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