BILL ANALYSIS
AB 2499
Page 1
ASSEMBLY THIRD READING
AB 2499 (Jerome Horton)
As Amended May 20, 2004
Majority vote
UTILITIES AND COMMERCE 12-0 APPROPRIATIONS 16-4
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|Ayes:|Reyes, Campbell, Bogh, |Ayes:|Chu, Berg, Calderon, |
| |Calderon, Canciamilla, | |Corbett, Correa, |
| |Diaz, Jerome Horton, La | |Firebaugh, Goldberg, |
| |Malfa, Levine, | |Leno, Nation, Negrete |
| |Ridley-Thomas, | |McLeod, Oropeza, Pavley, |
| |Strickland, Wesson | |Ridley-Thomas, Wesson, |
| | | |Wiggins, Yee |
| | | | |
|-----+--------------------------+-----+--------------------------|
| | |Nays:|Runner, Bates, Haynes, |
| | | |Keene |
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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 equivalent resource adequacy requirements applicable to
an electric corporation.
2)Requires that a POEU established after January 1, 2001, shall
obtain certification of a resource plan from the California
Energy Commission (CEC) before providing service to any
additional customers after January 1, 2006.
3)Requires a POEU established after January 1, 2001, to file
updates to its resource plans.
4)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.
5)States that in order to prevent the cost shifts from customers
AB 2499
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of POEU to IOU customers, the California Public Utilities
Commission (CPUC) shall impose a non-bypassable charge on
customer of an POEU who then take electric services from an
IOU.
EXISTING LAW :
1)Requires each electric corporation to prepare and file a
procurement plan with CPUC and requires that an approved plan
enable the utility to fulfill its obligation to serve its
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 RPS program.
FISCAL EFFECT :
1)One-time special fund cost of $300,000 to 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 CEC to review
and approve submitted resource plans and plan updates.
3)Absorbable costs to CPUC.
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.
AB 2499
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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 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.
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 : Edward Randolph / U. & C. / (916)
319-2083
FN: 0005787