BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 2638|
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THIRD READING
Bill No: AB 2638
Author: Cardoza (D)
Amended: 8/31/00 in Senate
Vote: 21
SENATE ENERGY, U.&C. COMMITTEE : 6-0, 8/21/00
AYES: Bowen, Alarcon, Murray, Peace, Solis, Vasconcellos
SENATE FLOOR : 29-1, 8/31/00
AYES: Alarcon, Alpert, Bowen, Brulte, Burton, Chesbro,
Costa, Dunn, Escutia, Figueroa, Hayden, Haynes, Hughes,
Johnston, Karnette, Kelley, Lewis, McPherson, Monteith,
Mountjoy, O'Connell, Peace, Perata, Poochigian, Rainey,
Schiff, Sher, Solis, Soto
NOES: Johannessen
ASSEMBLY FLOOR : Not relevant
SUBJECT : Public utilities: electrical power:
irrigation districts
SOURCE : Author
DIGEST : This bill prohibits an irrigation district,
without the agreement of an investor-owned utility (IOU)
from exercising the right of eminent domain to take
property owned by the IOU if the irrigation district
intends to put the property to the same use. The bill
permits irrigation districts to build and operate electric
facilities in the service territory of the IOU only upon
approval of the Public Utilities Commission, as specified,
CONTINUED
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or upon a service area agreement between the entities.
ANALYSIS : 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
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.
This bill permits irrigation districts (IDs) to build and
operate electric facilities in the service territory of an
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.
This bill:
1. Permits 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,
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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, 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.
1. Provides 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.
2. Requires 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.
3. Gives CPUC authority to adjudicate complaint cases
brought against an ID by an interested party for
violations of all of the above provisions.
4. Provides 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.
5. Provides 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.
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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 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
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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), enrolled, 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.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
NC:sl 9/27/00 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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