BILL ANALYSIS
AB 2499
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Date of Hearing: April 28, 2004
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Judy Chu, Chair
AB 2499 (Jerome Horton) - As Amended: April 12, 2004
Policy Committee: Utilities and
Commerce Vote: 12-0
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill requires new publicly owned electric utilities
(POEUs), prior to providing electrical service, to meet the same
energy resource adequacy requirements as investor-owned
utilities. Specifically, this bill:
1)Requires that a POEU established after January 1, 2001, shall
obtain approval of a long term energy resource plan from the
California Energy Commission (CEC) before providing service to
any additional customers after July 1, 2005. The POEU must
also file a resource plan update with the CEC at least every
three years.
2)Requires CEC to adopt requirements that a new POEU must meet
in its long-term resource plan.
3)Requires the Public Utilities Commission (PUC) to take action
to prevent the subsidization, by customers of an
investor-owned utility (IOU), of the customers of a new POEU.
FISCAL EFFECT
1)One-time special fund cost of $300,000 to the CEC to conduct a
rulemaking related to requirements for an energy resource plan
from new POEU. [Energy Resources Programs Account]
2)Ongoing special fund costs of up to $100,000 for the CEC to
review and approve submitted resource plans and plan updates.
3)Absorbable costs to the PUC.
AB 2499
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COMMENTS
Background and Purpose . AB 57 (Wright)-Chapter 835/Statutes of
2002, established guidelines for the procurement of electricity
by utilities after January 1, 2003. In a January 2004 decision
implementing the AB 57 procurement process, the PUC determined
that IOUs, energy service providers, and community aggregators
must have adequate energy resources to meet their forecasted
peak loads plus a 15 to 17 percent reserve margin by 2008. This
order applies to almost all retail electric service providers
other than POEUs, which represent about 25 percent of the
state's retail electrical load.
Because the California electricity distribution grid is a
statewide integrated system, however, when there are
insufficient resources to meet total 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 could cause instability across the
entire grid.
While not attempting to place the same procurement requirements
on existing POEUs, AB 2499 would place those requirements on
newly-formed POEUs. Since the energy crisis of 2001, a number
of local governments have recently proposed forming municipal
utilities in hopes of providing their residents and businesses
with lower electrical 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.
Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081