BILL ANALYSIS
AB 2638
Page 1
ASSEMBLY THIRD READING
AB 2638 (Calderon)
As Amended May 25, 2000
Majority vote
UTILITIES & COMMERCE 11-0
-----------------------------------------------------------------
|Ayes:|Wright, Pescetti, | | |
| |Calderon, Campbell, | | |
| |Cardenas, Maddox, | | |
| |Mazzoni, Papan, | | |
| |Villaraigosa, Vincent, | | |
| |Wesson | | |
-----------------------------------------------------------------
SUMMARY : States legislative intent to resolve specified issues
relating to electric distribution and transmission service
provided by irrigation districts, as specified. Specifically,
this bill :
1)Expresses legislative intent to adopt a statutory framework
during the 1999-2000 Regular Session that will provide the
California Public Utilities Commission (CPUC) with guidance
and the necessary authority to resolve the following issues
relating to electric distribution and transmission service
provided by irrigation districts within the service territory
of an investor-owned utility (IOU) or municipal utility:
a) Stranded distribution and transmission costs;
b) Cost-shifting, and shareholder versus ratepayer impacts;
c) Criteria for providing electric distribution and
transmission service, including, but not limited to, a
review of agreements between electric service providers;
d) The nature and application of "universal service"
requirements;
e) Condemnation powers available to irrigation districts;
f) California Environmental Quality Act issues (CEQA);
g) Local Agency Formation Commission issues; and,
h) California Independent System Operator system
AB 2638
Page 2
reliability issues.
2)Provides legislative findings and declarations concerning the
state's energy policy relating to electric distribution or
transmission service provided by irrigation districts within
the service territory of an investor-owned utility (IOU) or
municipal utility on or after May 1, 2000.
EXISTING LAW :
1)Provides that 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.
2)Provides that the transmission and distribution of electric
power remain essential services imbued with the public
interest that are provided over facilities owned and
maintained by the state's IOUs.
3)Authorizes irrigation districts to generate, transmit, and
distribute electricity, including sale to municipalities,
public utility districts, or persons.
4)Allows municipal utilities and irrigation districts to provide
electric service both inside and outside the boundaries of
their service territory.
FISCAL EFFECT : Unknown
COMMENTS : This bill is a legislative vehicle to address issues
relating to electric distribution and transmission service
provided by irrigation districts. The author has raised
concerns about the impact of "distribution competition" by
irrigation districts. Among the issues being discussed are:
stranded transmission and distribution costs, cost-shifting,
service territories and service territory agreements, universal
service requirements, eminent domain powers, grid reliability,
and CEQA issues.
There are more than 60 irrigation districts in the state, but
only four of them, Imperial Irrigation District, Merced
Irrigation District, Modesto Irrigation District, and the
Turlock Irrigation District, are presently providing electrical
service. The Laguna and Patterson irrigation districts plan to
AB 2638
Page 3
enter the electricity market in the near future, according to
the California Municipal Utilities Association. Irrigation
districts enjoy certain advantages that IOUs do not. They are
self-regulated, tax-exempt entities that are exempt from the
obligation to pay competition transition charges and provide
universal service. Some irrigation districts have gone outside
their service territory to "cherry-pick" large, industrial and
commercial customers served by existing IOUs and municipal
utilities. Cherry-picking shifts the remaining fixed costs of
maintaining the existing utility's system onto the less
desirable customers left behind.
Distributed Generation Proceeding at the CPUC. In December,
1998, CPUC initiated a rulemaking relating to the issues
surrounding distribution competition, distributed generation
(i.e., on-site electric generation, usually 20 megawatts or
less), and the role of the incumbent utility in the competitive
retail electricity market. In October, 1999, CPUC approved a
procedural roadmap (D.99-10-065) for further consideration of
these issues, and noted concerns regarding losses in both the
customer base and revenues resulting from direct wires
competition. CPUC opined that such reductions could have an
adverse impact on remaining customers of the IOUs because of
possible stranded electric distribution facilities. The
proceeding further noted that issues relating to the tax
advantages that public utilities have and whether limitations
should be placed on the ability to extend their customer base
should be decided by the Legislature. This bill is a
legislative vehicle to address those very issues.
Analysis Prepared by : Joseph Lyons / U. & C. / (916) 319-2083
FN: 0005258