BILL ANALYSIS
AB 2918
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Date of Hearing: April 19, 2004
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Sarah Reyes, Chair
AB 2918 (Laird) - As Amended: April 15, 2004
SUBJECT : Desalination facilities: electricity rates.
SUMMARY : Requires the California Public Utilities Commission
(CPUC) to initiate a proceeding to determine the feasibility and
cost of exempting desalination facilities from specified
charges. Specifically, this bill :
1)Finds and declares that the state's water supply problem
cannot be solved by additional supplies of clean fresh water
and that desalination technology might address fresh water
shortages mitigating the environmental impacts of building
dams and reservoirs to store water.
2)Declares the high costs of desalination technology are partly
due to the amount of electricity used during the desalination
process as well as the costs of the electricity.
3)Declares that since no major desalination technology was in
existence during and after the energy crisis that desalination
plants should be exempt for costs incurred during the
electricity crisis as a result of the state procuring power on
behalf of creditless electrical corporations.
4)Declares that predictable long term electricity for
desalination facilities will aid local water agencies and
regulated water corporations in addressing the state's water
problems.
5)Requires CPUC to initiate a quasi legislative proceeding by no
later than July 1, 2005 or determine at the next general rate
case for each electrical corporation the feasibility of
establishing a separate rate class for desalination plants
operated by public agencies or regulated utilities which were
placed in service after January 1, 2006.
6)Requires CPUC to determine in this proceeding the costs and
benefits associated with exempting public agencies or
regulated utilities operating a desalination facility from
Department of Water Resources (DWR) bond and power contract
AB 2918
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costs and any utility undercollections or bankruptcy related
charges, including historical procurement costs associated
with deregulation.
7)Requires CPUC to consider in its proceeding whether
desalination facilities employs programs to shift electricity
consumption to off peak demand periods, including
interruptible or curtailment service programs, and use of real
time metering.
EXISTING LAW:
1)Suspends direct transactions until DWR no longer supplies
power.
2)Establishes the process for CPUC to initiate proceedings and
provide notification to the public prior to decisions being
made.
FISCAL EFFECT : Unknown.
COMMENTS : This bill requires CPUC to initiate a quasi
legislative proceeding or determine in the general rate case for
each investor owned utility (IOU) the feasibility and costs
associated with establishing a separate rate class for
desalination facilities and exempting them from all costs
associated with deregulation and the energy crisis. From time
to time, CPUC is asked to develop a separate rate class for
customers. In some cases this may result in ratepayer
indifference or costs shifts. An example of a separate rate
class created for customers during an IOUs general rate case is
the agricultural rate class.
This bill should include declaratory language prohibiting cost
shifting. This bill should include declaratory language to
prohibit costs shifting to other customer classes as a result of
establishing a new rate class for desalination facilities and
exempting them from costs associated with deregulation or the
energy crisis.
Also, the declaratory language in this bill referencing costs
associated with the energy crisis should be deleted to ensure
the Legislature's objectivity regarding the issue of exempting
desalination facilities from cost recovery.
AB 2918
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REGISTERED SUPPORT / OPPOSITION :
Support
None on file.
Opposition
None on file.
Analysis Prepared by : Daniel Kim / U. & C. / (916) 319-2083