BILL ANALYSIS
Appropriations Committee Fiscal Summary
888 (Dunn)
Hearing Date: 5/29/03 Amended: 5/20/03
Consultant: Lisa Matocq Policy Vote: E, U & C
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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, should
Special*
be offset by fee revenues
Phase-out of direct Unknown, up to $17,000-$38,700/year
beg. General**
access 2004/05, for potential increased energy costs to
UC, CSU, community colleges, and K-12 schools
School facilities Potential unknown cost savings for
possible General**
energy costs rate reduction
*Utilities Reimbursement Account (URA)
**$7 million could count toward meeting the minimum funding
guarantee.
STAFF COMMENTS: 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
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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, 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 upon a number of
variables. However, using current market rates (and a
proposed 20% rate reduction in SCE's territory), and their
average direct access rates: UC staff estimate increased
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. Increased costs
to K-12 schools is unknown. 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 also potentially significant 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.