BILL ANALYSIS
SB 1388
Page 1
Date of Hearing: July 6, 2000
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Roderick Wright, Chair
SB 1388 (Peace) - As Amended: June 20, 2000
SENATE VOTE : 39-0
SUBJECT : Electrical power facilities.
SUMMARY : Enacts changes to electrical power plant siting
process and makes several changes to continued implementation of
electrical restructuring in California. Specifically, this
bill :
1)Requires local agencies that provide recommendations on power
plant sitting's to the California Energy Commission (CEC) to
do so within 180 days.
2)Eliminates the requirement that CEC prepare a geothermal
sufficiency study whenever it considers a proposal to site
geothermal electrical generation facilities.
3)Requires California Public Utilities Commission (CPUC) in
conjunction with Electricity Oversight Board to facilitate
approval of reasonable transmission facility planning and
engineering procedures, even if those expenditures do not
result in operational transmission facilities.
4)Requires CPUC to conduct specified small pilot projects to
gauge residential and small commercial consumer's
responsiveness to energy usage and price information.
EXISTING LAW
1)Provides CEC with responsibility for licensing power plants.
Certain state and local agencies have advisory
responsibilities to CEC under particular circumstances.
2)Requires CEC to provide a geothermal resource sufficiency
study whenever it considers a proposal to site a geothermal
electric generation facility.
3)Provides the Federal Energy Regulatory Commission (FERC) with
authority to set electric transmission rates.
SB 1388
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4)Provides for competition in the generation and sale of
electricity.
FISCAL EFFECT : Unknown.
COMMENTS :
1)This bill has three distinct sections. The first section
reflects recommendations of CEC on ways to improve the
efficiency of its power plant siting process. The second
section deals with recovery of transmission planning costs.
The final section established pilot projects to test small
customer responsiveness to energy price and usage information.
1)Power Plant Siting. SB 110 (Peace), Chapter 581, Statutes of
1999, directed CEC to review its siting process and make
recommendations for improvement. In March 2000, CEC issued a
report recommending a number of improvements to its power
plant siting process. This bill seeks to implement two of
those recommendations. First, this bill deletes the
requirement that CEC perform a field study adequacy analysis
for geothermal projects which is used to evaluate whether
there is sufficient underground heat and steam to power the
plant through its projected life cycle. Because we now
operate in a competitive generation market, CEC believes it is
now the responsibility of the developer to ensure an adequate
fuel supply. Second, this bill requires state and local
governmental entities that have jurisdiction or an interest in
a proposed power plant to make their recommendations within
180 days of the filing of the project. CEC noted that it is
statutorily required to process power plant applications
within one year and its ability to meet that deadlines is
jeopardized in cases where state and local agencies provide
their comments late in the process.
1)Transmission Planning and Abandoned Plant Cost Recovery. The
state's transmission system was originally constructed to
serve the needs of integrated utilities that owned generation
at various locations throughout the state. AB 1890 (Brulte),
Chapter 254, Statutes of 1996, the electrical restructuring
legislation established generation as a competitive system and
expanded the function of the transmission system to serve as
an open access carrier system which privately owned generators
use to provide power. Electric restructuring has also shifted
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jurisdiction of transmission ratemaking to FERC. Although
ordinary transmission planning costs are fully recoverable
under current FERC policy, FERC policy has a policy of
permitting utilities to recover only 50% of "abandoned plant"
costs (i.e. costs for a plant which might not be built).
Investor owned utilities note that when their planning and
engineering costs are not recoverable they are discouraged
from doing the necessary planning. This bill proposes to
resolve that concern by directing CPUC and the Electricity
Oversight Board to jointly facilitate approval of those
"abandoned plant" costs in the transmission rates approved by
FERC in accordance with California policy that allows the
recovery of reasonable to plan, design and engineer
transmission facilities.
1)Metering Pilot Projects. The author has proposed a meter
replacement and retrofit pilot project to provide real time
information to facilitate electricity demand responsiveness of
residential and small commercial customers. A key feature of
the electric restructuring legislation is the fact that
electricity provided t end use customers is purchased in the
wholesale electricity market. Today customers are insulated
from variations in the market by price caps which are $750 per
megawatt hour and the rate freeze prescribed by AB 1890. In
San Diego Gas and Electric Territory, however, where the rate
freeze has ended, customers will see variations in their
electric bill based not just on changes in usage, but also on
changes in the wholesale price of electricity. Economists are
that demand responsiveness, the ability to decide whether or
not to engage in a transaction. Assumes that both buyer and
seller are well informed. For the seller that means it has
the right not to sell at a price that is not in its best
interests. For the buyer, that means the right not to buy in
the event the sellers' offering price is greater than the
value to the buyer. Increased demand responsiveness such as
shifting of use to off-peak periods could also reduce peak
loads and contribute to overall system reliability.
1)The author asserts that in California, electricity buyers,
especially residential and small commercial customers do not
have the metering technology or the incentive to reduce peak
demand. CPUC recognizes the benefits of improving price
responsiveness however, its efforts have been focused on large
customers. Recent proceedings currently pending before CPUC
are beginning to address price responsiveness for small
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consumers. This bill requires CPUC to conduct a pilot study
of up to 3% of the residential and small commercial customers
of each electrical corporation where the rate freeze has
ended, to determine the value of information, rate design and
metering innovations for helping those customers better manage
their electricity use. CPUC is required to issue its initial
report not later than March 31, 2002 and within 15 months
after each electrical corporation ends the rate freeze. Thus,
San Diego Gas & Electric will be the first to conduct its
study and Pacific Gas & Electric and Southern California
Edison will follow as soon as they end the rate freeze.
1)This bill specifies several questions that are to be answered
by the pilot studies including: the effect on customers; the
effect on providers in offering energy management services;
the difference in consumption behavior based on the amount of
information available; the differences in cost savings; and
issues that would need to be addressed prior to system wide
deployment of such technology. This bill takes a step toward
answering important questions regarding whether small
commercial and residential customers want to and will be able
to respond to varying electric commodity prices and to what
extent.
REGISTERED SUPPORT / OPPOSITION :
Support
Sempra Energy
Southern California Edison
Opposition
None on file.
Analysis Prepared by : Carolyn Veal-Hunter / U. & C. / (916)
319-2083