BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 888| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 445-6614 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: SB 888 Author: Dunn (D), et al Amended: 5/20/03 Vote: 21 SENATE ENERGY, U.&C. COMMITTEE : 5-3, 5/6/03 AYES: Bowen, Alarcon, Dunn, Murray, Vasconcellos NOES: Morrow, Battin, McClintock SENATE APPROPRIATIONS COMMITTEE : 7-5, 6/4/03 AYES: Alpert, Bowen, Burton, Escutia, Karnette, Murray, Speier NOES: Battin, Aanestad, Ashburn, Johnson, Poochigian SUBJECT : Public utilities: electrical restructuring SOURCE : Author DIGEST : This bill enacts the Repeal of Electricity Deregulation Act of 2003. ANALYSIS : Current law establishes the PUC to have jurisdiction over all public utilities, including electrical. AB 1890 (Brulte), Chapter 856, Statutes of 1996, enacted the Electrical Restructuring Act of 1996. AB 1X (Keeley), Chapter 4, Statutes of 2001-02, First Extraordinary Session, among other things, directed the State Public Utilities Commission (PUC) to suspend direct access in order to ensure a sufficient revenue stream to satisfy the CONTINUED SB 888 Page 2 State Department of Water Resources costs for electricity procurement. The PUC suspended new direct access transactions in 2001, with certain exceptions. This bill enacts the "Repeal of Electricity Deregulation Act of 2003," which repeals or modifies specified "deregulation" policies established by AB 1890 (Brulte), Chapter 856, Statutes of 1996, confirms and expands upon certain recently-enacted "regulation" policies, and spells out the rights and obligations of utilities, ratepayers and the State Public Utilities Commission (PUC) in the state-regulated aspects of electricity service. This bill's key objective is to avoid a recurrence of the instability and high cost of the past few years by: 1.Confirming a regulatory compact. 2.Restoring long-term resource planning. 3.Phasing out retail competition. Specifically, this bill: 1.Repeals AB 1890's extensive legislative findings supporting electricity deregulation and instead establishes extensive new findings citing the failures of deregulation and supporting state regulation of electricity service. Requires PUC actions to be consistent with the bill's findings. 2.States legislative intent to achieve effective regulation of public utilities and achieve specified policy goals. 3.Imposes numerous regulatory responsibilities on the PUC. 4.Phases out direct access, except as otherwise specified, by January 1, 2005, or the expiration of current contracts, whichever is later. 5.Requires the PUC to submit to the Legislature, by June 1, 2004, a plan for implementation of a "core/noncore" model, as specified, and states legislative intent that no new direct access transactions be authorized until the SB 888 Page 3 PUC approves a plan. 6.Requires the PUC to establish special bundled service rates for public school facilities that reflect our unique peak usage. 7.Makes related changes. NOTE: For an extensive and informative discussion of the historical context, the electricity deregulation legislation and its consequences, and a detailed comparison of major features of proposed legislation, please refer to the Senate Energy, Utilities and Communications Committee analysis. Support/Opposition . This bill is supported by consumer groups, labor groups and municipal utilities. It is opposed by electricity generators and marketers, IOUs, and direct access customers. Supporters and opponents make some similar observations, but reach different conclusions. In general, supporters argue that the state lacks a coherent energy policy direction, which has contributed to the delay in necessary infrastructure investments. Phase out of direct access is vital because direct access discourages long-term planning and investment by IOUs. Supporter state that cost shifting and bundled customers is inevitable under direct access, as demonstrated by recent PUC decisions, and that direct access is anathema to restoring the obligation to serve. The bill builds on recent progress in the wake of the energy crisis. Opponents, in general, argue just the opposite. Opponents believe that this bill interferes with recent progress, destabilizes the electricity market, creates uncertainty, and discourages investment. Regulation is inefficient and costly, better to assign investment risks (and rewards) to the private sector. Direct access providers and customers argue for the preservation of direct access and argue the PUC is dealing effectively with cost shifting. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: Yes SB 888 Page 4 Fiscal Impact (in thousands) Major Provisions 2003-04 2004-05 2005-06 Fund PUC Unknown, potentially $1,700 annually, should be offset by fee revenues Special* Direct access phase- Unknown, potentially $17,000-$31,700/ out year beginning 2004/05, for potential increased energy costs to UC, CSU, community colleges General** School facilities rate Potentially significant energy cost General** savings *Utilities Reimbursement Account **$7 million could count toward meeting the minimum funding guarantee SUPPORT : (Per Sen. EU&C Committee analysis) California Labor Federation, AFL-CIO California Municipal Utilities Association City of Roseville Coalition of California Utility Employees Congress of California Seniors Consumer Federation of California Consumers Union Foundation for Taxpayer and Consumer Rights Northern California Power Agency Southern California Edison (if amended) Southern California Public Power Authority The Utility Reform Network Utility Consumers' Action Network SB 888 Page 5 61 individuals OPPOSITION : (Per EUC&C Committee analysis) AES Pacific Alliance for Retail Energy Markets APS Energy Services Automated Power Exchange Caithness Energy California Biomass Energy Alliance California Business Properties Association California Business Roundtable California Chamber of Commerce California Independent Petroleum Association California Manufacturers and Technology Association California Retailers Association California Wind Energy Association Callaway Golf Company Calpine Corporation City of Corona Clean Power Campaign Covanta Energy Dynegy Enpower Corporation Heraeus Metal Processing, Inc. Independent Energy Producers Los Angeles Unified School District (unless amended) Minnesota Methane National Energy Marketers Association NRG Energy, Inc. Pacific Gas and Electric Company Public Buildings Service of the U.S. General Services Administration Qualcomm School Project for Utility Rate Reduction Sempra Energy Silicon Valley Manufacturing Group Strategic Energy Sweetwater Union High School District Ultra-Tool International, Inc. USAA Realty Company Verizon Western Power Trading Forum Western States Petroleum Association SB 888 Page 6 Whitewater Energy Corporation Wintec Energy NC:cm 6/4/03 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END ****