BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
MARTHA M. ESCUTIA, CHAIRWOMAN
AB 67 - Levine Hearing
Date: September 7, 2005 A
As Amended: September 1, 2005 FISCAL B
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DESCRIPTION
This bill:
1. Expresses the intent of the Legislature that the
California Public Utilities Commission (CPUC) reduces
electricity and natural gas rates to the lowest amount
possible and requires the President of the CPUC to appear
annually before the Assembly and Senate policy committees
to report on electric and natural gas utility costs.
2. Extends the existing program that provides partial net
metering to customer-owned fuel cell electric generation
facilities, which sunsets January 1, 2006. This bill
replaces the 2006 sunset with a provision permitting a fuel
cell facility commencing operation before January 1, 2010
to be eligible for net metering for the life of the
facility.
BACKGROUND
Rates
Since early 2001, the electricity rates set by the CPUC for
customers of the state's major investor-owned utilities (IOUs)
have exceeded the IOUs' ongoing cost of service, far exceeding
the rates of in-state municipal utilities or any neighboring
state, and ranking among the highest in the nation.
Prior to 2001, IOU rates had been "frozen" pursuant to AB 1890
(Brulte), Chapter 856, Statutes of 1996. In addition to
freezing rates at 1996 levels for a four-year transition period,
AB 1890 guaranteed a 10% reduction in retail rates for small
customers, and promised larger rate reductions once the
transition period was over.
In 2001, the CPUC increased rates for the customers of Southern
California Edison (SCE) and Pacific Gas & Electric (PG&E) a
combined average of 4 cents per kilowatt hour to pay for the
high-cost of power. SDG&E rates have also increased, although
in smaller increments. While the Department of Water Resources
has claimed a significant share of electricity rates for its
ongoing operating costs and payments on bonds it issued to
finance its high-cost power purchases in 2001, the IOUs have
also collected an extra measure of rates that would otherwise be
dedicated to buying electricity. Under the CPUC's 2001 rate
increase decisions, these extra rates were subject to refund to
utility customers.
The IOUs accumulation of excess rates has long since matched
their historic procurement debts, leaving little excuse for
continuing today's high rates. However, the CPUC has, for the
most part, maintained higher rates and expanded their purposes
to include improving the financial health of the IOUs,
subsidizing direct access and distributed generation, and buying
"reliability insurance" in the form of minimum reserve margins.
The 2001 rate increases averaged 40%. According to the CPUC,
SCE rates have been reduced 13% and PG&E rates have been reduced
8% since. As a result, current rates remain 27-32% above
pre-crisis levels. The CPUC has not provided an account of the
use of this revenue or a schedule for achieving further rate
reductions.
Fuel Cell Net Metering
SB 656 (Alquist), Chapter 369, Statutes of 1995, required all
electric utilities to buy back any electricity generated by a
customer-owned solar or wind system. This buy-back program is
known as "net metering" because the electricity purchases of the
customer are netted against the electricity generated by the
customer's own solar or wind electric system. The generated
electricity spins the meter backward, making it financially
equivalent to using less electricity for the customer.
Net metering has also been extended partially to larger solar
facilities and to non-solar renewable facilities by giving
credit at the utility's generation rate (akin to a wholesale
rate, rather than full retail rate) for electricity produced.
In 2003, AB 1214 (Firebaugh), Chapter 661, Statutes of 2003
created a program providing partial net metering to
customer-owned fuel cell electric generation projects. Under AB
1214, the net-metered customer only gets credit at the
generation rate, rather than the full retail rate offered to
solar customers. AB 1214 sunsets January 1, 2006.
COMMENTS
1. New fuel cells provisions are consistent with sunset
extension for biogas projects previously approved by this
committee. AB 728 (Negrete McLeod) approved by this
committee June 30 and now pending on the Senate Floor,
extends a similar net metering program for biogas electric
generation facilities. The four-year extension for fuel
cells in this bill is consistent with the four-year
extension for biogas granted by AB 728.
2. Continuation of program without interruption requires
sunset extension now. The existing fuel cell net metering
program will sunset at the end of this year. If the
program is not extended, net metering won't be available to
both existing and planned fuel cell projects after the end
of the year. However, it's not clear if any of the handful
of fuel cell electric generation facilities actually rely
on net metering. The fact that no bill was introduced
before now to extend the sunset may indicate a lack of
interest in the program. If this bill is not enacted and
the program is allowed to sunset, it can be reenacted next
year.
3. No Amendments. - Pursuant to Senate rule 29.10, this
bill may not be amended.
ASSEMBLY VOTES
Assembly Floor (73-1)
Assembly Appropriations Committee (18-0)
Assembly Utilities and Commerce Committee
(10-0)
POSITIONS
Sponsor:
Clean Power Campaign
Support:
None on file
Oppose:
None on file
Lawrence Lingbloom
AB 67 Analysis
Hearing Date: September 7, 2005