BILL ANALYSIS                                                                                                                                                                                                    

                                                                     AB 895

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          Date of Hearing:  April 27, 2015


                                Anthony Rendon, Chair

          AB 895  
          (Rendon) - As Introduced February 26, 2015

          SUBJECT:  Utility rate refunds:  energy crisis litigation

          SUMMARY:    Directs money collected from litigation claims  
          associated with the 2000 to 2002 energy crisis away from the  
          Public Utilities Commission programs and towards the Ratepayer  
          Relief Fund, ensuring legislative oversight over the use of  
          these funds. 

          Specifically, this bill:

          a)Prohibits the Public Utilities Commission from distributing  
            proceeds collected from litigation claims to obtain ratepayer  
            recovery for the effects of the 2000 to 2002 energy crisis,  

          b)Requires that all proceeds collected from litigation claims be  
            deposited into the Ratepayer Relief Fund to be appropriated by  
            the Legislature for the benefit of ratepayers.  

          EXISTING LAW:  


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          1)Authorizes the commission to fix the rates and charges for  
            every public utility, and requires that those rates and  
            charges be just and reasonable.  (Public Utilities Code  
            Section 451) When the commission orders rate refunds to be  
            distributed, existing law requires the commission to require  
            the public utility to pay refunds to all current utility  
            customers, and, when practicable, to prior customers.  (Public  
            Utilities Code Section 453.5)

          2)Establishes the Ratepayer Relief Fund in the State Treasury to  
            benefit electricity and natural gas ratepayers, and to fund  
            investigation and litigation costs of the state in pursuing  
            allegations of overcharges and unfair business practices.   
            (Public Utilities Code Section 16428.15) 

          3)Requires that any energy settlement agreement direct  
            settlement funds to the following purposes in priority order:   
            (1) to reduce ratepayer costs of those utility ratepayers  
            harmed by the actions of the settling parties; and (2) for  
            deposit in the Ratepayer Relief Fund.  (Public Utilities Code  
            Section 16428.3)

          4)Authorizes funds deposited in the Ratepayer Relief Fund to be  
            appropriated by the legislature for purposes that benefit  
            ratepayers.  (Public Utilities Code Section 16428.3)

          FISCAL EFFECT:  Unknown. 

          COMMENTS:  The purpose of this bill is to ensure legislative  
          oversight of the use of ratepayer refunds resulting from  
          electricity crisis litigation.


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           1)2000 to 2002 Energy Crisis:   In 1996, legislation established  
            a competitive deregulated electricity market in California  
            which worked well until May 2000, after a serious drought  
            diminished the supply of inexpensive hydropower.  This led to  
            the Western Electricity Crisis of 2000 to 2001.  California's  
            increasing electricity prices, partnered with inadequate  
            infrastructure and the deteriorating financial stability of  
            major investor-owned utilities triggered a crisis in  
            California.  These problems made market manipulation possible,  
            and caused all-time high retail electricity prices and power  
            outages throughout California. 

            Since that time, various lawsuits have sought billions of  
            dollars in refunds.  Litigation continues to this day,  
            resulting in settlements and judgments in favor of California  
            electric ratepayers.  The Attorney General's Office has  
            negotiated upwards of $2 billion in settlement agreements  
            related to the energy crisis.

           2)CPUC Handling of Electric Crisis Settlement Funds:   The CPUC  
            has directed most funds from the energy crisis litigation to  
            ratepayers.  Currently, there are about 10 more contracts  
            being litigated.  

            A recent out-of-court case settlement (Dynegy 2012),  
            negotiated by the CPUC, resulted in money being spent on  
            developing a statewide electric vehicle charging program,  
            rather than on refunding ratepayers.  This program is not  
            meeting the milestones specified in the settlement order,  
            raising questions about the supposed benefit to ratepayers and  
            the effectiveness of the current process. 


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            Litigation continues to work its way through the court system.  
             Most recently, on April 21, 2015 the United States Supreme  
            Court ruled that a federal law governing the natural gas  
            market does not shield energy companies from state antitrust  
            claims made over the 2000 to 2001 energy crisis.

           3)Role of the Ratepayer Relief Fund:   The Ratepayer Relief Fund  
            was established primarily to benefit ratepayers, and fund  
            investigation and litigation costs of the state in pursuing  
            allegations of overcharges or unfair practices that adversely  
            affected ratepayers.  In directing settlement money into the  
            Ratepayer Relief Fund, this bill ensures that the money truly  
            benefits ratepayers and is spent in accordance with the  
            principles of the Ratepayer Relief Fund and the legislature. 

           4)Related legislation:    

             AB 1756 (Committee on Budget):   Provides that any funds paid   
            to the state as a result of energy litigation are to be  
            allocated in the following priority order:  "(1) to  reimburse  
            state funds for, or to finance, litigation and investigation  
            expenses," (2) to reduce ratepayer costs of  those utility  
            ratepayers harmed by the actions of the  defendants, and (3)  
            to reduce or pay debt service on the  energy bonds issued by  
            the Department of Water Resources.  (Chapter 228, Statutes of   


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          California Manufacturers and Technology Association

          Office of Ratepayer Advocates



          None on file.

          Analysis Prepared by:Allegra Roth / U. & C. / (916) 319-2083


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