraph (11) . 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 and
assume both the benefits and the future incurred costs of receiving
bundled electricity service from the electrical corporation .
(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. However, electrical corporations
shall not incur new obligations for long-term resource additions to
serve noncore eligible customers during the five-year phase-in period
provided in paragraph (7).
(6) Provide for the full recovery of existing direct access
customers' energy cost obligations from those existing
direct access customers, on a schedule comparable to the recovery of
comparable costs from core customers, either through refinancing the
cost obligation, or by 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 shall make a permanent election to become a noncore
customer and purchase electricity directly from a nonutility
electric service provider or receive competitive service from a
provider of last resort pursuant to paragraph (11) . 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 commission may establish
these annual megawatt limits, or yearly transition caps, in equal
annual amounts. The election process shall also provide an
opportunity for a noncore eligible customer to make a binding
declaration to become a noncore customer in a future year, and
thereby avoid cost responsibility for any new obligation for
long-term resource additions made between the date of the noncore
eligible customer's binding declaration and the actual date the
noncore eligible customer becomes a noncore customer.
(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 an affirmative permanent election to
either remain with the electrical corporation or to purchase
electricity from a nonutility electric service provider or to
receive competitive service from a provider of last resort pursuant
to paragraph (11) .
(9) Require nonutility electric service providers to comply with
the resource adequacy requirements established by the commission
pursuant to this 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 commission finds that the retail market
fails, and is no longer has failed and the provider of
last resort is no longer capable of providing reliable
electric service to noncore customers, electrical
corporation the electrical corporation shall provide
electric 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
, through the establishment, implementation, and enforcement of
resource adequacy requirements pursuant to Section 400.22 or 400.23
.
(14) Provide that customers that are purchasing electricity
pursuant to a direct transaction as of January 1, 2005, as
provided by the commission pursuant to subdivision (b) of Section
365, including customers that qualify as core customers, may
choose make a one-time permanent election
to continue to purchase electricity pursuant to a direct
transaction , to receive competitive service from a provider of
last resort pursuant to paragraph (11), or to return to
electric service provided by the electrical corporation. Those
customers who choose to continue to purchase electricity under a
direct transaction or to receive competitive service from a
provider of last resort pursuant to paragraph (11) 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 chapter, to aggregate additional
meters located on contiguous property under the customer's same
ownership , even if the customer's anchor meter has a maximum
peak demand of less than ____ kilowatts .
(15) Provide that the adoption of rules and regulations required
by this section, and the adoption of resource adequacy requirements
pursuant to this chapter, are a prerequisite for the implementation
of a core and noncore market authorized pursuant to this 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 noncore 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
400.11. In considering approval of the electrical corporation's
long-term integrated resource plan, the commission shall also ensure
that the plan includes a reasonable estimate of the customer load
departure through Community Choice Aggregation, as such estimate is
provided for by a Community Choice Aggregator pursuant to Section
366.2.
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
that adequate physical generating capacity dedicated to
serve serving all load requirements is
available to meet peak demand and planning and operating reserves, at
a location and at a time locations and at
times as may be necessary to ensure local area reliability and
system reliability, on a least-cost-to-ratepayers basis.
at just and reasonable rates.
(c) The commission shall implement and enforce these resource
adequacy requirements in a nondiscriminatory manner on all load
serving entities and their customers, either by requiring all
load serving entities to meet the requirements individually, or by
directing the electrical corporation to secure the resources
necessary to meet resource adequacy requirements and allocating the
costs thereof to all customers pursuant to Section 400.23 .
(d) The cost of meeting To the extent that
the resources necessary to meet resource adequacy requirements are
provided by an electrical corporation pursuant to Section 400.23, the
costs of meeting those 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 , that cannot
be bypassed, pursuant to rates that are just and reasonable, as
determined by the commission.
(e) Resource adequacy requirements established by the commission
shall provide for , and ensure, all of the following:
(1) Grid System-wide and local area 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.
(3) Adequate and timely investment in new generating capacity to
meet future load requirements, including planning and operating
reserves.
(4) Market power mitigation.
(5) Deliverability.
(6) Resource commitments by load serving entities at least three
years in advance of need, in order to ensure that new resources can
be constructed if necessary to meet the need.
(f) Load serving entities may procure physical generating capacity
through a market-based mechanism, provided that the
mechanism achieves the commission, after a hearing,
determines that there is convincing factual evidence that the
mechanism will achieve 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 to ensure local area
reliability and system reliability .
(2) Adequate investment in new generating capacity.
(2) Adequate and timely investment in new generating capacity to
meet future load requirements, including planning and operating
reserves.
(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 and market power mitigation measures are in
place that are 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 chapter.
(i) For purposes of this 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.
400.23. Notwithstanding any other provision of this chapter, to
ensure that adequate physical generating capacity dedicated to serve
all load requirements is available to meet peak demand and planning
and operating reserves, at locations and at times as may be necessary
to ensure local area reliability and system reliability, the
commission may order electrical corporations to procure, schedule,
and dispatch capacity to meet resource adequacy requirements on
behalf of all customer load, including load served by nonutility
electric service providers, provided all of the following conditions
are met:
(a) The Independent System Operator shall provide detailed
instructions to the electrical corporation as to where and when and
in what amount resources are needed to meet local area reliability.
(b) The instructions of the Independent System Operator shall be
adopted as upfront achievable standards and criteria as part of the
electrical corporation's procurement plan approved by the commission
pursuant to Section 454.5.
(c) The Independent System Operator and the commission shall
provide market power mitigation measures to ensure that the costs
incurred to procure resources pursuant to Section 454.5 necessary to
meet resource adequacy requirements, including local area
reliability, peak demand, and planning and operating reserves, are
just and reasonable.
(d) The costs of meeting resource adequacy requirements shall be
allocated on a cost-based basis to each customer class, based on the
contribution of each class of customers to the electrical corporation'
s system peak demand.
(e) The allocation of costs of meeting resource adequacy
requirements shall be made in a manner to ensure that there are no
stranded costs, and no cost shifting between customer classes or
between customers of an electrical corporation and customers of
another load serving entity.
(f) The costs of meeting resource adequacy requirements shall be
recovered from all customers on a fully compensatory basis each year,
pursuant to rates that are just and reasonable, through a
transmission and distribution charge that cannot be bypassed.
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 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.
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).
400.60. Nothing in this chapter limits the ability of any
customer to participate in a Community Choice Aggregation program
pursuant to Section 366.2.
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.