BILL ANALYSIS 1 1 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 1 2 0 1 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