BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
DEBRA BOWEN, CHAIRWOMAN
AB 1421 - Wright Hearing
Date: July 13, 1999 A
As Amended: July 8, 1999 FISCAL B
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DESCRIPTION
Existing law authorizes the California Public Utilities
Commission (CPUC) to investigate restructuring of natural
gas services, but requires it to submit its recommendations
to the Legislature, and prohibits it from enacting any gas
restructuring decisions prior to January 1, 2000 (SB 1602
(Peace), Chapter 401, Statutes of 1998).
Existing law authorizes the CPUC to investigate a process
for certification and regulation of default service, but
requires it to submit its recommendations to the
Legislature for approval (SB 477 (Peace), Chapter 275,
Statutes of 1997).
This bill establishes the incumbent utilities as the
mandatory provider of "default" bundled gas service and
prohibits the CPUC from unbundling distribution-related gas
and electric services, such as metering and billing, for
most customers.
Specifically, the bill :
Gas provisions
Requires that gas utilities provide "bundled basic gas
service" (including transmission, storage, distribution,
purchasing, revenue cycle services and after meter
services) to all "core" (residential and small commercial)
customers, unless the customer chooses to purchase gas from
a non-utility provider.
Requires that gas utilities be the exclusive provider of
"revenue cycle services" (meter installation and reading,
billing, collection and related customer services) for all
customers, except that non-core customers and core
customers served by an aggregator may receive billing and
collection services from a non-utility provider.
Requires that, where billing and collection services by
non-utility providers are permitted, the existing "avoided
cost" methodology for calculating credits provided by the
utility in lieu of providing these services shall be
maintained.
Requires "after meter services" (leak detection and other
safety-related services) to be included in the distribution
rate, and not charged separately.
Electric provisions
Makes a statement of legislative intent that the CPUC
should carefully evaluate the consequences of further
unbundling of distribution services and report back to the
Legislature before taking action.
Authorizes the CPUC to consider additional or modified
unbundling of distribution services, but requires the CPUC
to submit its recommendations to the Legislature for
approval.
Requires the CPUC to submit a report regarding the
development of retail competition to the Legislature by
September 1, 2000.
Requires electric utilities to conduct research to
determine the typical simultaneous peak load of
agricultural customers with multiple meters and report to
those customers and the CPUC by July 1, 2001. Requires the
CPUC to consider the research results in setting future
distribution rates for those customers.
KEY QUESTIONS
1.Should the CPUC retain authority to enact decisions
related to unbundling of distribution related electric
services, such as metering and billing, currently
provided by utilities, or should such decisions be made
only by the Legislature, as this bill proposes?
2.Should the existing "avoided cost" methodology for
calculating the credit for services not provided by the
utility be fixed in statute? Is this method fair to
incumbent providers, competitors and their customers?
3.Should the various other technical ratemaking issues
captured by this bill be fixed in statute and only be
altered in legislation?
4.Are there other matters before the CPUC for which
decisions should be preempted pending legislative
approval?
BACKGROUND
Both the natural gas and electricity commodity markets have
been opened to competition in California and consumers have
the choice to buy the commodity itself from the incumbent
utility provider or alternative providers. However, the
level of competition for the range of services related to
providing gas and electricity has been the subject of
ongoing debate and discussion, both in the Legislature and
at the CPUC. This bill proposes a final answer to
questions about restructuring of gas services and proposes
to allow the Legislature, and not the CPUC, to answer
questions about restructuring of electric services.
Currently, the CPUC is authorized to investigate
restructuring of gas services, but is required to submit
its recommendations to the Legislature, and prohibited from
enacting any gas restructuring decisions prior to January
1, 2000. The CPUC is also authorized to investigate a
process for certification and regulation of default
electric service, but is required to submit its
recommendations to the Legislature for approval.
This bill prohibits competition for gas-related revenue
cycle services, including meter installation and reading,
billing, collection and related customer services, by
requiring that utilities be the exclusive provider of these
services for all customers. Only non-core customers and
core customers served by an aggregator may receive billing
and collection services from a non-utility provider. For
these customers, the existing avoided cost methodology
(which favors the incumbent providers) for calculating
credits provided by the utility in lieu of providing these
services must be maintained.
The bill indefinitely prohibits the CPUC from enacting any
additional or modified unbundling of distribution services.
This protects the incumbent utilities from competition for
these services by preserving their role as provider of
revenue cycle services and preserving the avoided cost
methodology for calculating credits provided by the utility
for services they don't provide.
Under the bill, the CPUC would be allowed to consider
unbundling of distribution services, but enactment of any
decisions would be subject to approval by the Legislature.
The bill requires the CPUC to submit a report regarding the
development of retail competition to the Legislature by
September 1, 2000, but this report is not linked to the
prohibition on CPUC decisions and would not necessarily
result in a legislative decision on the matter.
In most respects, this bill's gas provisions are consistent
with the CPUC's July 8, 1999 natural gas strategy decision
(D.99-07-015) which outlines future options for the gas
market. In the decision, the CPUC recommends that the
utility be the provider of default service, meter
installation and reading, and after-meter services. The
exception is that the CPUC identifies open competition in
billing services for core customers as a promising option.
The CPUC will submit its final decision on this matter to
the Legislature for review, consistent with SB 1602.
The CPUC is also engaged in an assessment of distribution
competition that includes consideration of the electric
service issues addressed in this bill. A distribution
rulemaking (R.98-12-015) is underway to investigate various
issues related to distribution competition and distributed
generation. The assigned commissioner for this rulemaking,
Commissioner Duque, has proposed a further staff study on
distribution competition and the role of the utility in
competitive electricity markets and services. A decision
on these issues could lead to proposed statutory changes,
but is not expected until late 2000.
COMMENTS
1.Who better to decide? The future of distribution
competition and the future role of the utilities are
complex questions that the CPUC is currently
investigating. The premise of this bill is that final
decisions on these matters are best left to the
Legislature. However, the bill only applies that premise
to selected matters before the CPUC. If it agrees with
this premise, the Committee may wish to consider if there
are other matters before the CPUC for which decisions
should be preempted pending legislative approval. One
example is any departure from the existing requirements
that utilities buy and sell energy through the Power
Exchange. Another is establishment of new or different
service fees that utilities may charge non-utility
providers for customers who have switched.
2.Double-billing? By locking in the avoided cost
methodology, this bill arguably will perpetuate
"double-billing" for certain services, because the
avoided cost methodology results in customers being
billed by the utility for residual services that are no
longer actually provided by the utility. When a customer
switches to a non-utility provider of energy, the
provider is offered a credit by the utility for costs
associated with providing energy to that customer.
Currently, the utility is required to offer a credit
equal to the cost actually avoided by not serving that
customer. As a practical matter, for a utility with five
million customers to serve, the cost avoided by not
serving one customer is essentially zero. This serves as
a disincentive to competition, or at least raises the
threshold, because it takes a lot of individual customer
switches before the utility's avoided cost amounts to
much.
Competitors naturally prefer a methodology known as
"long-run marginal costs." In simplified terms, the cost
of providing services to all customers is divided by the
total number of customers to calculate the credit offered
for each customer. Competitors argue this method ensures
that customers to pay only for services actually used.
3.Where did that study come from ? The study of
simultaneous peak loads of agricultural customers that
this bill requires addresses an issue separate from the
rest of the bill that's been raised by the Agricultural
Energy Consumers Association. These customers feel that
utilities are not fairly metering their consumption,
which contributes to overly high distribution rates. The
intent of this study is to establish a more accurate load
profile for agricultural customers. The CPUC is required
to consider the results in setting future distribution
rates for those customers.
ASSEMBLY VOTES
Assembly U & C (11-0)
Assembly Appropriations (13-1)
Assembly Floor (50-17)
POSITIONS
Support:
Advocates for Consumer Equity, Inc.
Agricultural Energy Consumers Association
California Firefighters
Coalition of California Utility Employees
Engineers & Scientists of California, Local 20, IFPTE (San
Francisco)
Eric Lawson, Torrance
International Brotherhood of Electrical Workers, Local 100
(Fresno)
International Brotherhood of Electrical Workers, Local 11
(Pasadena)
International Brotherhood of Electrical Workers, Local
1245 (Walnut Creek)
International Brotherhood of Electrical Workers, Local
1710 (El Monte)
International Brotherhood of Electrical Workers, Local 18
(Los Angeles)
International Brotherhood of Electrical Workers, Local 180
(Vallejo)
International Brotherhood of Electrical Workers, Local
2295 (El Monte)
International Brotherhood of Electrical Workers, Local 234
(Castroville)
International Brotherhood of Electrical Workers, Local 302
(Pleasant Hill)
International Brotherhood of Electrical Workers, Local 332
(San Jose)
International Brotherhood of Electrical Workers, Local 340
(Sacramento, Yolo)
International Brotherhood of Electrical Workers, Local 40
(North Hollywood)
International Brotherhood of Electrical Workers, Local 413
(Santa Barbara)
International Brotherhood of Electrical Workers, Local 428
(Bakersfield)
International Brotherhood of Electrical Workers, Local 440
(Riverside)
International Brotherhood of Electrical Workers, Local 441
(Orange County)
International Brotherhood of Electrical Workers, Local 45
(Hollywood)
International Brotherhood of Electrical Workers, Local 465
(San Diego)
International Brotherhood of Electrical Workers, Local 477
(San Bernardino)
International Brotherhood of Electrical Workers, Local 551
(Santa Rosa)
International Brotherhood of Electrical Workers, Local 569
(San Diego)
International Brotherhood of Electrical Workers, Local 595
(Dublin)
International Brotherhood of Electrical Workers, Local 6
(San Francisco)
International Brotherhood of Electrical Workers, Local 617
(San Mateo)
International Brotherhood of Electrical Workers, Local 639
(San Luis Obispo)
International Brotherhood of Electrical Workers, Local 684
(Modesto)
International Brotherhood of Electrical Workers, Local 952
(Ventura)
International Chemical Workers Union Conference/United Food
and Commercial
Workers Union, Local 350 (Temple City)
International Chemical Workers Union Conference/United Food
and Commercial
Workers Union, Local 47 (West Covina)
International Chemical Workers Union Conference/United Food
and Commercial
Workers Union, Local 58 (La Verne)
International Chemical Workers Union Conference/United Food
and Commercial
Workers Union, Local 78 (Alta Loma)
SEMPRA Energy
Southern California Edison
Southern California Gas Workers Council
State Building and Construction Trades Council of
California
Utility Workers Union of America (National Union)
Utility Workers Union of America, Local 132 (Los Angeles)
Utility Workers Union of America, Local 170 (Bakersfield)
Utility Workers Union of America, Local 246 (Los Alamitos)
Utility Workers Union of America, Local 483 (Santa Barbara)
Utility Workers Union of America, Local 522 (Moreno Valley)
Oppose:
Association of Bay Area Governments
Association of California Water Agencies (ACWA)
Automated Power Exchange
California Electric Users Cooperative
California Public Utilities Commission
Clean Power Campaign
Consumers Union
Dixie School District
Enron Corporation
Environmental Defense Fund
Eureka City Schools
Folsom Cordova Unified School District
Fresno Unified School District
Greenmountain.Com
Independent Energy Producers Association
International Brotherhood of Electrical Workers, Local 47
New Energy Ventures
New Haven Unified School District
Office of Ratepayer Advocates (ORA)
Pacific Utility Installation, Inc.
Peralta Community College District
Polaris Group
Pollock Pines Elementary School District
Reliant Energy
San Francisco Unified School District
Santa Rosa Junior College
School Project for Utility Rate Reduction
Sierra Club
Tamalpais Union High School District
The Utility Reform Network (TURN)
Tulare Joint Union High School District
Utility Consumers' Action Network (UCAN)
Utility.Com
Western Power Trading Forum
Lawrence Lingbloom
AB 1421 Analysis
Hearing Date: July 13, 1999