BILL ANALYSIS
Appropriations Committee Fiscal Summary
888 (Dunn)
Hearing Date: 5/19/03 Amended: 5/20/03
Consultant: Lisa Matocq Policy Vote: E, U & C
5-3
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BILL SUMMARY: SB 888 enacts the Repeal of Electricity
Deregulation Act of 2003, as specified.
Fiscal Impact (in thousands)
Major Provisions 2003-04 2004-05
2005-06 Fund
PUC Unknown, potentially $1,700 annually,
Special*
should be offset by fee revenues
Phase-out of direct Potentially significant
increased energy General**
access costs to UC/CSU/community colleges/
K-12 schools
School facilities energy Potential unknown cost savings for
General**
costs possible rate reduction
*Utilities Reimbursement Account (URA)
**Counts toward meeting the minimum funding guarantee.
STAFF COMMENTS: This bill meets the criteria for referral
to the Suspense File. AB 1890 (Brulte, Ch. 856, St. of
1996) enacted the Electrical Restructuring Act of 1996
which, among other things:
authorized direct transactions between competing
electricity suppliers and customers;
created the Independent System Operator (ISO) and
required the ISO to establish inspection, maintenance,
and replacement standards for the transmission grid;
"unbundled" generation, transmission, and retail service,
and required that separate charges appear on consumers'
bills;
created the Power Exchange (PX) to establish an electric
energy auction.
AB 1x (Keeley, Ch. 4, St. of 2001), among other things,
directed the Public Utilities Commission (PUC) to suspend
direct access in order to ensure a sufficient revenue
stream to satisfy the Department of Water Resources' costs
for electricity procurement. The PUC suspended new direct
access transactions in 2001, with certain exceptions.
This bill:
repeals the former legislative findings regarding
electricity deregulation and establishes new ones
relating to direct access, policy goals, and regulation;
provides that the utilities have an obligation to serve
retail customers with reliable service at just and
reasonable rates, as specified;
imposes numerous regulatory responsibilites on the PUC;
requires the PUC to establish and oversee a long-term,
comprehensive integrated resource planning portfolio of
supply and demand-reduction resources, as specified;
requires the PUC to submit to the Legislature, by June 1,
2004, a proposal for implementation of a "core/noncore"
model, as specified ("core" generally refers to bundled
customers and "noncore" refers to unbundled customers),
and states legislative intent that no new direct access
transactions be authorized until the commission approves
a plan;
phases out direct access, except as otherwise specified,
by January 1, 2005 or the expiration of current
contracts, whichever is later, and requires the PUC to
report to the Legislature by June 1, 2004 on the
phase-out;
extends, from January 1, 2006 to January 1, 2010, the
prohibition on power plant divestiture;
deletes obsolete provisions relating to the PX;
requires the utilities to hold in trust, for the benefit
of ratepayers, any refunds for excessive electricity
costs they receive, as determined by the PUC;
provides that holding companies are subject to the
continuing jurisdiction of the PUC for specified
purposes;
requires the PUC to establish special bundled service
rates for public school facilities that reflect their
unique peak usage;
makes related changes.
It is unknown what the long-term impact of eliminating
direct access will be. However, University of California
(UC), California State University (CSU), community
colleges, and some K-12 school districts, including Los
Angeles Unified have direct access contracts. Any future
increased costs resulting from the termination of direct
access are indeterminable, and depend on a number of
variables. However, for illustrative purposes, using
current market rates (taking into consideration a proposed
20% rate reduction in SCE's territory), and their average
direct access rates: UC staff estimate costs of $11.6
million annually, CSU staff estimate costs of $10 million
annually, and the avg. annual cost to community colleges
could be $10.1 million. Any costs would be incurred upon
the expiration of their current contracts or January 1,
2005, whichever is later. STAFF NOTES that some contracts
do not contain "expiration dates" but rather require that
prices be renegotiated periodically. The author may wish
to consider a technical amendment to address this issue.
There are potential unknown cost savings to K-12 schools to
the extent that rates are reduced for public schools.
STAFF NOTES that many public schools are year-round (228 of
the 700 schools in L.A. Unified), and therefore, it is
unknown to what extent they would fall into a unique peak
usage category. STAFF RECOMMENDS that the bill be amended
to include a deadline for the PUC to establish the special
rate for schools.
PUC staff indicate that they will need 20 new positions to
comply with the requirements of the bill, at a cost of $1.7
million; future year costs are unknown, but significant.
URA revenues are derived from an annual fee imposed on
public utilities. Therefore, increased costs should be
offset by fee revenues.