BILL ANALYSIS                                                                                                                                                                                                    1
1





   SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
                  DEBRA BOWEN, CHAIRWOMAN


AB 811 -  Keeley                                  Hearing  
Date:  July 13, 1999                 A
As Amended:         July 12, 1999            FISCAL       B
                                                             
  
                                                             
  8
                                                             
  1
                                                             
  1


                         DESCRIPTION
  
  This bill  requires the California Public Utilities  
Commission (CPUC) to establish a Power Exchange energy  
credit (PX credit) that is calculated according to actual  
hourly data for customers with time-of-use (TOU) meters  
installed  on or after  January 1, 2000.

  The bill  allows customers with TOU meters installed  before   
January 1, 2000 to make a one-time choice, before January  
30, 2000, to have their PX credit calculated according to  
actual hourly data  or  the average load profile for their  
customer class.

  The bill  requires additional billing costs resulting from  
the hourly calculation methodology to be recoverable from  
that customer class and prohibits shifting any costs  
between customer classes.

                        KEY QUESTIONS

 1.What impact will hourly calculation of the PX credit have  
  on customers' energy consumption incentives and  
  Competition Transition Cost (CTC) obligations?

2.Should customers with existing TOU meters be allowed to  
  choose between PX credit methods (actual hourly or class  











  average), depending on which method benefits them?  If  
  so, is it feasible to require that choice within 29 days  
  from the date of enactment of this bill?

3.Why should ratepayers in the customer class at large be  
  charged for additional billing costs associated with an  
  hourly PX credit, instead of limiting the charges to the  
  customers who are actually getting the credit?
  
                         BACKGROUND
  
The value, and price, of electricity varies by time of day  
and season.  Consumption of electricity is much lower at  
4:00 a.m. than it is at 4:00 p.m. and so is the price.   
Traditional mechanical meters record the total amount of  
electricity consumed between readings, but do not record  
actual consumption patterns (temporal data).  TOU meters  
measure energy as it is being used, providing an exact  
reading of how much energy was used at any given time.

According to the sponsor of this bill, the California  
Retailers Association, retail stores and office buildings  
have above average loads (high usage during the day) and  
little ability to shift loads due to the constraints of  
normal business hours.  Customers exceeding a certain load  
who choose a direct access energy service provider (ESP)  
are required to install a TOU meter.  The meter data is  
used to precisely calculate their bill - actual usage in  
any hour multiplied by the actual energy cost for that  
hour.  Before the ESP can bill the customer, the local  
utility must generate a bill for transmission and  
distribution services, and for the CTC.  AB 1890 requires  
that these charges be determined residually by subtracting  
a credit for the commodity portion of the bill.  This  
credit is referred to as the PX credit.

Currently, the PX credit is calculated based on average  
"load profiles," even for customers with TOU meters.  All  
customers within a given customer class (e.g., residential,  
small commercial, agricultural, industrial) are credited  
for the total energy they consume according to a load  
profile for their customer class, rather than according to  
their own actual hourly usage. The load profile uses  
average historical data to estimate how much energy is  










purchased at any given hour by each customer class.

As a result, customers with a below average load  
(relatively low peak usage) get a higher PX credit relative  
to the actual value of the energy they consume than  
customers with an above average load (relatively high peak  
usage).  Because of the relationship between the PX credit  
and CTC calculations, above average customers also pay  
relatively more CTC.  If customers are allowed to take  
advantage of TOU meter readings in the calculation of the  
PX credit, those with above average loads will get a larger  
PX credit and smaller CTC obligation than they get under  
the current method.

                           COMMENTS

1.Potential impact on consumption patterns and CTC  
  collection.   The current PX credit methodology  
  effectively rewards efficient usage patterns, to the  
  extent that a customer can "beat" the average load  
  profile for his or her class.  When the PX credit is  
  calculated according to an average load profile,  
  customers who are more efficient than average receive a  
  higher PX credit and, consequently, pay a lower CTC  
  amount than they would if the PX credit is calculated  
  according to hourly usage.  By enabling customers to  
  collect a PX credit calculated according to hourly usage,  
  this bill benefits above average energy consumers by  
  increasing their PX credit and, consequently, decreasing  
  their relative CTC contribution.  Essentially, these  
  customers will be rewarded, compared to the current  
  rules, for using an above average energy load.  The bill  
  confines the CTC impact by prohibiting cost-shifting  
  between customer classes, consistent with existing law.

  2.Who pays for the choice?   The provision of the bill  
  allowing customers with existing TOU meters to choose  
  between PX credit methods (actual hourly or class  
  average), may contribute to the impacts described in  
  Comment 1.  This is due to the fact that customers will  
  choose whichever method gives them the largest PX credit.  
   For customers with above average loads, the choice will  
  be the hourly credit.  For customers with below average  
  loads, the choice will be the average credit (status  










  quo).  The  Committee may wish to consider  whether direct  
  access customers with TOU meters should be allowed to  
  choose their preferred PX credit methodology.  

  3.Is 29 days enough?   If customers are allowed to choose,  
  the  Committee may wish to consider  the appropriate  
  duration of that choice and whether the 29 days provided  
  by this bill is sufficient.  One practical problem with  
  this deadline is that the hourly PX credit methodology  
  that the bill requires the CPUC to implement will almost  
  certainly take longer than 29 days from the enactment of  
  the bill to implement.  As a result, customers would not  
  know the exact terms of the hourly credit option before  
  being forced to choose between it and the average credit.

  4.Who should foot the bill for the billing?   Establishing a  
  new PX credit method may result in increased billing  
  costs for the utilities.  AB 811 requires additional  
  billing costs (for customers in a given class) due to the  
  hourly calculation methodology to be recovered through  
  rates from that customer class.   It is not clear why all  
  customers in any given class should share the costs  
  associated with a program that benefits only those who  
  choose to participate in it, potentially to the detriment  
  of the customer class at large.  If the billing costs  
  associated with an hourly PX credit are going to be  
  assigned to ratepayers, the  Committee may wish to  
  consider  whether the costs should be confined to the  
  customers who have chosen to take advantage of the hourly  
  PX credit.

  5.Conflict with SB 1063 (Bowen).   Should the Committee  
  approve this bill, it should include an amendment to  
  change the number of the code section that the bill  
  establishes (367.5) to resolve the technical conflict  
  with SB 1063 (Bowen).
                               
                       ASSEMBLY VOTES
  
Assembly U & C Committee           (11-0)
Assembly Appropriations Committee  (21-0)
Assembly Floor                     (76-0)

                          POSITIONS










  
  Support:
  Agricultural Energy Consumers Association
Association of California Water Agencies (ACWA)
Building Owners & Managers Association of California
Building Owners & Managers Association of San Francisco
California Cast Metals Association
California Manufacturers Assocation (CMA)
California Retailers Association
Chemical Industry Council of California
Green Mountain Energy Resources
New Energy Ventures
Southern California Edison

  Oppose:
  Enron Corporation
Utility.com



Lawrence Lingbloom 
AB 811 Analysis
Hearing Date:  July 13, 1999