BILL ANALYSIS                                                                                                                                                                                                            1
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                 SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
                                DEBRA BOWEN, CHAIRWOMAN
          

          SB 1201 -  Torlakson                                   Hearing  
          Date:  April 13, 2004                S
          As Amended:         March 15, 2004      FISCAL/URGENCY       B

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                                       DESCRIPTION
           
           Existing law: 
           
          1.Permits the Bay Area Rapid Transit District (BART) to purchase  
            "preference power" from a  federal power marketing agency  ,  
            requires Pacific Gas & Electric Company (PG&E) to deliver that  
            power via its transmission and distribution facilities without  
            discrimination or delay, and requires PG&E to bill BART as  
            though all power is delivered to a single point (SB 184 (Kopp),  
            Chapter 681, Statutes of  1995).

          2.Exempts BART's load served by preference power from the  
            "competition transition charge" (CTC) collected pursuant to AB  
            1890 (Brulte), Chapter 856, Statutes of 1996.

           This bill  permits BART to purchase electricity on the same terms  
          from a  local publicly-owned electric utility.  

                                       BACKGROUND
           
          Until 1994, BART was served by PG&E.  Under the federal  
          Reclamation Project Act of 1939, BART qualifies as a "preference  
          entity" to purchase and receive hydropower from the Central Valley  
          Project (CVP).  This federal power is marketed by the Western Area  
          Power Administration (WAPA).  In 1994, BART received, under a  
          10-year contract, an allocation of federal reclamation project  
          power from the CVP through WAPA.  

          The provisions of SB 184 and AB 1890 referenced above enabled BART  
          to receive its allocation of federal preference power at its  
          multiple delivery points in the Bay Area via PG&E's transmission  
          and distribution system, without paying many of the costs  
          associated with retail service.









        BART has sought another preference power contract from WAPA to  
        replace the current contract, which ends in 2006.  Demand for  
        low-cost federal preference power is high, and costs and other  
        terms are not as favorable as they have been in the past.  BART  
        must give notice to WAPA by June whether it wants to continue  
        buying power from WAPA under a new contract.  BART is seeking this  
        urgency bill to give it another supply option if contracting with  
        WAPA doesn't work out.

        A local publicly-owned ("municipal") electric utility could sell  
        excess power to BART in much the same way as WAPA currently does,  
        provided PG&E is required to deliver it to BART's facilities  
        within PG&E's service area.  While the cost may not be as low as  
        the federal preference power, it is likely to be lower than the  
        alternative - bundled retail service from PG&E.  BART's other  
        previous option - direct access - is not available currently as  
        direct access has been suspended pursuant to AB 1X (Keeley),  
        Chapter 4, Statutes of 2001.  

                                      COMMENTS
         
         1.Why only BART?   This bill is the latest in a series of special  
          statutes allowing BART to seek lower-cost alternatives to PG&E  
          service in the wholesale market.  BART's argument for special  
          treatment is that electricity costs are a major part of its  
          operating costs (which are funded by taxpayers and fare  
          revenues) and BART requires access to wholesale electricity to  
          provide cost-effective transit services.  BART is also unique in  
          that it departed PG&E service before electric restructuring or  
          the 2000/2001 energy crisis, so the costs incurred during that  
          time, which are now embedded in PG&E's bundled rates and  
          recovered from departing customers through surcharges, were not  
          incurred to serve BART.

         2.Is a CTC exemption warranted?   BART was among several parties  
          who obtained an exemption from the "nonbypassable" charges that  
          AB 1890 required for recovery of IOU generation-related costs  
          that could be stranded by customer departure to other suppliers.  
           The current exemption applies only to the extent BART's load is  
          served by federal preference power, and not if BART load is  
          served via the direct access or bundled service options.  As an  
          adjunct to permitting BART to purchase electricity from a  
          municipal utility, this bill would extend the CTC exemption to  
          BART load served by a municipal utility.  Most of the original  
          elements of the CTC have been fully collected.  The remaining  
          charge ("tail CTC") is collected to pay for pre-existing  







            contracts with qualifying facilities which are still in effect.   
            Although BART has been exempt from the costs of these contracts,  
            the contracts were entered by PG&E prior to BART's departure.   
             The author and the committee may wish to consider  whether an  
            extension of the CTC exemption is justified. 

           3.Technical amendment.   Section 374 of the Public Utilities Code  
            lists several CTC exemptions, including BART's.  Subdivision (a)  
            of Section 374, exempting certain load served by irrigation  
            districts, is no longer operative (as of March 31, 2002) and  
            should be repealed.

                                        POSITIONS
           
           Sponsor:
           
          Bay Area Rapid Transit District

           Support:
           
          None on file

           Oppose:
           
          None on file



          Lawrence Lingbloom 
          SB 1201 Analysis
          Hearing Date:  April 13, 2004