BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
DEBRA BOWEN, CHAIRWOMAN
AB 1421 - Wright
Hearing Date: August 25, 1999 A
As Amended: August 18, 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).
This bill prevents further restructuring of gas services by
designating the incumbent utilities as the mandatory
provider of "default" bundled gas service and prohibiting
the CPUC from unbundling distribution-related gas services,
such as metering and billing, for most customers.
Specifically, the bill :
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 must be
maintained.
Requires "after meter services" (leak detection and other
safety-related services) to be included in the distribution
rate and not billed separately.
The bill additionally 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. It
also requires the CPUC to consider the research results in
setting future distribution rates for those customers.
KEY QUESTIONS
1.Should the current moratorium on, and investigation of,
natural gas restructuring be replaced by a statutory
prohibition of further restructuring?
2.Should specific ratemaking issues, such as the
methodology for calculating the credit for services not
provided by the utility, be fixed in statute?
3.Should the Legislature require electric utilities to
conduct what is essentially a private research project
intended to benefit their agricultural customers?
BACKGROUND
The natural gas commodity market has been opened to
competition for several years in California and customers
have the choice to buy the commodity itself from the
incumbent utility provider or alternative providers.
However, the appropriate level of competition for the range
of services related to providing the gas has been the
subject of ongoing debate and discussion, both in the
Legislature and at the CPUC. This bill proposes a final
answer to any lingering questions about further
restructuring of gas services.
Pursuant to SB 1602, 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.
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.
With one exception, this bill's provisions are generally
consistent with the CPUC's July 8, 1999 natural gas
strategy decision (D.99-07-015) which outlines future
options for the gas restructuring. 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 to this bill's consistency with the CPUC
decision is on the issue of billing. The CPUC identifies
open competition in billing services for core customers as
a promising option, while this bill prohibits competition
for billing services for most customers.
The CPUC intends to submit its final recommendations on
these matters to the Legislature for review later this
year. Because this bill repeals SB 1602 and definitively
concludes that gas services should not be further
unbundled, it renders the moratorium, the CPUC
investigation and future review of the findings by the
Legislature moot.
COMMENTS
1.More-atorium? The CPUC will not formally issue its gas
restructuring recommendations to the Legislature until
after the end of this year's session and, since the
current moratorium expires on January 1, 2000, the
Legislature will not have an opportunity to review the
recommendations before the moratorium expires.
If the Committee is interested in providing for
legislative review of the CPUC recommendations, while
still preventing CPUC action until the Legislature has
reviewed and acted on the recommendations, it could
extend the moratorium for an additional year. This would
allow the CPUC to finish its work, and the Legislature to
review it prior to either the CPUC or the Legislature
enacting any final policies.
2.Double-billing? By locking in the avoided cost
methodology, this bill arguably will result in
"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 electric
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. This
bill says that if a similar credit is offered for gas
customers, the utility would be required to offer the
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 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 utilities
are not fairly metering their consumption, which
contributes to 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.
The Committee approved a related bill, SB 282 (Kelley),
on April 13. SB 282 requires the California Energy
Commission to report on various activities related to
reducing energy costs and improving competitive
opportunities for California agriculture and other rural
energy customers. SB 282 is on the Senate Floor,
awaiting concurrence in Assembly amendments.
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 Farm Bureau Federation
California Firefighters
California Labor Federation, AFL-CIO
California Teamsters Public Affairs Council
Coalition of California Utility Employees
Consumer Federation of California
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)
Los Angeles County Federation of Labor, AFL-CIO
Pacific Gas and Electric Company
Resources for Independent Living, Inc.
San Diego-Imperial Counties Labor Council, AFL-CIO
San Mateo County Central Labor Council
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 465 (San Diego)
Utility Workers Union of America, Local 483 (Santa Barbara)
Utility Workers Union of America, Local 522 (Moreno Valley)
Utility Workers Union of America, Local 659 (Central Point,
Oregon)
Oppose:
Association of Bay Area Governments
Association of California Water Agencies (ACWA)
Automated Power Exchange
California Public Utilities Commission (CPUC)
Clean Power Campaign
College of Marin
Consumers Union
Dixie School District, San Rafael
Enron Corporation
Environmental Defense Fund
Eureka City Schools
Folsom Cordova Unified School District
Fresno Unified School District
Greenmountain Energy Resources
Independent Energy Producers Association
International Brotherhood of Electrical Workers, Local 47
Marin County Office of Education
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: August 25, 1999