BILL NUMBER: AB 2918 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 15, 2004
AMENDED IN ASSEMBLY APRIL 12, 2004
INTRODUCED BY Assembly Member Laird
FEBRUARY 20, 2004
An act to add Section 366.3 747 to
the Public Utilities Code, and to amend Section 12948.1 of
the Water Code, relating to desalination facilities.
LEGISLATIVE COUNSEL'S DIGEST
AB 2918, as amended, Laird. Desalination facilities:
direct transactions electricity rates .
Under existing law, the Public Utilities Commission has regulatory
authority over public utilities, including electrical corporations,
and authorizes the commission to establish rules
fix just and reasonable rates and charges for all public
utilities , subject to control by the Legislature. The
existing Public Utilities Act requires the commission, pursuant to
electrical restructuring, to authorize and facilitate direct
transactions between electricity suppliers and retail end-use
customers. However, other existing law suspends the right of retail
end-use customers other than community aggregators, as defined, to
acquire service from certain electricity suppliers after a period of
time to be determined by the commission, until the Department of
Water Resources no longer supplies electricity under that law. Under
existing law, the commission has imposed a cost responsibility
surcharge on retail end-use customers that continue to receive
electric service through a direct transaction .
This bill would, notwithstanding any other law, require
the commission to authorize a desalination facility that commences
operation after January 1, 2005, to acquire electricity through a
direct transaction. The bill would provide that no desalination
facility that commences operation after January 1, 2005, and is
operated by a water agency or water corporation to supply water to
its customers, may be assessed a cost responsibility surcharge,
unless the commission finds that the Department of Water Resources
specifically purchased electricity to service the electricity demands
of the facility for any electrical corporation
serving more than 1,000,000 customers, require that by July 1, 2005,
the commission initiate either a quasi-legislative or ratesetting
proceeding to determine the feasibility of establishing a separate
rate class for desalination plants operated by public agencies or by
regulated utilities, which are placed in service after January 1,
2006 .
The existing Cobey-Porter Saline Water Conversion Law authorizes
the Department of Water Resources, either independently or in
cooperation with public or private entities, to conduct a program of
investigation, study, and evaluation in the field of saline water
conversion, to provide assistance to persons or entities seeking to
construct desalination facilities, and after submission of a written
report and upon appropriation from the Legislature, to finance,
construct, and operate saline water conversion facilities.
This bill would authorize the department to cooperate, to the
extent existing resources allow, with the commission in determining
whether to authorize a desalination facility to enter into direct
transactions.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. The Legislature finds and declares all of the
following:
(a) The state has serious water supply problems which will be
difficult to solve without additional supplies of clean fresh water.
(b) Some methods for addressing fresh water shortages raise very
controversial issues, including the environmental effects of new dams
used to store additional supplies, purchasing water from
agricultural interests, and shipping water from one part of the state
to another.
(c) Desalination has recently become more cost effective as a
result of recent technological improvements, although desalination is
not free of difficult policy and environmental issues.
(d) Fresh water provided by desalination will remain costly,
partly because of the cost of electricity used in the desalination
process.
(e) As a result of the energy crisis of 2000-01, the Department of
Water Resources began to purchase electricity for the customers of
the investor-owned utilities in January 2001 to avoid electricity
service disruptions and to minimize the adverse effect on California'
s economy.
(f) California issued revenue bonds to finance the Department of
Water Resources electricity purchases and to repay funds borrowed
from the state's General Fund.
(g) Electricity rates approved by the Public Utilities Commission
for the customers of the state's largest electrical corporations
will, for 20 years, include charges to repay the bonds issued to
finance the Department of Water Resources electricity purchases.
(h) The Public Utilities Commission, pursuant to
legislative mandate, has suspended certain direct transactions and
has imposed cost responsibility surcharges on certain customers that
purchase electricity through direct transactions, in part, to repay
the bonds issued to finance the Department of Water Resources
electricity purchases.
(i) Because there were no major desalination plants in
existence during the electricity crisis and because desalination was
not expected to be a significant consumer of electricity at the time
the Department of Water Resources entered into the electricity
purchase agreements, it is questionable whether desalination plants
should be charged in their electricity rates for the costs for
electricity procured during the electricity crisis.
(j)
(i) Predictable long-term negotiated electricity costs for
desalination facilities will aid local water agencies and regulated
water corporations in addressing critical water problems.
SEC. 2. Section 366.3 747 is added
to the Public Utilities Code, to read:
366.3. (a) Notwithstanding any other provision of law, the
747. The commission shall, by July 1, 2005, for any electrical
corporation serving more than 1,000,000 customers, initiate either a
quasi-legislative or ratesetting proceeding to determine the
feasibility of establishing a separate rate class for desalination
plants operated by public agencies or by regulated utilities, which
are placed in service after January 1, 2006. The commission may make
the determination in the utility's next general rate case. In the
proceeding, the commission shall determine the costs and benefits
associated with exempting public agencies or regulated utilities
operating a desalination facility from costs of electricity procured
through the Department of Water Resources pursuant to Division 27
(commencing with Section 80000) of the Water Code, or through any
historical procurement costs associated with restructuring of the
electrical industry, including any utility undercollections or
insolvency or bankruptcy related charges, both during and after the
energy crises of 2000-01. In the proceeding, the commission shall
additionally consider whether a desalination facility employs
programs to shift electricity consumption to offpeak electricity
demand periods, including interruptible or curtailable service
programs, and use of real time metering. commission
shall authorize a desalination facility that commences operation
after January 1, 2005, to acquire electricity through direct
transactions.
(b) No desalination facility that commences operation after
January 1, 2005, and is operated by a water agency or water
corporation to supply water to its customers, shall be assessed a
cost responsibility surcharge, unless the commission finds that the
Department of Water Resources specifically purchased electricity to
service the electricity demands of the facility.
SEC. 3. Section 12948.1 of the Water Code is amended to read:
12948.1. The department shall provide assistance to persons or
entities with state and local desalination facility permit
applications seeking to construct desalination facilities for
reducing the concentration of dissolved solids in brackish
groundwater or seawater in the state and shall cooperate, to the
extent existing resources allow, with the Public Utilities Commission
in determining whether to authorize a desalination facility to enter
into direct transactions.