BILL ANALYSIS 1 1 SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE MARTHA M. ESCUTIA, CHAIRWOMAN AB 380 - Nunez Hearing Date: June 30, 2005 A As Amended: June 28, 2005 FISCAL B 3 8 0 DESCRIPTION This bill establishes "resource adequacy" standards for electric utilities and other providers of electric service, collectively referred to as "load-serving entities" (LSEs). Specifically, this bill : 1. Requires the California Public Utilities Commission (CPUC) to establish resource adequacy requirements to meet specified objectives - most importantly, ensuring that each LSE has enough reasonably-priced power to serve their customers reliably. 2. Requires all LSEs to be subject to the same requirements for resource adequacy, energy efficiency, and the renewable portfolio standard. 3. Requires LSEs to report resource adequacy information to the CPUC. 4. Requires the CPUC to enforce resource adequacy requirements for all LSEs. 5. Assures full recovery of utility resource adequacy costs approved by the CPUC. 6. Exempts municipal utilities, the State Water Project, and specified customer generation. 7. Establishes separate, self-enforced resource adequacy requirements for municipal utilities. BACKGROUND The CPUC has adopted resource adequacy requirements which require LSEs to achieve 15-17% reserve margins by June 1, 2006. In its orders on resource adequacy, the CPUC has maintained it has authority to apply requirements to non-utility LSEs, such as energy service providers (ESPs). The ESPs have contested the CPUC's authority to require ESPs to meet the CPUC's requirements, but haven't changed the CPUC's mind or succeeded in getting a court to overturn the CPUC's jurisdiction in this area. The CPUC is in the process of implementing its resource adequacy requirements. Currently, the CPUC's jurisdiction over ESPs is derived from general registration requirements which don't specify the ESPs' resource adequacy obligations. This bill would make the CPUC's authority to apply and enforce resource adequacy requirements on ESPs unambiguous. According to the CPUC, this bill would minimize if not eliminate any legal uncertainty over its authority to set resource adequacy standards. COMMENTS 1. A single, clear definition of "resource adequacy" should be established. This bill describes various criteria for resource adequacy in multiple different sections. The author and the committee may wish to consider replacing these multiple references with a single definition of resource adequacy, drawing from the criteria already contained in the bill. 2. Language compromising California Energy Commission (CEC) authority to collect and disclose LSE data should be removed. This bill appropriately authorizes the CPUC to r equire the production of information from all LSEs necessary to determine compliance. However, the bill also requires the CEC to use the information provided to the CPUC and to ensure its confidentiality. This provision conflicts with SB 1389 (Bowen), Chapter 568, Statutes of 2002, which gives the CEC broad authority to collect data to fulfill its forecasting duties and prepare the Integrated Energy Policy Report. SB 1389 further provides a detailed process governing disclosure of information which balances public interest in disclosure against industry interest in confidentiality. With respect to resource adequacy data, this bill would short circuit SB 1389, compromising the CEC's authority and potentially reversing recent legislative efforts to improve public disclosure. The author and the committee may wish to consider removing these provisions and leaving the CEC and CPUC data collection authorities and disclosure standards as they are currently. 3. Overlap with pending initiative. The "Repeal of Electricity Deregulation and Blackout Prevention Act," pending on the November 2005 special election ballot, contains similar, but not identical, provisions enacted in a different code section. If this bill and the ballot measure are both enacted, there will be some conflicts between the two which will need to be reconciled. 4. Prior legislation. AB 2006 (Nunez), which was vetoed by the Governor last year, also contained resource adequacy provisions similar to this bill. ASSEMBLY VOTES Assembly Floor (74-0) Assembly Appropriations Committee (18-0) Assembly Utilities and Commerce Committee(11-0) POSITIONS Sponsor: Author Support: Alliance for Retail Energy Markets (if amended) American Federation of State, County and Municipal Employees California Public Utilities Commission Coalition of California Utility Employees Duke Energy Pacific Gas and Electric Company (if amended) Sempra Energy (if amended) Southern California Edison The Utility Reform Network Oppose: South San Joaquin Irrigation District Western States Petroleum Association Lawrence Lingbloom AB 380 Analysis Hearing Date: June 30, 2005