BILL NUMBER: AB 2918	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  APRIL 27, 2004
	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 747 to the Public Utilities Code, relating
to desalination facilities.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 2918, as amended, Laird.  Desalination facilities:  electricity
rates.
   Under existing law, the Public Utilities Commission has regulatory
authority over public utilities, including electrical corporations,
and authorizes the commission to fix just and reasonable rates and
charges for all public utilities.
   This bill would, 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.
   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) 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.
   (i) Predictable long-term negotiated electricity costs for
desalination facilities will aid local water agencies and regulated
water corporations in addressing critical water problems. 

   (e) The Public Utilities Commission should not shift costs as a
result of the enactment of this act. 
  SEC. 2.  Section 747 is added to the Public Utilities Code, to
read:
   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.