BILL ANALYSIS Ó Senate Appropriations Committee Fiscal Summary Senator Christine Kehoe, Chair SB 790 (Leno) Hearing Date: 05/26/2011 Amended: 05/11/2011 Consultant: Brendan McCarthy Policy Vote: EU&C 6-4 _________________________________________________________________ ____ BILL SUMMARY: SB 790 makes a variety of changes to the law governing community choice aggregation, whereby cities and counties may purchase wholesale electricity and deliver it to some or all of their residents without forming a municipal utility. _________________________________________________________________ ____ Fiscal Impact (in thousands) Major Provisions 2011-12 2012-13 2013-14 Fund Updating regulations and $325 $325 $325Special * providing oversight Costs to state agenciesUnknown Various due to higher electricity costs * Public Utilities Commission Utilities Reimbursement Account. _________________________________________________________________ ____ STAFF COMMENTS: SUSPENSE FILE. AS PROPOSED TO BE AMENDED. Under current law, electricity service in the state is generally provided by investor owned utilities or publicly owned utilities. In addition, electric service providers are allowed to sell electricity directly to non-residential customers, using the transmission and distribution system owned by the utilities. The amount of electricity provided by electric service providers is capped. In addition, current law allows cities and counties to elect to provide electricity to some or all of the residents in their jurisdiction, through a process known as community choice aggregation. There are procedural requirements on cities and counties that set up community choice aggregation plans, but there is no general cap on the amount of electricity service they may, in aggregate, provide. To date, only one successful SB 790 (Leno) Page 1 community choice aggregation plan has been set up. Under community choice aggregation, customers can opt out of joining the plan and continue to receive retail electricity service from their utility. SB 790 makes a variety of changes to the statutes governing community choice aggregation, with the intent to make it easier for local governments to set up community choice aggregation plans. The bill authorizes two specific local government agencies and any other local agency that is authorized to generate and deliver electricity to enter into community choice aggregation. The bill requires more sharing of information on customer electricity demand between incumbent utilities and local governments considering community choice aggregation. The bill limits the liability of local governments that participate in community choice aggregation through a joint powers authority. The bill specifies how charges imposed on consumers participating in community choice aggregation for public purpose programs shall be charged and how those charges can be spent. The bill requires the Public Utilities Commission to open a rulemaking to develop a code of conduct for investor owned utilities when a local government is considering community choice aggregation. The bill limits the Public Utilities Commission's ability to impose charges on customers electing to participate in community choice aggregation, to offset costs already incurred by their utility (such as for long-term electricity generation contracts purchased to meet projected customer demand or resource adequacy requirements). The Public Utilities Commission indicates that it will need three additional, ongoing positions to adopt rules and oversee the implementation of the new requirements, totaling about $325,000 per year. In addition to the direct cost to the state from the bill, there are potential indirect costs to state agencies as electricity ratepayers. Because the bill changes the rules for allocating costs between community choice aggregation customers and customers of the investor owned utilities, it is possible that there will be some cost shifting between ratepayers. To the extent that costs are shifted to investor owned utility SB 790 (Leno) Page 2 customers, the state will share in those costs. The extent of this impact is unknown. The proposed Committee amendments reflect policy amendments agreed to in the Senate Energy Utilities and Communications Committee that were inadvertently left out of the most recent amendments.