BILL ANALYSIS
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THIRD READING
Bill No: AB 2869
Author: Levine (D)
Amended: 6/30/04 in Senate
Vote: 21
SENATE ENERGY, U.&C. COMMITTEE : 8-0, 6/22/04
AYES: Bowen, Morrow, Alarcon, Battin, Dunn, McClintock,
Murray, Vasconcellos
NO VOTE RECORDED: Sher
ASSEMBLY FLOOR : 80-0, 5/27/04 - See last page for vote
SUBJECT : Local publicly owned electric utilities
SOURCE : Los Angeles Department of Water and Power
DIGEST : This bill exempts specified customers of a
utility from paying a cost responsibility surcharge imposed
on customers departing investor-owned utility service for a
local publicly owned electric utility.
ANALYSIS : 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
CONTINUED
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the permission of the utility.
This bill provides that these provisions of law do not
apply to an exchange of customers affected by a local
publicly owned electric 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.
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Comments
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).
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
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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.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 7/7/04)
Los Angeles Department of Water and Power (source)
City of Los Angeles
ASSEMBLY FLOOR :
AYES: Aghazarian, Bates, Benoit, Berg, Bermudez, Bogh,
Calderon, Campbell, Canciamilla, Chan, Chavez, Chu,
Cogdill, Cohn, Corbett, Correa, Cox, Daucher, Diaz,
Dutra, Dutton, Dymally, Firebaugh, Frommer, Garcia,
Goldberg, Hancock, Harman, Haynes, Jerome Horton, Shirley
Horton, Houston, Jackson, Keene, Kehoe, Koretz, La Malfa,
La Suer, Laird, Leno, Leslie, Levine, Lieber, Liu,
Longville, Lowenthal, Maddox, Maldonado, Matthews, Maze,
McCarthy, Montanez, Mountjoy, Mullin, Nakanishi, Nakano,
Nation, Negrete McLeod, Oropeza, Pacheco, Parra, Pavley,
Plescia, Reyes, Richman, Ridley-Thomas, Runner, Salinas,
Samuelian, Simitian, Spitzer, Steinberg, Strickland,
Vargas, Wesson, Wiggins, Wolk, Wyland, Yee, Nunez
NC:nl 7/8/04 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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