BILL ANALYSIS
SB 1194
Page 1
Date of Hearing: June 19, 2000
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Roderick Wright, Chair
SB 1194 (Sher) - As Amended: June 15, 2000
SENATE VOTE : 39-0
SUBJECT : Electrical restructuring: public benefits programs.
SUMMARY : Reaffirms policy that each investor-owned utility
(IOU) shall continue to operate its electric distribution grid
in its service territory and have a reasonable opportunity to
recover its costs, extends the collection of a nonbypassable
system benefit charge to fund specified programs, requires
various reports relating to these programs, and requires further
legislative action before program moneys can be expended.
Specifically, this bill :
1)Restates the policy of the state that each IOU operate its
electric distribution grid in a safe, reliable, efficient, and
cost-effective manner and that electric corporations continue
to make prudent investments in their distribution grids.
2)Reaffirms California's doctrine, as reflected in regulatory
and judicial decisions, regarding IOUs' reasonable opportunity
to recover costs and investments associated with their
electric distribution grid and the reasonable opportunity to
attract capital for investment on reasonable terms.
3)Extends the collection of a nonbypassable system benefit
charge to support to fund three specific programs: 1) energy
efficiency and conservation activities; 2) public interest
research, development, and demonstration (RD&D); 3) in-state
operation and development of existing, new, and emerging
renewable energy resources.
4)Requires investor-owned (IOU) and municipal utilities to
collect specific dollar amounts for each of the programs
beginning on January 1, 2002, through January 1, 2012, and
requires the funds to be deposited in specified accounts until
appropriation by the Legislature.
5)Requires the Energy Resources Conservation and Development
Commission (CEC) to develop investment plans for renewable
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energy and RD&D. For renewable energy, CEC is required to
submit an initial investment plan by March 31, 2001,
addressing the application of moneys collected between January
1, 2002, and January 1, 2007. A subsequent investment plan is
due March 31, 2006, relating to the application of moneys
collected between January 1, 2007, and January 1, 2012. For
RD&D, CEC is required to submit an initial investment plan by
March 1, 2001, addressing the application of moneys collected
between January 1, 2002, and January 1, 2007. A subsequent
investment plan is due March 31, 2006, relating to the
application of moneys collected between January 1, 2007, and
January 1, 2012. No moneys may be expended in the years
covered by these plans without further legislative action.
6)Requires California Public Utilities Commission (CPUC) and CEC
to continue to administer energy efficiency programs, as
defined, following prescribed guidelines.
7)Requires the Governor, on or before January 1, 2004, to
appoint an independent review panel that, on or before January
1, 2005, would be required submit a report to the Legislature
and CEC evaluating the programs funded under this bill, and
including specific recommendations aimed at assisting the
Legislature in determining whether to change or eliminate the
collection of system benefits charge on or after January 1,
2007.
8)Requires CPUC to require IOUs to inform all customers who
request residential service connections via telephone of the
availability of the California Alternative Rates for Energy
(CARE) program and how they may qualify for and obtain these
services, and permits IOUs to recover the reasonable costs of
implementing these provisions. Additionally, requires IOUs to
accept applications for the CARE program according to
procedures specified by CPUC.
9)Makes related findings and declarations.
EXISTING LAW
1)States legislative findings that the transmission and
distribution of electric power are essential services imbued
with the public interest that are provided over facilities
owned and maintained by the state's IOUs.
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1)Declares 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.
1)Requires IOUs and municipal utilities to collect a public
goods surcharge from each electricity customer to fund four
specific programs: 1) energy efficiency and conservation
activities; 2) public interest RD&D; 3) in-state operation and
development of existing, new, and emerging renewable energy
sources; and 4) assistance to low-income users. Statutory
authority to collect funds for the renewables programs sunsets
on March 31, 2002.
1)Requires CEC to transfer funds collected for these programs to
specified funds.
1)Provides that funds expended for production incentives for new
in-state renewable electricity generation technology
facilities are limited to facilities that are operational
prior to January 1, 2002.
FISCAL EFFECT : Unknown.
COMMENTS :
1)Electric Distribution Grid. Historically, California's
electrical corporations were vertically integrated companies
that owned operated, managed and controlled electric
generation, transmission and distribution. In 1996,
California enacted landmark electric restructuring legislation
AB 1890 (Brulte), Chapter 854, Statutes of 1996, which created
a competitive generation market and transferred control of the
investor owned utilities transmission to the Independent
System Operator. With the passage of the restructuring bill
and past decisions of CPUC, there has been uncertainly created
regarding investments in new generation and transmission. In
an effort to ensure that similar uncertainly does not occur
with regard to the distribution system, this bill reaffirms
the core distribution functions that remain under the
authority of CPUC. This bill also reaffirms the historical
cost recovery doctrine governing investments in the electric
distribution grid to ensure that essential investments
continue to be made to the grid.
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2)Public Purpose Programs. Another key component of AB 1890
that this bill seeks to address is the collection of a
separate component to fund specified public purpose programs
such as 1) cost-effective energy efficiency and conservation
activities; 2) public interest research and development; and
3) renewable energy. Under existing law, the three investor
owned utilities, Southern California Edison Company (SCE),
Pacific Gas and Electric Company (PG&E) and San Diego Gas and
Electric Company (SDG&E) are required to collect specified
amounts to fund these programs through 2001. CPUC's authority
to collects funds to support the renewables program became
explicitly inoperative on March 31, 2002. This bill extends
the authority to collects funds to support these programs for
up to ten years in two five-year blocks. However, rather than
just simply extending the funding authorization, this bill
requires CEC to develop investment plans for the renewable and
RD&D programs covering each five year block. Further, the
Legislature must take action before any of the money can be
spent.
3)Renewable Program Improvements. Both opponents and proponents
of this bill acknowledge that it was the Legislature's intent
that funding for the renewable program terminate after five
years. The author and proponents of the bill recognize,
however, that California has not reached the levels of
renewable resources envisioned at that time. While minor
increases have been attained, the author and proponents of
this bill seek to optimize public investment and ensure that
the most cost-effective and efficient investments in renewable
resources are pursued. Thus, this bill directs CEC in
developing the investment plan to have as its long-term goal
the development of a fully competitive and self-sustaining
California renewable energy supply. Key components of the
investment plan include: increasing in-state renewable
resources, fostering resource diversity, obtaining the
greatest environmental benefits for California residents,
supporting emerging renewable energy technologies,
establishing specific numerical targets composed as impacted
by both emerging technologies and existing resources, which
will be evaluated on an annual basis.
4)In an effort to ensure adequate funding for new renewable
energy, this bill requires that the CEC's investment plan
include specific guidance regarding production incentives for
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those resources. Producers of new, repowered or refurbished
renewable resources would only be eligible to receive
production credits for the new or incremental power that is
produced, delivered and sold at market prices. Existing
renewable resources would be eligible to receive production
credits if the CEC finds that those sources are a
cost-effective source of both reliability and environmental
benefits as compared to other eligible sources. Earlier
provisions of this bill created some controversy amongst new
and existing sources of renewable energy. These revised
guidelines establish a level of parity amongst new, repowered,
refurbished and existing sources of renewable energy.
5)This bill further directs CEC to make recommendations on a
wide range of issues including but not limited to: rebates,
buydowns or equivalent incentives for emerging renewable
technologies, customer credits for renewable energy not under
contract, customer education, incentives for reducing fuel
costs at solid fuel biomass energy facilities, solar thermal
generating resources that enhance the environmental value or
reliability of the electricity system and require financial
assistance to remain viable. The CEC is further directed to
consider fuel cell technologies if it finds that such
technologies have similar or better air pollutant
characteristics and could contribute significantly to the
infrastructure development or meet the long-term objective of
a self-sustaining competitive supply of renewable energy.
6)RD&D Program Improvements. An independent review panel
analyzed the RD&D program and issued its report in March 2000
encompassing several recommendations. Key recommendations of
interest to the Legislature addressed program administration.
The report specifically queried whether the program can be
transformed within CEC into a new "organizational environment
that would provide the legal and organizational basis for a
superior public interest RD&D program" or whether it will be
necessary to administer the program in cooperation with an
external organization. This bill requires CEC to prepare an
investment plan on or before March 1, 2001, addressing those
issues as well as well as the application of the moneys
collected. In order to ensure that the monies collected in
this program are not being used to replaced funds that
industry would otherwise have expended on their own, this bill
requires CEC to include a criteria to identify projects that
are not adequately provided by competitive and regulated
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markets. CEC will also be required to develop an investment
plan on or before March 31, 2006 addressing the application of
moneys that may be collected between January 1, 2007 and
January 1, 2001. Money related to RD&D cannot be expended in
either five-year block without further action by the
Legislature.
7)Energy Efficiency Program Improvements . The energy efficiency
program is currently administered by CPUC. This bill declares
the Legislature's intent that CPUC continue to administer the
programs. As CPUC evaluates investments in energy efficiency,
this bill directs it to ensure local and regional interests,
multifamily dwellings and energy service industry capabilities
are incorporated into the program portfolio design. In past
years, the program design left many of these entities
incapable or unqualified to access the energy efficiency
moneys. This bill also modifies the program to restrict use
of energy efficiency funds to provide incentives for the
purchase of new energy-efficient refrigerators. Today, the
CEC offers rebates of $75 for the purchase of energy efficient
refrigerators. Recently appliance standards have increased so
that all refrigerators are significantly more efficient that
older models. Federal standards that will be implemented in
2001 will result in even slighter differences between all
refrigerators. For those reasons, elimination of the
incentives at this time makes sense so that those moneys can
be used for other aspects of the program.
8)Systems Benefit Charge. This bill establishes that the
systems benefit charges to fund the energy efficiency,
renewable energy, and research and development programs is
nonbypassble for every customer of an electrical corporation.
While this bill authorizes the commission to require each
electrical corporation through 2012, funds cannot be expended
until the Legislature acts after review of the investment
plans described above. The rate component authorized for
collection commencing January 1, 2002 is based on the rate
used on January 1, 2000. The amounts authorized for
collection will be adjusted at a rate equal to the lesser of
the annual growth in electric commodity sales or inflation.
These provisions serve to place limits on program funding
levels and customer surcharge rates which large users have
indicated provides them greater certainty regarding costs to
support these programs.
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9)Independent Review Panel. This bill requires the Governor to
appoint an independent review panel of members with expertise
on the energy service needs of large and small electricity
consumers to review the operation of the programs. The panel,
to be appointed by January 1, 2004, is required to prepare a
report on or before January 1, 2005 evaluating the public
purpose programs. The report will also assess whether the
programs are consistent with the statutory goals, if
established targets for renewable generation are likely to be
achieved, and changes that should be made to result in more
efficient use of public resources. The panel is also directed
to compare the CEC's programs with efforts in other states.
The report is aimed at assisting the Legislature to determine
whether to change or eliminate the collection of the system
benefits charge.
REGISTERED SUPPORT / OPPOSITION :
Support
American Association of Business Persons with Disabilities
American Lung Association
Appliance Recycling Centers of America
California Biomass Energy Alliance
California Farm Breau
California League of Conservation Voters
Center for Resource Solutions
California Municipal Utilities Association
California Retailers Association
California Small Business Association
California Solar Energy Industries Association
California Public Interest Research Group
CalEnergy
CEERT
Chamber of Commerce
City of Petaluma
City of Santa Monica
Clean Power Campaign
Coalition for Clean Air
Coalition of California Utility Employees
Consumers First
Earth Committee Office
Electric and Gas Industries Association
Eley Associates
Enron
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Enron Wind
Environmental Defense
Global Possibilities
Green Mountain
Independent Energy Producers
Intergy
Latino Issues Forum
Living Wise Resource Action Programs
MidAmerican Energy
Natural Resources Defense Council
Network Power Systems, Inc.
Next Generation
New Energy
Pacific Gas and Electric Company
Planning and Conservation League
Plug Power, Inc.
PositivEnergy
Sacramento Cool Communities Program
Save San Francisco Bay Association
Sunray Energy - Solar SEGS
Sempra Energy
Sierra Club
SMUD
Southern California Edison
The Regeneration Project: Episcopal Power and Light
TURN
Union of Concerned Scientists
Opposition
California League of Food Processors
California Wind Energy Association
Western Power Trading Fourm
Analysis Prepared by : Carolyn Veal-Hunter / U. & C. / (916)
319-2083