BILL ANALYSIS Ó AB 895 Page 1 Date of Hearing: April 27, 2015 ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE 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, and 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: AB 895 Page 2 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. AB 895 Page 3 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. AB 895 Page 4 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 2003) AB 895 Page 5 REGISTERED SUPPORT / OPPOSITION: Support California Manufacturers and Technology Association Office of Ratepayer Advocates Opposition None on file. Analysis Prepared by:Allegra Roth / U. & C. / (916) 319-2083 AB 895 Page 6