BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 995
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          CONCURRENCE IN SENATE AMENDMENTS
          AB 995 (Wright)
          As Amended August 18, 2000
          2/3 vote
           
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          |ASSEMBLY:  |     |(May 20, 1999)  |SENATE: |30-5 |( August 23,   |
          |           |     |                |        |     |2000 )         |
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                    (vote not relevant)
           
           Original Committee Reference:   U. & C.  
          
          SUMMARY  :  Reaffirms policy that each investor-owned utility  
          (IOU) shall continue to operate its electric distribution grid  
          in its service territory and have a reasonable opportunity to  
          recover its costs, extends the collection of a nonbypassable  
          system benefit charge to fund specified programs, requires  
          various reports relating to these programs, and requires further  
          legislative action before program moneys can be expended.   
          Specifically, this bill:

          1)Restates the policy of the state that each IOU operate its  
            electric distribution grid in a safe, reliable, efficient, and  
            cost-effective manner and that electric corporations continue  
            to make prudent investments in their distribution grids.

          2)Reaffirms California's doctrine, as reflected in regulatory  
            and judicial decisions, regarding IOUs' reasonable opportunity  
            to recover costs and investments associated with their  
            electric distribution grid and the reasonable opportunity to  
            attract capital for investment on reasonable terms.

          3)Extends the collection of a nonbypassable system benefit  
            charge to fund three specific programs:  a) energy efficiency  
            and conservation activities; b) public interest research,  
            development, and demonstration (RD&D); and, c) in-state  
            operation and development of existing, new, and emerging  
            renewable energy resources.

          4)Requires IOUs and municipal utilities to collect specific  
            dollar amounts for each of the programs beginning on January  
            1, 2002, through January 1, 2012, and requires the funds to be  
            deposited in specified accounts until appropriation by the  
            Legislature.








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          5)Requires the Energy Resources Conservation and Development  
            Commission (CEC) to develop investment plans for renewable  
            energy and RD&D.  For renewable energy, CEC is required to  
            submit an initial investment plan by March 31, 2001,  
            addressing the application of moneys collected between January  
            1, 2002, and January 1, 2007.  A subsequent investment plan is  
            due March 31, 2006, relating to the application of moneys  
            collected between January 1, 2007, and January 1, 2012.  For  
            RD&D, CEC is required to submit an initial investment plan by  
            March 1, 2001, addressing the application of moneys collected  
            between January 1, 2002, and January 1, 2007.  A subsequent  
            investment plan is due March 31, 2006, relating to the  
            application of moneys collected between January 1, 2007, and  
            January 1, 2012.  No moneys may be expended in the years  
            covered by these plans without further legislative action.

          6)Requires the California Public Utilities Commission (CPUC) and  
            CEC to continue to administer energy efficiency programs, as  
            defined, following prescribed guidelines.

          7)Requires the Governor, on or before January 1, 2004, to  
            appoint an independent review panel that, on or before January  
            1, 2005, would be required to submit a report to the  
            Legislature and CEC evaluating the programs funded under this  
            bill, and including specific recommendations aimed at  
            assisting the Legislature in determining whether to change or  
            eliminate the collection of system benefits charge on or after  
            January 1, 2007.

          8)Requires CPUC to require IOUs to inform all customers who  
            request residential service connections via telephone of the  
            availability of the California Alternative Rates for Energy  
            program and how they may qualify for and obtain these  
            services, and permits IOUs to recover the reasonable costs of  
            implementing these provisions.  Additionally, requires IOUs to  
            accept applications for the CARE program according to  
            procedures specified by CPUC.

          9)Authorizes CPUC to include misrepresentation of a material  
            fact by an applicant obtaining a registration as an electric  
            service provider as a reason to suspend or revoke their  
            registration.

          10)Makes related findings and declarations.








                                                                  AB 995
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           EXISTING LAW  :

          1)States legislative findings that the transmission and  
            distribution of electric power are essential services imbued  
            with the public interest that are provided over facilities  
            owned and maintained by the state's IOUs.

          2)Declares the delivery of electricity over transmission and  
            distribution systems is currently regulated, and will continue  
            to be regulated to ensure system safety, reliability,  
            environmental protection, and fair access for all market  
            participants.

          3)Requires IOUs and municipal utilities to collect a public  
            goods surcharge from each electricity customer to fund four  
            specific programs:  a) energy efficiency and conservation  
            activities; b) public interest RD&D; c) in-state operation and  
            development of existing, new, and emerging renewable energy  
            sources; and, d) assistance to low-income users.  Statutory  
            authority to collect funds for the renewables programs sunsets  
            on March 31, 2002.

          4)Requires CEC to transfer funds collected for these programs to  
            specified funds.

          5)Provides that funds expended for production incentives for new  
            in-state renewable electricity generation technology  
            facilities are limited to facilities that are operational  
            prior to January 1, 2002.

          6)Authorizes CPUC to utilize enforcement provisions against  
            electric service providers, including having their  
            registration suspended or revoked for specified acts of  
            misconduct.



           FISCAL EFFECT  :

          1)CPUC indicates minor absorbable special fund costs to continue  
            administering the energy efficiency program.

          2)CEC indicates absorbable costs to prepare the investment plans  
            for future legislative consideration to determine expenditure  








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            of funds collected for RD&D and renewable energy programs.

          3)Absorbable special fund costs for CPUC and CEC to provide  
            assistance to the independent review panel.

           COMMENTS  :  Electric Distribution Grid.  Historically,  
          California's electrical corporations were vertically integrated  
          companies that owned operated, managed and controlled electric  
          generation, transmission and distribution.  In 1996, California  
          enacted landmark electric restructuring legislation AB 1890  
          (Brulte), Chapter 854, Statutes of 1996, which created a  
          competitive generation market and transferred control of the  
          investor owned utilities transmission to the Independent System  
          Operator.  With the passage of Chapter 854 and past decisions of  
          CPUC, there has been uncertainly created regarding investments  
          in new generation and transmission.  In an effort to ensure that  
          similar uncertainly does not occur with regard to the  
          distribution system, this bill reaffirms the core distribution  
          functions that remain under the authority of CPUC.  This bill  
          also reaffirms the historical cost recovery doctrine governing  
          investments in the electric distribution grid to ensure that  
          essential investments continue to be made to the grid.

          Public Purpose Programs.  Another key component of Chapter 854  
          that this bill seeks to address is the collection of a separate  
          component to fund specified public purpose programs such as:  a)  
          cost-effective energy efficiency and conservation activities; b)  
          public interest research and development; and, c) renewable  
          energy.  Under existing law, the three investor owned utilities,  
          Southern California Edison Company (SCE), Pacific Gas and  
          Electric Company  and San Diego Gas and Electric Company, are  
          required to collect specified amounts to fund these programs  
          through 2001.  CPUC's authority to collects funds to support the  
          renewables program became explicitly inoperative on March 31,  
          2002.  This bill extends the authority to collects funds to  
          support these programs for up to 10 years in two five-year  
          blocks.  However, rather than simply extending the funding  
          authorization, this bill requires CEC to develop investment  
          plans for the renewable and RD&D programs covering each five  
          year block.  Further, the Legislature must take specific action  
          before any of these moneys can be spent.

          Program Improvements.  It was the Legislature's intent that  
          funding for the renewable program terminate after five years.   
          California, however, has not reached the levels of renewable  








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          resources envisioned at that time.  This bill seeks to optimize  
          public investment and ensure that the most cost-effective and  
          efficient investments in renewable resources are pursued and  
          directs CEC to prepare an investment plan aimed at development  
          of a fully competitive and self-sustaining California renewable  
          energy supply.  This bill also established revised guidelines to  
          establish a level of parity amongst new, repowered, refurbished  
          and existing sources of renewable energy.  This bill also  
          requires CEC to address issues regarding the organizational  
          environment managing the RD&D program.  Finally, this bill  
          provides for improvements in the energy efficiency program by  
          requiring CPUC to ensure local and regional interests,  
          multifamily dwellings and energy service industry capabilities  
          are incorporated into the program portfolio design.  In past  
          years, the program design left many of these entities incapable  
          or unqualified to access the energy efficiency moneys.

          Systems Benefit Charge.  This bill establishes that the systems  
          benefit charges to fund the energy efficiency, renewable energy,  
          and research and development programs is nonbypassble for every  
          customer of an electrical corporation.  While this bill  
          authorizes CEC to require each electrical corporation to collect  
          the systems benefit charges through 2012, funds cannot be  
          expended until the Legislature acts after review of the  
          investment plans described above.  This bill further includes  
          provisions that place limits on program funding levels and  
          customer surcharge rates which large users have indicated  
          provides them greater certainty regarding costs to support these  
          programs.

          Independent Review Panel.  This bill requires the Governor to  
          appoint an independent review panel of members with expertise on  
          the energy service needs of large and small electricity  
          consumers to review the operation of the programs.  The panel,  
          to be appointed by January 1, 2004, is required to prepare a  
          report on or before January 1, 2005 evaluating the public  
          purpose programs.  The report will also assess whether the  
          programs are consistent with the statutory goals, if established  
          targets for renewable generation are likely to be achieved, and  
          whether changes should be made to result in more efficient use  
          of public resources.  The panel is also directed to compare  
          CEC's programs with efforts in other states.  The report is  
          aimed at assisting the Legislature to determine whether to  
          change or eliminate the collection of the system benefits  
          charge.








                                                                  AB 995
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          Analysis Prepared by  :  Carolyn Veal -Hunter / U. & C. / (916)  
          319-2083



                                                               FN: 0006114