BILL ANALYSIS                                                                                                                                                                                                              1





                SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
                               DEBRA BOWEN, CHAIRWOMAN
          

          AB 2509 -  Nakanishi                                   Hearing  
          Date:  June 22, 2004                 A
          As Amended:         June 15, 2004                 Non-FISCAL      
            B

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                                      DESCRIPTION
           
           This bill  expresses the intent of the Legislature that the  
          California Public Utilities Commission (CPUC) recognize the  
          costs an "electric microutility" (a privately-owned, vertically  
          integrated electric utility with fewer than 5,000 customers)  
          faces if required to respond to CPUC proceedings generally  
          applicable to electric utilities and consider these costs before  
          naming an electric micro-utility as a respondent.

                                      BACKGROUND
           
          As defined in this bill, the term "electric micro-utility"  
          applies only to Mountain Utilities (MU), a tiny, vertically  
          integrated utility owned by Kirkwood Mountain Resort in Alpine  
          County and serving the ski area and the immediate vicinity.  MU  
          has approximately 500 customers, many of whom are seasonal  
          residents, and a service area less than two square miles.   
          According to MU, the closest transmission lines are over 30  
          miles away.  MU is not part of the grid managed by the  
          Independent System Operator and its generation portfolio  
          consists of six diesel engines with a capacity of 4,800  
          kilowatts.

          According to MU, the CPUC, in its decisions and through its  
          staff in the Energy Division and Office of Ratepayer Advocates,  
          has informed MU that it must apply mandated programs uniformly  
          to each regulated utility, unless the law allows some  
          discretion.  Examples of statutory programs electric utilities  
          are generally subject to include the California Alternative  
          Rates for Energy (CARE) low-income program and the Renewable  
          Portfolio Standard program.









          According to MU, even though the CPUC recognizes the disparity  
          between the capabilities of large and very small utilities, the  
          CPUC cannot relieve small utilities from programs intended for  
          large ones without statutory authority.

          When CPUC opens a new proceeding, it issues an order outlining  
          the purposes of the proceeding and the parties expected to  
          participate.  The matter is then assigned to a Commissioner and  
          an Administrative Law Judge who establish the scope, timelines  
          and procedures for the case.  At any time after the proceeding  
          is assigned to a Commissioner, a respondent can move to be  
          excused from the proceeding if they feel participation is  
          inappropriate.

          MU has cited four proceedings in which it believes it was  
          inappropriately named as a respondent.  Those cases involved: 1)  
          the allocation of low income assistance funds appropriated in SB  
          X2 2 (Alarcon), Chapter 11, Statutes of 2001; 2) adjustments to  
          residential baseline allowances; 3) an investigation of  
          construction bidding practices of all utilities; and 4) public  
          policy issues relating to the implementation of a public goods  
          charge on natural gas.  MU was excused from three of the  
          proceedings after making a single filing because the CPUC found  
          that the proceeding did not apply to MU's situation.  In the  
          fourth proceeding, MU was not specifically excused, but the CPUC  
          found it was not required to actively participate in the  
          hearing.

                                       COMMENTS
                                           
           1.What is this bill saying?   This bill doesn't override any  
            statutes generally applicable to electrical corporations,  
            including MU.  An expression of the Legislature's intent that  
            the CPUC recognize and consider MU's regulatory burden will do  
            nothing to excuse the CPUC from its obligations under existing  
            laws to regulate electrical corporations, including MU.  It  
            may only give some direction to the CPUC in cases where it  
            already has discretion to exclude MU from cases applicable to  
            electrical corporations - equivalent in effect to a persuasive  
            letter, or perhaps a resolution.  This bill seems to be an  
            equivocal suggestion that MU should not be regulated by the  
            CPUC because the costs exceed the benefits.  If MU has made  
            the case that it is facing an unjustified regulatory burden  
            under current law,  the author and the committee may wish to  
            consider  whether the bill should actually relieve MU from CPUC  
            regulation.  At a minimum, the bill should be drafted as  
            operative language, rather than intent.








           2.Should the customer threshold be lower?   While MU has only 500  
            customers, the threshold in this bill is 5,000 customers.   
            This effectively limits application of the bill to MU, as the  
            next largest electrical corporation, Bear Valley Electric  
            Company, has about 20,000 customers.  However,  the author and  
            the committee may wish to consider  whether the threshold could  
            be set lower (1,000 or 2,000) and still accommodate the  
            anticipated growth in the MU service territory.
           
                                     PRIOR VOTES
          
          Assembly Floor                     (63-3)
          Assembly Utilities and Commerce Committee    (8-0)

                                       POSITIONS
           
           Sponsor:
           
          Mountain Utilities

           Support:
           
          None on file

           Oppose:
           
          None on file


          Lawrence Lingbloom 
          AB 2509 Analysis
          Hearing Date:  June 22, 2004