BILL ANALYSIS
AB 1421
Page 1
Date of Hearing: April 19, 1999
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Roderick Wright, Chair
AB 1421 (Wright) - As Amended: April 15, 1999
SUBJECT : Gas and electric service.
SUMMARY : This bill declares that core customers of a gas
corporation should continue to receive safe basic gas service
from the gas corporation unless the customer makes a positive
declaration to receive service from another entity. This bill
also declares that all customers of an electrical corporation
should continue to receive basic electric service from the
electric corporation unless the customer chooses or contracts to
receive power through a direct transaction with another service
provider. Specifically, this bill :
1)Defines basic gas service to include transmission, storage,
and distribution of natural gas, purchasing natural gas on
behalf of a customer, revenue cycle services and after meter
services. Revenue cycle services includes metering services,
customer billing and collection and related customer services;
2)Defines basic electric service to include transmission and
distribution of electric power, purchasing of electric power
on behalf of a customer and revenue cycle services such as
metering, customer usage, customer billing and related
customer services;
3)Allows a customer to choose or contract to receive basic gas
service from another provider;
4)Allows a customer to make a positive declaration to receive
basic electric service from another provider;
5)Specifies that a public utility gas corporation shall continue
to be the exclusive provider of revenue cycle services, as
defined, in its service territory, except as specified, and
requires the distribution rate to continue to include
after-meter services, as defined;
6)Requires California Public Utilities Commission (CPUC) to
authorize a gas corporation to purchase natural gas commodity
from any source and to set the natural gas commodity portion
AB 1421
Page 2
of the bundled rate equal to the weighted average cost of gas;
7)Specifies that the difference between the cost of purchases by
the gas corporation and the cost of gas as measured by
appropriate market indices shall be shared by the gas
corporation and bundled service customers in a manner
determined by CPUC;
8)Specifies that all costs of procurement, other than the
purchase of natural gas commodity, shall be included as part
of the basic distribution rate paid by all distribution
customers;
9)Requires CPUC to authorize gas corporations to offer optional
competitive rate schedules and tariffs;
10)Requires CPUC to require each electrical corporation to
provide bundled basic electric service, as defined, to all
customers in its service territory unless the customer makes a
positive declaration in accordance with specified existing law
to receive electric power through a direct transaction with
another electric service provider;
11)Requires metering, billing, and collection service to be
provided by the existing public utility electrical
corporation, unless the customer makes a positive declaration
to receive electric power through a direct transaction with
another electric service provider;
12)Requires CPUC to set the electric energy commodity portion of
the bundled rate, as specified;
13)Authorizes the electrical corporation to purchase energy and
associated ancillary services from the Power Exchange (PX) and
from other sources;
14)Specifies that the difference between the cost of purchases
from other sources and the cost of purchases from the PX shall
be shared by the electrical corporation and bundled service
customers in a manner determined by CPUC;
15)Specifies that all costs of providing basic electric service,
other than the purchases of energy and ancillary services and
transmission shall be included as part of the basic
distribution rate paid by all distribution customers;
AB 1421
Page 3
16)Authorizes each electrical corporation to offer all customers
rate alternatives to purchasing energy as part of basic
electric service, such as time-of-use based rates and other
optional competitive rates.
EXISTING LAW : Permits CPUC to investigate the restructuring of
natural gas services, as specified, but prohibits the enactment
and enforcement of any natural gas restructuring decisions for
core customers prior to January 1, 2000.
Permits CPUC to exercise its authority to investigate a process
for certification and regulation of the rates, charges, terms,
and conditions of default service.
Provides that if CPUC determines that a process for
certification and regulation of default service is in the public
interest, CPUC shall submit its finding and recommendations to
the Legislature.
FISCAL EFFECT : Unknown.
COMMENTS :
1)This bill codifies that the investor owned utilities (IOU) are
the default providers of gas and electric service, provides a
definition of basic service, and prohibits the unbundling of
gas and electric metering and billing. None of the provisions
of the bill affect direct access. A customer is still free to
choose an energy service provider other than the IOU.
2)This bill defines basic gas service-provided by the IOUs-to
include transmission, storage, and distribution of natural
gas, purchasing natural gas on behalf of a customer, revenue
cycle services, and after meter services. Revenue cycle
services include metering services, customer billing and
collection, and related customer services. (Metering
services, as defined under current law, include, but are not
limited to: gas meter installation, maintenance, testing,
collecting, and processing consumption data and all related
services associated with the meter. After meter services
include, but are not limited to: leak investigation,
inspecting customer piping and appliances, carbon monoxide
investigation, pilot re-lighting, and high bill
investigation).
AB 1421
Page 4
3)This bill prohibits further unbundling of gas (and electric)
metering and billing, which would prevent utilities from
charging separately to investigate gas leaks, relight pilot
lights, check gas appliances, or check for carbon monoxide
leaks. According to the sponsors of this bill, this would
ensure that low- and middle-income customers are not forced to
choose between safety and saving money on a service call. In
September 1998 CPUC's Safety Branch determined that further
unbundling of natural gas metering and billing would create
safety risks for customers, the public, and utility employees.
4)This bill provides that customers who fail to choose a direct
access provider are guaranteed service by IOUs. For IOUs, the
natural gas commodity portion of the bundled rate shall be no
higher than the weighted average cost of gas, determined by
unspecified "appropriate market indices." If the cost to gas
customers falls below the average price, the difference
between the two accrues to gas customers and the gas
corporation, in a manner determined by CPUC. For IOU electric
customers, the PX price will serve as the benchmark. When the
IOU purchases energy and ancillary services from sources other
than the PX, as permitted by this bill, and beats the PX
benchmark price, the difference is shared between the electric
corporation and its customers.
5)On the electric side, residential and small commercial
customers are guaranteed the PX-wholesale price. However,
because the IOUs would be allowed to purchase energy outside
the PX, the possibility remains that the IOUs, (with 99%
retail market share) might manipulate the outcome of the PX
auction to the detriment of customers, and the PX-benchmark
price. A guarantee of the PX-wholesale price does not ensure
that the benchmark will always stay relatively low.
6)Advocates for the energy service providers, and some consumer
organizations, including The Utility Reform Network (TURN),
are concerned that the provisions of this bill may result in
the IOUs gaming the PX to their competitive advantage.
According to New Energy Ventures, this bill "codifies the
current competitive advantage of the utility default provider
and solidifies the market power held by utilities."
According to the Clean Power Campaign, this bill eliminate
CPUC authority to set the terms and conditions of default
service, freezing in place the current system which requires
AB 1421
Page 5
energy service providers (ESPs) beat a wholesale price with a
retail price. Thus, this bill may prevent green power
providers from emerging into a larger market."
7)The Coalition of California Utility Employees and the Southern
California Gas Workers Council indicate that this bill
guarantees residential and small commercial customers safe,
basic gas and electric service, and the benefits of gas and
electric restructuring. They also assert that bill ensures
that (default provider) customers "continue to get the
benefits of competitive energy prices from the PX by doing
nothing."
8)By statutorily defining the role of the default provider, this
bill limits the role of CPUC in setting policy and guidelines.
This bill would repeal the provisions of the Public Utilities
Code permitting CPUC to exercise its authority to investigate
a process for certification and regulation of the rates,
charges, terms, and conditions of default service. SB 477
(Peace, Chapter 275, Statutes of 1997) additionally provided
that if CPUC determines that a process for certification and
regulation of default service is in the public interest, the
Commission shall submit its findings and recommendations to
the Legislature for approval.
9)The bill also prohibits "state-mandated slamming," by
prohibiting CPUC from adopting proposals to force utility
customers to shop for gas and electricity, or to determine the
definition of default provider.
10)According to the sponsors, this bill "will ensure that all
residential and small business customers can be assured of
continued safe and reliable basic electrical and gas service,
including bundled revenue cycle services if they choose to
continue to receive electric and gas from their existing
investor-owned utility."
REGISTERED SUPPORT / OPPOSITION :
Support
Coalition of California Utility Employees (Co-sponsor)
Local Union 465, IBEW
IBEW, Local Union 659
IBEW, Local Union 1245
AB 1421
Page 6
Southern California Gas Workers Council (Co-sponsor)
Sempra Energy
Southern California Edison (SCE)
Utility Workers of America, Local No. 246
Opposition
Association of California Water Agencies
California Cleaners Association
Clean Power Campaign
Enron Corp.
IBEW, Local No. 47
New Energy Ventures (NEV)
Office of Ratepayer Advocates
The Utility Reform Network (TURN)
Analysis Prepared by : Joseph Lyons / U. & C. / (916) 319-2083