BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 380
                                                                  Page  1

          Date of Hearing:   May 11, 2005

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                   Judy Chu, Chair

                      AB 380 (Nunez) - As Amended:  May 2, 2005 

          Policy Committee:                               
          UtilitiesVote:11-0

          Urgency:     No                   State Mandated Local Program:  
          Yes    Reimbursable:              No

           SUMMARY  


          This bill requires the Public Utilities Commission (PUC) to  
          establish and enforce requirements ensuring that all electricity  
          providers have adequate generating capacity to meet peek demand  
          and operating reserves at just and reasonable rates.  
          Specifically, this bill:


          1)Requires the PUC, in consultation with the Independent System  
            Operator (ISO), to establish the resource adequacy  
            requirements for all load-serving entities (LSEs).


          2)Requires all LSEs, including nonutility electric service  
            providers and community choice aggregators (CCAs), to be  
            subject to the same requirements as the requirements for  
            investor-owned utilities (IOUs), including resource adequacy,  
            resource diversity, cost-effective energy efficiency, and the  
            renewables portfolio standard.


          3)Requires the PUC to require LSEs to report to the commission  
            such information as needed to enable the PUC to determine  
            compliance with the adopted resource adequacy requirements.


          4)Requires the California Energy Commission (CEC) to use the  
            information reported to the PUC pursuant to (4) in its  
            biennial integrated policy report.









                                                                  AB 380
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          5)Requires the PUC to implement and enforce the resource  
            adequacy requirements on all LSEs.


          6)Requires the PUC to ensure that costs incurred on behalf of an  
            investor-owned utility's (IOU's) customers are recovered in a  
            non-bypassable manner from the customers on whose behalf they  
            were incurred and to develop a mechanism to ensure no shifting  
            of costs.


          7)Requires every local publicly owned electric utility (muni) to  
            ensure adequate generating resources to meet peak demand to  
            ensure local area reliability, and to report to the CEC  
            information required relative to the utility's resource plan.


          8)Requires the PUC to impose penalties on any LSEs that fail to  
            procure adequate generating resources in accordance with PUC's  
            order implementing the above requirements.


           FISCAL EFFECT  

          Absorbable costs to the PUC and the CEC. The PUC indicates that  
          it is already engaged in much of what the bill would require.

           
          COMMENTS  


           Background and Purpose  . LSEs include all retail electricity  
          providers-IOUs, electric service providers (ESPs), CCAs, and  
          munis. The IOUs are currently required to procure 115 to 117  
          percent of projected peak demand to ensure they have adequate  
          resources to meet the demand of their customer base. The IOU  
          customers pay for the reserve requirements through their rates.  
          According to the PUC, the commission is in the process of  
          developing resource adequacy rules, applicable to both utilities  
          and ESPs, to ensure that each retail electric service provider  
          has sufficient resources available to ensure reliable service  
          under adverse conditions. 










                                                                  AB 380
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          There have been concerns that the IOUs have been asked to  
          procure reserves not only on their own behalf but also on the  
          behalf of direct access customers because the PUC does not have  
          a process in place by which it can verify whether the ESPs are  
          actually procuring sufficient electricity and needed reserves.  
          To the extent IOUs buy reserves on behalf of direct-access  
          customers, costs are shifted from the direct-access customers to  
          the IOU customers. 


          Even if there are no cost shifts, there may be a reliability  
          risk for IOU customers because the ESPs have not purchased  
          power. If the ESP has failed to procure enough resources, the  
          customer continues to draw electricity from the IOU's reserves,  
          which compromises reliability for the IOU's customers, or  
          increases costs across all of its customers if the IOU has to  
          purchase additional resources on the spot market for these  
          unanticipated customers.




          According to the author, this bill will require the PUC to  
          ensure that non-utility energy service providers and CCAs are  
          subject to the same resource adequacy, resource diversity,  
          cost-effective energy efficiency, and renewable portfolio  
          standard requirements as are the IOUs.


           Analysis Prepared by  :    Chuck Nicol / APPR. / (916) 319-2081