BILL ANALYSIS
AB 2499
Page 1
Date of Hearing: April 19, 2004
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Sarah Reyes, Chair
AB 2499 (Horton) - As Amended: April 12, 2004
SUBJECT : Energy Commission: publicly owned electric utilities:
long-term resource plans.
SUMMARY : Requires publicly owned electric utilities (POEU)
established after January 1, 2001, to meet the same resource
adequacy requirements of investor owned utilities (IOUs) before
they can provide electric services. Specifically, this bill :
1)States that a POEU established after January 1, 2001, shall
meet the same resource adequacy requirements applicable to an
electric corporation.
2)Requires that a POEU established after January 1, 2001, shall
obtain approval of a long term resource plan from the
California Energy Commission (CEC) before providing service to
any additional customers after July 1, 2005.
3)Requires CEC to adopt requirements that a POEU must meet in
its long-term resource plan.
4)Requires a POEU established after January 1, 2001, to file
updates to its resource plans at least every three years.
5)Requires a POEU established after January 1, 2001, to make
findings that CEC has approved POEU resource plan and the
public interest and necessity requires that POEU to provide
retail services.
6)States that in order to prevent the subsidization of public
utility customers by other investor owned utility customers,
the California Public Utilities Commission (CPUC) shall impose
a non-bypassable charge on customer of an IOU who take
electric services from POEU.
EXISTING LAW :
1)Requires each electric corporation to prepare and file a
procurement plan with the CPUC and requires that an approved
plan enable the utility to fulfill its obligation to serve its
AB 2499
Page 2
customers at just and reasonable rates.
2)Requires IOUs to increase its total amount of eligible
renewable resources by at least one percent per year, until
20% of its retail sales are procured from renewables.
3)Requires each governing body of a POEU to implement and
enforce an renewable portfolio standard (RPS) that takes into
consideration the impact on rates, reliability, the goal of
environmental improvement, and the impact on financial
resources. The governing board will annually report to its
customers concerning the RPS program.
FISCAL EFFECT : Unknown.
COMMENTS : In 2002, the Legislature passed AB 57 (Wright),
Chapter 835, Statutes of 2002, which established guidelines for
procurement of electricity by the utilities after January 1,
2003, and for CPUC to review the utilities' procurement plans.
CPUC issued a decision implementing AB 57 procurement process in
January. Under the decision, CPUC found that IOUs, energy
service providers (ESPs), and community aggregators must have
adequate resources to meet forecasted peak load plus a 15% to
17% reserve margin by 2008. This order applies to almost all
retail electric service providers other than POEUs.
SB 1078 (Sher), Chapter 516, Statutes of 2002, required all
retail electricity providers to create a RPS by increasing their
total amount of renewable resources by at least one percent per
year, until 20% of their retail sales are procured from
renewables. This bill specifically exempted POEUs from the 20%
RPS, and merely required each governing body of a POEU to
implement a RPS that recognizes the intent of the Legislature to
encourage renewable resources.
The common theme to both AB 57's procurement process and RPS is
while POEUs represent approximately 25% of the retail load
served in California, they have been exempted from the major
policy decisions aimed at assuring the state has sufficient
clean and reliable resources to meet future demand and avoid
future rolling blackouts. POEUS argue that because they are
ultimately responsible to voters and not shareholders they will
naturally act in the public interest and do not need additional
state oversight. This argument ignores the increasing need to
view resource adequacy from a statewide perspective. Because
AB 2499
Page 3
the California electricity distribution grid is a statewide
integrated system, when there are inadequate resources to meet
demand the entire grid can become unstable. Since POEUS
generally rely on the same distribution grid as other retail
providers, any failure of a POEU to meet customer demand can
cause instability across the entire grid.
AB 2499 does not address the full inequity and instability of
the current procurement rules, but instead focuses on a growing
risk to instability and reliability caused by the creation of
new municipal utilities. Since the energy crisis in 2001, a
number of local governments have proposed forming municipal
utilities in hopes of providing their residents and business
with lower rates. The author is concerned that since these new
municipal utilities do not have experience in procuring power
and have little or no ability to produce their own electricity,
they will not be able to meet their own resource adequacy needs.
To assure that these new municipal utilities do not threaten
the reliability of the entire integrated distribution grid, AB
2499 requires these new electricity providers to show they can
meet the needs of their own customers.
All Things Created Equal
While this legislation is a clear step in the right direction
toward creating a fair and reliable resource adequacy standard
it still leaves an unequitable system in place. While most
retail electricity providers must meet a resource adequacy
standard, 25% of the load will remain free to set any standard
they wish. This bill will also create different standard for
different POEUs depending on when they were formed. The state
may be better served if all POEUs were required to meet the
resource adequacy standards.
Opponents of this bill argue that this bill would make it
impossible for POEU to compete with IOUs. If this argument is
true, then it is also an admission that POEUS do not or will not
meet the same resource adequacy standards as other retail
providers since meeting the same 15% reserve requirement should
not create a higher costs for POEUs.
REGISTERED SUPPORT / OPPOSITION :
Support
AB 2499
Page 4
Congress of California Seniors
Sempra Energy
Pacific Gas and Electric
Southern California Edison
The Utility Reform Network (TURN)
Opposition
Alameda Power & Telecom
California Municipal Utilities Association
City of Azusa
City of Pasadena
City of Rancho Cucamonga
City of Roseville
League of California Cities
Analysis Prepared by : Edward Randolph / U. & C. / (916)
319-2083