BILL ANALYSIS 1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
DEBRA BOWEN, CHAIRWOMAN
AB 2869 - Levine Hearing Date:
June 22, 2004 A
As Amended: May 25, 2004 Non-FISCAL
B
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DESCRIPTION
Existing law (AB 1890 (Brulte), Chapter 854, Statutes of 1996)
prohibits competitors from providing electric service to the
customer of a local publicly owned electric utility (muni), and
prohibits a muni from providing electric service to the customer
of an investor-owned utility (IOU), unless the customer agrees
to pay an "exit fee" for generation-related costs.
Existing law further prohibits a muni or IOU from selling
electricity to the customer of another muni or IOU without the
permission of the utility.
This bill provides that these provisions of law do not apply to
customers affected by a utility completing a mutually agreeable
condemnation process to resolve a fringe area agreement in which
there's a balance of benefits between the customers of the muni
and the IOU.
BACKGROUND
AB 1890 threw open the doors to retail competitors within the
service territories of IOUs. However, the extent to which munis
were permitted to offer direct access service to IOU customers,
or required to permit other providers to offer service to their
customers, was limited to voluntary arrangements where both
utilities agreed to allow competition and customers agreed to
continue to pay for generation investments made by their
incumbent utility.
Since it was formed, the Los Angeles Department of Water and
Power (LADWP), has periodically exchanged customers on the
"fringe" of its service territory with the adjacent IOU,
Southern California Edison (SCE), where it has been more
economical for the other utility to serve the customer. Rather
than formally alter their service territories, the utilities
have billed each other for the cost of serving these fringe
customers. According to LADWP, it has 132 customers served by
SCE, and SCE has 178 customers served by LADWP.
LADWP has a set of 20 additional SCE customers acquired through
minor annexations initiated in 1985 by the City of Los Angeles.
LADWP is serving these customers, but the annexation is not
complete, so the customers still lie within SCE's formal service
territory. According to LADWP, this bill ensures when the
service territory maps are redrawn, the customers will not be
subject to charges resulting from a 2003 CPUC decision which
imposes a cost responsibility surcharge (CRS) on customers
departing IOU service for muni service within the IOU's service
territory (Decision 03-07-028). The CRS recovers procurement
costs incurred by IOUs and the Department of Water Resources
(DWR) during 2000-2001.
COMMENTS
1.The CRS should not apply to the customers in question. Under
the CPUC decision, the CRS would apply only to extent
customers were considered to have taken bundled service from
SCE on or after February 1, 2001. According to LADWP, it has
been serving these customers since before 2001. Consequently,
these customers never purchased power from DWR via IOU
service, so the statutes providing the basis for CRS
collection, and the CRS as it has been established by the
CPUC, do not apply.
CPUC Decision 03-07-028 provides, in relevant part:
A Municipal Departing Load Cost Responsibility
Surcharge (MDL CRS) mechanism is hereby adopted
applicable to designated customers that took bundled
service on or after February 1, 2001 in the service
territories of PG&E, SCE, and SDG&E and subsequently
departed to be served by a "publicly owned utility"
as defined by Section 9604(d).
2.Even if the CRS did apply, this bill does not achieve an
exemption. Section 9601's "exit fee" provisions weren't the
statutory basis for the CPUC decision establishing the CRS.
Instead, the basis was Section 366.2, enacted by AB 117
(Migden), Chapter 838, Statutes of 2002, which provides, in
relevant part:
It is the intent of the Legislature that each retail
end-use customer that has purchased power from an
electrical corporation on or after February 1, 2001,
should bear a fair share of (DWR's) electricity
purchase costs, as well as electricity purchase
contract obligations incurred as of (January 1,
2003), that are recoverable from electrical
corporation customers in commission-approved rates.
It is further the intent of the Legislature to
prevent any shifting of recoverable costs between
customers.
If this bill's objective is to secure a CRS exemption for
these customers, it should provide a more straightforward
exemption from the relevant statute (Public Utilities Code
Section 366.2) and/or CPUC decision. However, such an
exemption does not appear to be necessary, since no statute or
CPUC decision appear to apply the CRS in this case. The
provisions of Section 9601, which the bill provides an
exemption from, do not appear to apply to the circumstances in
question.
3.Technically speaking . Section 9601 establishes obligations
for a utility wishing to sell electricity to another utility's
customers. As drafted, this bill says Section 9601 does not
apply to "customers" affected by a mutually agreeable
condemnation. The author and the committee may wish to
consider whether, instead, the bill should say Section 9601
does not apply to "an exchange of customers" resulting from
condemnation.
PRIOR VOTES
Assembly Floor (80-0)
Assembly Utilities and Commerce Committee
(11-0)
POSITIONS
Sponsor:
Los Angeles Department of Water and Power
Support:
City of Los Angeles
Oppose:
None on file
Lawrence Lingbloom
AB 2869 Analysis
Hearing Date: June 22, 2004