BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 117| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 445-6614 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: AB 117 Author: Migden (D) Amended: 8/27/02 in Senate Vote: 21 SENATE ENERGY, U.&C. COMMITTEE : 6-0, 6/25/02 AYES: Bowen, Alarcon, Dunn, Murray, Sher, Vasconcellos SENATE APPROPRIATIONS COMMITTEE : 12-0, 8/21/02 AYES: Alpert, Battin, Bowen, Burton, Escutia, Johannessen, Johnson, Karnette, Murray, Perata, Poochigian, Speier ASSEMBLY FLOOR : 73-0, 1/28/02 - See last page for vote SUBJECT : Electrical restructuring: aggregation SOURCE : Author DIGEST : This bill, subject to certain conditions, allows cities and counties to aggregate their electric loads and provide service directly to their residents. ANALYSIS : Existing law authorizes retail competition within investor-owned utility (IOU) service areas (direct access) and authorizes marketers, public agencies, cities, counties, and special districts to offer electric service to customers aggregated on a voluntary basis, provided that each customer in their jurisdiction agrees to participate by a positive written declaration (opt-in community aggregation). CONTINUED AB 117 Page 2 Existing law (AB 1X (Keeley), Chapter 4, Statutes of 2001) requires the California Public Utilities Commission (CPUC) to suspend the right of retail customers of IOUs to acquire electric power service from non-IOU providers until the Department of Water Resources (DWR) no longer supplies power to IOU customers. Pursuant to AB 1X, the CPUC has suspended direct access as of September 20, 2001. This bill establishes a general exception to the direct access suspension for community aggregation undertaken by cities and counties serving their own residents. This bill changes the procedures governing community aggregation to, among other things, allow cities and counties to aggregate on an "opt-out" basis, rather than an "opt-in" basis. This bill contains provisions to ensure cost recovery from departing customers. Existing law requires IOUs to collect a non-bypassable surcharge in the distribution component of rates to fund public purpose programs, including energy efficiency and conservation activities. This bill requires the IOU to direct a proportional share of its energy efficiency activities to the community aggregator's territory. Existing law requires non-IOU electric service providers (ESPs) to register with the CPUC, but only if they serve residential and small commercial customers. This bill requires all ESPs to register with the CPUC. Background : In 1996, the Legislature passed AB 1890 (Brulte), Chapter 856, Statutes of 1996, to restructure the electric industry. One of the key features of electrical restructuring was the authorization of retail competition within IOU service areas. AB 1890 ended the service monopoly of utilities and authorized retail customers to purchase energy directly from suppliers. These transactions are known as "direct access." Community aggregation is a form of direct access where, for example, a city may act as a purchasing agent on behalf of its AB 117 Page 3 residents. Opt-in community aggregation, wherein the governing body of the community, such as the city council, chooses an electricity supplier for the entire community, was discussed but ultimately tabled during the AB 1890 debates. This bill resurrects that concept by permitting the governing body to select a provider of electricity which then becomes the default provider for everyone in the community. AB 1X, as part of the structure to authorize DWR to purchase electricity for utility customers, authorized the CPUC to prohibit additional direct access (including community aggregation). AB 1X permits the issuance of ratepayer-backed revenue bonds to finance DWR purchasing costs. To ensure the predictable revenue stream necessary for the issuance of bonds and prevent cost-shifting from direct access to bundled service customers, the CPUC was authorized to prevent additional migration of IOU customers by suspending direct access. Pursuant to AB 1X, the CPUC has suspended IOU customers' right to acquire direct access service after September 20, 2001. The public goods surcharge and accompanying programs were established initially by AB 1890 and extended by SB 1194 (Sher), Chapter 1050, Statutes of 2000 and AB 995 (Wright), Chapter 1051, Statutes of 2000. The public goods surcharge is a per-kilowatt-hour fee paid by all electric customers to fund four public goods categories: (1) energy efficiency; (2) renewable energy sources; (3) research and development of alternative energy supplies; and (4) assistance to low-income customers. The law requires the IOUs to spend specific amounts of money or percentages of money from the baseline year 1994, in each of the first three categories, while the fourth, the low-income assistance program, is a needs-based program. Because the public goods surcharge is collected in the distribution component of rates and is non-bypassable, customers purchasing electricity from a community aggregator would continue to pay the public goods surcharge to their IOU. AB 117 Page 4 FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: Yes SUPPORT : (Verified 8/28/02) California Public Interest Research Group California State Association of Counties City of Berkeley City of Corona Joint Powers Authority City of Culver City CR & R, Incorporated East Bay Municipal Utility District League of California Cities Pacific Area Communications Pacific Gas and Electric Company (if amended) An individual ASSEMBLY FLOOR : AYES: Aanestad, Alquist, Aroner, Ashburn, Bates, Bogh, Briggs, Calderon, John Campbell, Canciamilla, Cardenas, Cardoza, Cedillo, Chan, Chavez, Chu, Cogdill, Cohn, Correa, Cox, Daucher, Diaz, Dickerson, Dutra, Firebaugh, Florez, Frommer, Goldberg, Harman, Havice, Hollingsworth, Horton, Jackson, Keeley, Kehoe, Kelley, Koretz, Leonard, Leslie, Longville, Lowenthal, Maldonado, Matthews, Migden, Mountjoy, Nakano, Nation, Negrete McLeod, Oropeza, Robert Pacheco, Rod Pacheco, Papan, Pavley, Pescetti, Reyes, Richman, Runner, Shelley, Simitian, Steinberg, Strickland, Strom-Martin, Thomson, Vargas, Washington, Wayne, Wesson, Wiggins, Wright, Wyland, Wyman, Zettel, Hertzberg NC:jk 8/28/02 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END ****