BILL ANALYSIS
AB 2638
Page 1
Without Reference to File
CONCURRENCE IN SENATE AMENDMENTS
AB 2638 (Cardoza)
As Amended August 31, 2000
Majority vote
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|ASSEMBLY: |73-3 |( June 6, 2000 |SENATE: |29-1 |( August 31, |
| | |) | | |2000 ) |
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Original Committee Reference: U. & C.
SUMMARY : Permits irrigation districts (IDs) to build and
operate electric facilities in the service territory of an
investor-owned utility (IOU) only upon approval of the
California Public Utilities Commission (CPUC) based on specified
findings; provides IOUs with discounting authority to compete
with Ids; and, provides a limited exemption from these
provisions for those IDs already providing electric distribution
service.
The Senate amendments :
1)Permit IDs to build and operate electric facilities in the
service territory of an IOU only upon CPUC's finding that it
is in the public interest and that the ID has met the
following conditions:
a) Provide universal service to all retail customers
requesting service within the area to be served at
reasonable, non-discriminatory rates comparable to those
provided by the existing retail electric service provider.
The area to be served must include a percentage of
residential and small customers, based on load, comparable
to the percentage of residential and small customers in the
district, based on load;
b) Will not adversely affect the reliability of electric
service;
c) Prevents or eliminates economic waste;
d) Implements public purpose and low income programs; and,
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e) Provides service at least 15% below the IOU's tariffed
rates, exclusive of the commodity charges and public
purpose program charges. The 15% threshold is meant to
address the tax benefits that IDs have as compared with
IOUs.
2)Provide that the California Environmental Quality Act (CEQA)
review of any new electrical facilities outside an ID's
boundaries shall be conducted by the board of supervisors of
the county in which the majority of the construction occurs.
3)Require an ID to offer service to all customers inside of its
service territory before being able to offer service to
customers outside of its service territory.
4)Give CPUC authority to adjudicate complaint cases brought
against an ID by an interested party for violations of all of
the above provisions.
5)Provide pricing flexibility for an IOU by permitting it to
discount its electric service to its "marginal cost" in order
to compete with an ID. The electrical corporation may recover
the lost revenues from remaining customers up to the amount
that the revenues would have been recoverable had the customer
been lost to the ID. Such lost revenues may not be recovered
from small ratepayers.
6)Provide an exemption from these provisions for IDs already
providing electric distribution service in their existing
service area and with a service area agreement for limited
expansion, as defined.
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)Allows IDs to provide electric service both inside and outside
the boundaries of their service territory.
3)Permits an ID to act as the lead agency under the review
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mandated by CEQA for new electric facility construction
projects it undertakes, even when the project is outside of
the district's boundaries.
4)Requires a county board of supervisors to reject the formation
of an ID if it is not for the primary purpose of providing
irrigation services.
AS PASSED BY THE ASSEMBLY , this bill stated legislative intent
to resolve specified issues relating to electric distribution
and transmission service provided by IDs.
FISCAL EFFECT : Unknown
COMMENTS : There are more than 60 IDs in the state, but only
four of them, Imperial ID, Merced ID, Modesto ID, and the
Turlock ID, are presently providing electrical service. The
Laguna and Patterson IDs plan to enter the electricity market in
the near future, according to the California Municipal Utilities
Association.
Distribution competition: Current law allows IDs to provide
electric service both inside and outside the boundaries of their
service territory. This bill permits IDs to build and operate
electric facilities in the service territory of an IOU if CPUC
deems it to be in the public interest and providing specified
conditions have been met.
IDs are self-regulated, tax-exempt entities that are exempt from
the obligation to pay competition transition charges and provide
universal service. Some IDs 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. This bill provides pricing flexibility for an IOU
by permitting it to discount its electric service to its
"marginal distribution cost" in order to compete with an ID.
The IOU may recover the lost revenue from remaining customers up
to the amount that the revenues would have been recoverable had
the customer been lost to the ID. Such lost revenues may not be
recovered from small ratepayers.
Exemption for existing IDs: This bill exempts those irrigation
districts already offering electric distribution service in
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their existing service area and with a service area agreement or
limited expansion as defined.
CEQA review: Under current law, an ID proposing to build and
install electrical service lines and equipment serves as its own
lead agency under CEQA. By contrast, an IOU wishing to install
the same equipment to provide the same services can't serve as
its own lead agency for CEQA, due to the fact it is not a public
entity. Instead, the CPUC serves as the lead agency for CEQA.
This bill designates CPUC as the lead agency for CEQA for ID
electric construction projects outside of the district's
boundaries.
Complaints: In cases where the ID provides service to an entity
outside of the district boundaries, this bill provides the CPUC
with jurisdiction to adjudicate complaints brought against the
ID by interested parties. Currently, all IOU customers can take
their complaints to CPUC for resolution and this bill attempts
to extend that same benefit to customers of IDs who are located
outside of the district's boundaries.
Related legislation: SB 1939 (Alarcon), recently approved by
both houses, requires local publicly-owned utilities, including
IDs, which have not implemented programs for low-income
electricity customers, to perform a needs assessment and
establish rate assistance and energy efficiency programs, and
prohibits IDs from providing electric transmission or
distribution service to retail customers in another utility's
service territory unless the district certifies by ordinance
that it provides public purpose programs, and has universal
service, consumer protection, and environmental policies
comparable to those of the incumbent utility provider.
Additionally, SB 1939 makes various changes to IDs voting
requirements.
Analysis Prepared by : Joseph Lyons / U. & C. / (916) 319-2083
FN: 0007356