BILL ANALYSIS 1
1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
DEBRA BOWEN, CHAIRWOMAN
SCR 30 - Poochigian Hearing
Date: June 24, 2003 S
As Introduced: May 1, 2003 FISCAL C
R
3
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DESCRIPTION
This resolution concludes that energy-related refunds ordered by
the Federal Energy Regulatory Commission (FERC), or negotiated
by the Attorney General (AG), the Governor, or any other agent
of the state, should be dedicated strictly to repay the
Department of Water Resources (DWR) energy bonds, or reduce or
eliminate the rate surcharges dedicated to bond repayment.
BACKGROUND
The AG, on behalf of the state, has entered several agreements
to settle lawsuits arising from the energy crisis. These
include agreements with:
Calpine - $6 million in cash, consisting of:
$1.5 million dedicated to installing solar energy technology
at schools and other public buildings.
$4.5 million to reimburse the state for investigation costs.
Constellation - $2.5 million in cash, consisting of:
$1.25 million dedicated to installing solar energy technology
at schools and other public buildings.
$1.25 million to reimburse the state for investigation costs.
Williams - $417 million total value, consisting of:
$147 million in cash through 2010 - $70 million dedicated to
installing solar energy technology at schools and other public
buildings, $20 million for siting and installing turbines, $12
million divided between the AG, the California Public
Utilities Commission and the Electricity Oversight Board for
investigation costs, and the balance divided among
participating local governments and other states.
$180 million attributed to a reduction in Williams' energy
contract with DWR.
$90 million attributed to six electric generating turbines
given to the cities of San Francisco and San Diego.
El Paso - $1.7 billion total value, consisting of:
$665 million in cash, $225 million up front and $440 million
over 20 years - $505.6 million to IOU ratepayers and $159.4
million divided among participating local governments and
other states.
$900 million worth of natural gas over the next 20 years,
allocated among the settling parties.
$125 million attributed to a reduction in El Paso's energy
contract with DWR.
This settlement has not been finalized and the AG's office
indicates the numbers and details are subject to change.
State lawsuits against other energy companies (e.g., Coral,
Dynegy, Mirant, PG&E, Powerex, Reliant and Sempra) are pending.
COMMENTS
1.Same issue addressed in budget trailer bill. The Budget
Conference Committee has adopted provisions, to be included in
the general government trailer bill, which provide the
Legislature with some oversight of energy settlement funds
secured by the state. The bill requires settlement funds
secured by the AG to be directed first to reduce costs of
ratepayers who were harmed by the settling parties. In the
case of IOU ratepayers, the bill requires funds to be directed
first to reduce the debt service on the DWR energy bonds.
While the trailer bill establishes the reduction of DWR bond
debt as a priority, it gives the AG and the Legislature some
discretion to dedicate settlement funds to other purposes that
benefit ratepayers. It also provides for reimbursement of the
state's investigation and litigation costs, and recognizes
that not all settlement proceeds will be cash that can be
applied to DWR bond debt. This resolution's recommendation is
that energy-related refunds should be dedicated strictly to
reduce the DWR bond debt.
The author and the committee may wish to consider whether this
resolution should be amended to be consistent with the trailer
bill, or whether this issue is better addressed exclusively in
the trailer bill, since the bill would be binding on the AG
and would prevail in any conflict with this resolution.
2.Why pay off the cheapest debt first? The DWR bonds are a
relatively low-cost method to finance ratepayer obligations.
Ratepayers might pay more than twice as much for debt financed
by IOUs than for DWR debt.
The author and the committee may wish to consider whether
priority should be given to delivering the greatest ratepayer
benefit, such as paying the highest cost ratepayer debt or
other obligations, rather than focusing strictly on the DWR
bond debt, which is probably the cheapest debt available to
ratepayers.
3.Not all refunds at stake are owed to IOU ratepayers. There
are many ratepayers who have a stake in the pending energy
refund proceedings or litigation who aren't IOU customers,
never received power from DWR, and aren't paying the DWR bond
charge. These include customers of in-state municipal
utilities and out-of-state utilities. These customers may be
entitled to refunds secured by the AG and others, but would
receive no benefit from reducing DWR's bond debt. There also
may be IOU or non-IOU related claims for energy costs paid by
a utility which aren't recoverable from ratepayers. This
resolution seems to compel that all remedies secured by the
state go exclusively to IOU ratepayers, even when the harm was
to other parties. This could lead to unfair and illegal
remedies, unless the AG and others abandon all claims that
aren't made on behalf of IOU ratepayers.
4.Just the facts? This resolution contains a number of
statements which focus blame for high energy costs on
government (e.g., "poor regulatory oversight," "inaction and
lack of leadership," "bad policy decisions," "poorly
negotiated contracts"). It's unclear whether these statements
refer to FERC, or the state. The resolution makes no mention
of the unjust and unreasonable charges, market manipulation,
and illegal conduct of wholesale energy suppliers which has
led to the refund proceedings, litigation, settlements, and
criminal indictments.
The author and the committee may wish to consider these
provisions should be made more objective, or simply removed.
POSITIONS
Sponsor:
Author
Support:
None on file
Oppose:
None on file
Lawrence Lingbloom
SCR 30 Analysis
Hearing Date: June 24, 2003