BILL ANALYSIS                                                                                                                                                                                                              1





                 SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
                                DEBRA BOWEN, CHAIRWOMAN
          

          AB 2499 - Jerome Horton                           Hearing Date:  
          June 22, 2004                   A
          As Amended:         June 16, 2004            FISCAL       B

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                                       DESCRIPTION
           
           This bill  requires new publicly owned electric utilities (new  
          munis commencing service after January 1, 2001) to meet equivalent  
          requirements for "resource adequacy" as applicable to  
          investor-owned utilities (IOUs), and to meet the following  
          conditions before providing service in any new area:

          1.The California Energy Commission (CEC) has determined if the new  
            muni's resource plan meets resource adequacy requirements.

          2.The new muni's governing body finds: 

                 its resource plan meets resource adequacy requirements, 
                 the public interest and necessity require it to provide  
               service, and 
                 the anticipated public good outweighs the reasonably  
               identified risks.

                                       BACKGROUND
           
          Pursuant to AB 57 (Wright), Chapter 835, Statutes of 2002, the  
          California Public Utilities Commission (CPUC) issued a decision  
          governing IOU long-term procurement in January (Decision  
          04-01-050).  While AB 57 requires IOU procurement plans to "enable  
          the (IOU) to fulfill its obligation to serve at just and  
          reasonable rates," AB 57 does not speak directly to resource  
          adequacy.

          Nevertheless, the CPUC decision included provisions to implement  
          resource adequacy requirements, including mandatory minimum  
          reserve levels, for IOUs and other entities serving electric load  
          within IOUs' service territories, such as electric service  
          providers and community choice aggregators.  The CPUC proposes  








          these load-serving entities must have adequate resources to serve  
          their load, plus achieve a reserve margin between 15-17 percent by  
          2008.  The CPUC decision does not apply resource adequacy  
          requirements to munis, new or existing.

          The IOUs do not now meet these resource adequacy standards and  
          there are no statutory definitions or obligations regarding  
          resource adequacy for any utility.  Beyond directing the  
          California Power Authority to determine an appropriate statewide  
          reserve level as part of its mandate, the Legislature has not  
          provided specific guidance on the reserve issue.
                                            










































                                       COMMENTS

          1.No statutory resource adequacy requirements.   This bill requires  
            new munis to meet the same resource adequacy requirements as  
            IOUs.  However, resource adequacy requirements for IOUs have  
            only been conceived by the CPUC, and not implemented.  If they  
            are implemented pursuant to the recent CPUC decision, they will  
            apply to IOUs, but not munis.

            The IOUs aren't now subject to any statutory resource adequacy  
            requirements, and this bill doesn't establish or define resource  
            adequacy requirements for either IOUs or munis.  The bill  
            requires new munis to meet standards equivalent to standards  
            which don't really exist yet.  AB 2006 (Nunez), pending in this  
            committee, establishes resource adequacy requirements, but  
            exempts munis.  

            This bill is somewhat unprecedented in that it would essentially  
            allow the CPUC to set resource adequacy standards for a muni  
            through a multi-layered process where the standards are set by  
            the CPUC, the CEC determines if the muni meet the CPUC  
            standards, and the muni's governing body considers the CEC's  
            determination and makes the final decision.

           2.Unrelated intent language should be deleted.   This bill includes  
            an intent statement telling the CPUC ensure there's no cost  
            shifting between IOUs and new munis (Subdivision (g) of Section  
            1, Page 3, Lines 24-27).  This statement is related to an  
            operative provision which has been deleted from the bill.   The  
            author and the committee may wish to consider  whether this  
            statement should be deleted.

                                       PRIOR VOTES
           
          Assembly Floor                     (62-5)
          Assembly Appropriations Committee  (16-4)
          Assembly Utilities and Commerce Committee    (12-0)

                                        POSITIONS
           
           Sponsor:
           
          Southern California Edison

           Support:
           
          Congress of California Seniors







          Pacific Gas and Electric Company

           Oppose:
          
          California Municipal Utilities Association
          City of Moreno Valley
          City of Rancho Cucamonga
          Sacramento Municipal Utility District
          Southern California Public Power Authority (unless amended)


          Lawrence Lingbloom 
          AB 2499 Analysis
          Hearing Date:  June 22, 2004