BILL NUMBER: AB 2006 AMENDED
BILL TEXT
AMENDED IN SENATE AUGUST 17, 2004
AMENDED IN SENATE AUGUST 9, 2004
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 add Chapter 2.4 (commencing with Section 400) to Part 1
of Division 1 of, to add Section 743.2
Sections 250, 454.05, and 1001.7 to, and to repeal Section 330
of, the Public Utilities Code, relating to electricity
public utilities .
LEGISLATIVE COUNSEL'S DIGEST
AB 2006, as amended, Nunez. Electrical restructuring :
Reliable Electric Service Act of 2004 ; Public Utility
Commission procedures .
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 require costs incurred by an electrical
corporation to implement transactions on behalf of direct-access
customers to be recovered from those customers that,
prior to adopting any settlement agreement that is contested by any
party and involves a ratepayer obligation over $10,000,000, the
Public Utilities Commission hold a hearing to review the settlement
and any alternative proposed by any party, to ensure that the
proposed settlement achieves specified purposes . The bill
would require electrical corporations, commencing January 1, 2006, to
prepare and file at least every 3 years, and for the
commission to approve, a long-term integrated resource plan, as
specified. The bill would provide for the recovery of initial
capital investment made by an electrical corporation in generation
resources specified, if the investment is found to be reasonable and
is approved by the commission in the certificate of public
convenience and necessity proceedings , and the
investment complies with the conditions specified by the commission
in the certificate of public convenience and necessity
proceedings at the time the investment is approved. The
bill would also provide for the recovery of an electrical corporation'
s full cost of contracting for generation resources with another
entity, as specified .
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 , on or
before December 31, 2005, 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 that adequate
physical generating capacity is available ,
dedicated to serve all load requirements , is available 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 found reasonable by the commission, be
equitably borne and fully recoverable
from all customers of taking service from
the electrical corporation on a nonbypassable basis at the
time the commitment to incur the cost is made on a
pro rata, fully compensatory basis .
The bill would require local publicly owned electric utilities to
comply with resources adequacy standards established by the Western
Energy Coordinating Council (WECC).
The bill would require a majority vote of the commission
membership at a public meeting in order to approve any change in
rates or alteration of any utility classification, contract,
practice, project, or rule that affects rates directly or indirectly
or to approve the settlement of any judicial or administrative
proceeding that would result in any of those consequences. The bill
would require that, prior to approving an electrical corporation
application for a certificate of convenience and necessity for the
proposed construction of generation resources, the commission convene
a proceeding at which any party may submit, and the commission shall
consider, alternative proposals meeting specified criteria .
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, that is available to meet peak
demand and planning and operating reserves, at or deliverable to
locations and at times as may be necessary to ensure local
area reliability and system reliability, the commission shall adopt
resource adequacy requirements that apply equally to all load serving
entities.
(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.
(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 recoverable 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 made to provide safe, reliable electric service are
prudent and cost effective, should be the highest priority of
California regulatory policy and action.
(k) 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. 1.5. Section 250 is added to the Public Utilities Code, to
read:
250. Prior to adopting any settlement agreement that is contested
by any party and that involves a ratepayer obligation of greater
than ten million dollars ($10,000,000), in addition to any other
requirement applicable to settlements, the commission shall not
approve the settlement before it has held a hearing to review the
settlement and any alternative proposed by any party, in order to
ensure that the proposed settlement agreement resolves the dispute at
the lowest reasonable cost to ratepayers, while balancing other
public interest objectives, including protection of public health and
safety, promotion of a sound economy, conservation of resources,
preservation of environmental quality, and promotion of adequate,
just, and reasonable service.
SEC. 2. Section 330 of the Public Utilities Code is repealed.
SEC. 3. 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 take
standby service from the electrical corporation on a
commission-approved rate schedule .
(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 , including contracting for maintenance of generation
facilities .
(c) Notwithstanding subdivisions (a) and (b), an electrical
corporation has no obligation to plan for or procure , or to
bill or meter electricity or meet resource adequacy
requirements for any customer that elects to enter
has entered into a direct transaction. Costs
incurred by the electrical corporation to implement direct
transactions on behalf of direct access customers, shall be recovered
from 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, which may include, among other
resources, new and repowered generation resources, cogeneration, and
renewable generation resources, consistent with the electrical
corporation's long-term integrated resource plan approved
pursuant to Section 400.11 and its 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 both of the following:
(1) The electrical corporation's initial capital investment in
generation resources specified, found reasonable, and approved
by the commission in the certificate of public
convenience and necessity proceedings, if the
investment complies with the conditions specified by the commission
in the certificate of public convenience and necessity
proceedings at the time the investment is approved.
(2) The electrical corporation's full cost of contracting for
generation resources with another entity in accordance with
found reasonable pursuant to Sections 454.5 and
Article 16 (commencing with Section 399.11) of Chapter 2.3,
including the reasonable costs for taking 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.
(c) Nothing in this chapter alters the requirements of Section
451, 454.5, 455.5, 463, or 1005.5.
(d) It is the intent of the Legislature in enacting this section
to reaffirm California's traditional regulatory compact
doctrine , 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
and file with the commission 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 funding of all practicable and cost-effective
energy efficiency and load management resources.
(6) Provide for investments in, or procurement of, necessary
generation resources, 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
the electrical corporation, including load served
under a standby tariff," does not include the electrical load of
customers who have entered 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 both
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)
(d) 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-based 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 annually update
its report as part of its annual workplan.
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, cost-effective energy efficient
, and the renewable portfolio standard, that are
applicable to electrical corporations pursuant to this section, or
otherwise as required by law, or 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 serving all
load requirements is available to meet peak demand and planning and
operating reserves, at or deliverable to locations and at
times as may be necessary to ensure local area reliability and system
reliability, 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. The electrical corporation's costs of meeting
those resource adequacy requirements, including the costs associated
with system reliability found reasonable by the commission and local
area reliability, shall be equitably borne by and
fully recoverable from all customers of the
electrical corporation on a pro rata, fully compensatory basis, that
cannot be bypassed, pursuant to rates that customers
taking service from the electrical corporation on a nonbypassable
basis at the time the commitment to incur the cost is made, pursuant
to rates that are just and reasonable, as determined by the
commission.
(e)
(d) Resource adequacy requirements established by the
commission shall provide for, and ensure, all of the following:
(1) 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) 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) In order sufficiently far in advance, to
ensure that new resources can be constructed if necessary to meet the
need, resource commitments by load serving entities shall be made
sufficiently far in advance, and no less than three years in advance
of need.
(f)
(e) Load serving entities may procure physical generating
capacity through a market-based mechanism, provided that 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 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 and market power
mitigation measures are in place that are sufficient to ensure a
well-functioning wholesale electricity market.
(g)
(f) The commission shall adopt rules and regulations
necessary to enforce resource adequacy requirements established
pursuant to this section uniformly among all load serving entities,
including establishing a uniform accounting mechanism to identify,
count, track, and verify all capacity needed to meet these resource
adequacy requirements for each load serving entity. 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)
(g) 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.
(i) Local publicly owned electric utilities, as defined in Section
9604, shall comply with resources adequacy standards established by
the Western Energy Coordinating Council (WECC). if the
customer generation (1) takes standby service from the electrical
corporation on a commission-approved rate schedule that requires the
customer's load serving entity to provide for adequate backup
planning and operating reserves for that customer generation or (2)
is not physically interconnected to the transmission grid, so that if
the customer generation fails, backup power is not supplied from the
electricity grid.
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. (a) Nothing in this chapter limits the ability of any
customer to participate in a Community Choice Aggregation program
pursuant to Section 366.2.
(b) 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.
400.70. On or before September 1, 2005
June 30, 2006 , the commission shall prepare and submit to the
Legislature a report describing the extent to which existing rate
allocations for each customer class reflect cost of service and
describing how the continuing costs resulting from the energy crisis
of 2000-01, including, but not limited to, bond charges and
above-market contract costs incurred by the Department of Water
Resources, are being recovered from each customer class .
SEC. 4. Section 743.2 is added to the Public Utilities Code, to
read:
743.2. (a) It is the intent of the legislature in enacting this
section that the commission recognize the potential competitive
disadvantage experienced by large manufacturing customers of
electricity.
(b) The commission may order an electrical corporation to file
tariffs that offer discounted rates for large manufacturing customers
of electricity if the commission determines those customers face a
competitive disadvantage with regard to electricity rates for
similarly-situated users in other states.
SEC. 5.
SEC. 4. Section 454.05 is added to the Public Utilities Code, to
read:
454.05. Every decision of the commission pursuant to Section 454
that approves a change in rates or an alteration of any utility
classification, contract, practice, project, or rule that affects
rates directly or indirectly pursuant to Section 454, or the
settlement of any judicial or administrative proceeding to which the
commission is a party and that results in a change in rates or a
change in a utility classification, contract, practice, project, or
rule that affects rates directly or indirectly, shall be made by vote
of a majority of the commission membership in a public meeting of
the commission. A decision made in violation of this section is void.
SEC. 5. Section 1001.7 is added to the Public Utilities Code, to
read:
1001.7. Prior to approving a certificate of public convenience
and necessity for generation resources proposed to be constructed by
an applicant electrical corporation, the commission shall do both of
the following:
(a) Convene a proceeding in which any other party may submit a
proposal for construction of those generation resources if the
proposal meets the same or higher standards for price and system
reliability than the proposal of the applicant electrical
corporation.
(b) Consider whether a proposal for an alternative generation
resources project submitted pursuant to subdivision (a), other than
the proposal of the applicant electrical corporation, would provide
lower costs to ratepayers, better system reliability, and the same or
superior environmental benefits.
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.