BILL ANALYSIS
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UNFINISHED BUSINESS
Bill No: SB 1388
Author: Peace (D)
Amended: 6/20/00
Vote: 21
SENATE ENERGY, U.&C. COMMITTEE : 10-0, 5/9/00
AYES: Bowen, Alarcon, Brulte, Hughes, Kelley, Mountjoy,
Murray, Peace, Solis, Vasconcellos
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SENATE FLOOR : 39-0, 5/30/00
AYES: Alarcon, Alpert, Bowen, Brulte, Burton, Chesbro,
Costa, Dunn, Escutia, Figueroa, Hayden, Haynes, Hughes,
Johannessen, Johnson, Johnston, Karnette, Kelley, Knight,
Leslie, Lewis, McPherson, Monteith, Morrow, Mountjoy,
Murray, O'Connell, Ortiz, Peace, Perata, Poochigian,
Rainey, Schiff, Sher, Solis, Soto, Speier, Vasconcellos,
Wright
ASSEMBLY FLOOR : Not available
SUBJECT : Electrical power facilities
SOURCE : Author
DIGEST : This bill has three parts: Part 1 deals with
power plant licensing improvements recommended by the
California Energy Commission, Part 2 deals with increasing
transmission planning costs from customers, and Part 3
establishes pilot programs to test small customer
CONTINUED
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responsiveness to energy price and usage information.
Assembly Amendments add language to Part 3 of the bill to
authorize the California Energy Commission to periodically
review and adjust depreciation schedules and rates, as
specified.
ANALYSIS : Current law provides the California Energy
Commission (CEC) with responsibility for licensing large
power plants. Certain state and local agencies have
advisory responsibilities to the CEC under particular
circumstances.
This bill requires those state and local agencies to
provide recommendations within 180 days of the filing of an
application to license a power plant.
Current law requires the CEC to prepare a geothermal
resource sufficiency study whenever it considers a proposal
to site a geothermal electric generation facility.
This bill deletes that requirement.
Current law provides the Federal Energy Regulatory
Commission (FERC) with authority to set electric
transmission rates.
This bill requires the California Public Utilities
Commission (PUC), in conjunction with the Electricity
Oversight Board, to facilitate FERC approval of reasonable
transmission facility planning and engineering
expenditures, even if those expenditures do not result in
operational transmission facilities. This bill further
requires the PUC to approve all reasonable transmission
planning, design, and engineering expenditures irrespective
of whether those expenditures result in an operational
transmission line.
Current law provides for competition in the generation and
sale of electricity.
This bill requires the PUC to conduct specified pilot
projects of certain customers to gauge small consumer
responsiveness to energy usage and price information.
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Background
This bill has three distinct parts: Part 1 deals with
power plant licensing improvements recommended by the CEC,
Part 2 deals with recovering transmission planning costs
from customers, and Part 3 establishes pilot programs to
test small customer responsiveness to energy price and
usage information.
Part 1 - CEC Report Recommendations
In March 2000, the CEC issued a report recommending a
number of improvements to its power plant siting process.
That report, which was reviewed by this Committee during an
April 11, 2000, informational hearing, suggests a number of
statutory, regulatory, and management changes.
This bill implements two of the CEC's recommended statutory
changes, the first of which deletes the requirement that
the CEC perform a steam-field adequacy analysis for
geothermal projects. Geothermal projects are electrical
generation projects which utilize underground heat and
steam as the energy source (e.g. the Geysers power plants).
A steam-field adequacy analysis investigates whether there
is enough underground heat and steam to power the plant
through its projected life. The CEC recommended deleting
this requirement because in a competitive generation
market, it believes the responsibility of ensuring an
adequate fuel supply, in this case heat and water, should
fall to the power plant developer and not rest with the
CEC.
The second of the recommended changes implemented by this
bill is a requirement that state and local governmental
entities having jurisdiction or an interest in a proposed
power plant make their recommendations within 180 days of
the filing of the project. The CEC noted that it has a
statutory one year requirement to process power plant
siting applications and its ability to meet that deadline
is jeopardized in cases where state and local agencies
provide their comments late in the process. While the CEC
has entered into Memoranda of Understanding (MOU) with the
California Air Resources Board, the State Department of
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Toxic Substance Control, the California Independent System
Operator, and a number of other agencies to establish a 180
day target for input, this bill applies a statutory
requirement of 180 days to those agencies and to other
entities not covered by such MOUs.
Part 2 - Transmission Lines
Transmission lines are an essential electric infrastructure
and those lines owned by investor-owned electric utilities
(IOU), such as the Pacific Gas and Electric Company (PG&E)
and Southern California Edison (SCE), are rate regulated.
The IOUs plan and engineer new transmission lines to serve
their service territories, but they can't build those lines
without approval from the Independent System Operator
(ISO), the statutorily-created entity controlling the
transmission system. The ISO evaluates all transmission
facility proposals and considers alternate ways of meeting
customer demand, such as building new power plants or
alternative transmission facilities, then selects the least
costly option.
IOUs are concerned that if their transmission facilities
aren't permitted to be built, they aren't assured that
their planning and engineering costs for transmission
facilities will be recoverable from customers. The failure
to be able to recover those costs could discourage
utilities from doing necessary planning, thereby impairing
the future ability of the transmission system to operate
reliably and efficiently.
This bill proposes to resolve that concern by stating that
the Legislature finds that reasonable expenditures for
planning and engineering of transmission facilities is in
the public interest and requires the PUC and the EOB to
jointly facilitate approval of those costs in the
transmission rates approved by FERC.
Part 3 - Residential and Small Commercial Customer Pilot
Projects
Much of the effort in restructuring the electric industry
was focused on creating a competitive market for electric
generation - in other words, increasing the supply of
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electricity - but little work was done on addressing the
issue of consumer demand, largely because the price for
electricity was frozen.
As electric rates are unfrozen, which is the case in the
San Diego Gas & Electric Company (SDG&E) territory,
customers will see variations in their electric bill based
not just on changes in usage but also on changes in the
price of electricity. While rates were frozen, consumers
had little incentive to pay attention to when they were
using electricity because the price for electricity was
always the same. As rates become unfrozen, consumers who
want to keep their bills low have an incentive to use their
electricity at the least expensive times of the day - if
they can easily figure out the price of electricity at a
given time of day and if they are charged a price which
varies by time of day.
The author believes this consumer reaction, known as
"demand responsiveness," is an important component of
electric system reliability and of a well-functioning
market. Encouraging demand responsiveness is particularly
critical at a time when California is facing a squeeze in
resources and the prospect of high energy prices under
adverse climatic conditions.
This bill establishes a pilot project to test demand
responsiveness associated with three different ways of
providing consumers with price and usage information. The
first provides real-time (minute-to-minute) usage
information; the second provides for peak, mid-peak, and
off-peak usage and rate information coupled with a utility
rate schedule that differentially prices electricity at
peak, mid-peak and off-peak rates, while the third provides
for hourly usage and rate information coupled with a
utility rate schedule that allows prices to vary by the
hour. The author believes obtaining a better understanding
of the extent to which various levels and types of usage
and price information will trigger demand responsiveness is
essential in understanding the cost effectiveness of the
types of investments and opportunities that should be
afforded customers.
The bill requires all utilities that no longer have frozen
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rates to participate in the three pilots, which means only
SDG&E will be immediately affected by the bill. However,
once PG&E and SCE are out from the rate freeze (which
should happen sometime in 2001), then some of their
customers will also have to participate in the three pilot
programs.
The total pilot program participation is limited to three
percent of the residential and small commercial customers
of each utility and is further limited to the minimum
number of customers needed to develop a statistically valid
sample for the two pilots with time-of-use rates. The
design and implementation of the pilot study shall include
interested energy service providers and equipment
manufacturers.
Each of the three pilot programs is required to use a
standard usage information output interface, which the
bills defines, and the PUC will select the interface that
conforms with nationally recognized standards. This bill
requires that the interface be secure, safe, and the most
cost-effective available. The purpose of a standard usage
information output interface is to establish an industry
standard, which in turn will drive the creation of
compatible devices which use that consumer information.
The cost of the pilot programs is recoverable from
customers.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
Negligible costs and savings to the CEC and the PUC to
implement the changes made by the bill (various special
accounts).
SUPPORT : (Verified 8/21/00)
Sempra Energy
Edison International
Pacific Gas and Electric Company
NC:cm 8/21/00 Senate Floor Analyses
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SUPPORT/OPPOSITION: SEE ABOVE
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