BILL ANALYSIS �
------------------------------------------------------------
|SENATE RULES COMMITTEE | SB 790|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
------------------------------------------------------------
THIRD READING
Bill No: SB 790
Author: Leno (D)
Amended: 5/11/11
Vote: 21
SENATE ENERGY, UTILITIES & COMM COMMITTEE : 6-4, 05/03/11
AYES: Berryhill, Corbett, DeSaulnier, Pavley, Rubio,
Simitian
NOES: Padilla, Fuller, Strickland, Wright
NO VOTE RECORDED: De Le�n
SENATE APPROPRIATIONS COMMITTEE : 6-2, 05/26/11
AYES: Kehoe, Alquist, Lieu, Pavley, Price, Steinberg
NOES: Walters, Runner
NO VOTE RECORDED: Emmerson
SUBJECT : Electricity: community choice aggregation
SOURCE : Marin Energy Authority
Sierra Club California
San Francisco Public Utilities Commission
DIGEST : This bill expands the government entities
eligible to form a community choice aggregation (CCA) to
include any public agency with power authorizing it to
generate or deliver electricity within its designated
jurisdiction.
ANALYSIS : Existing law:
CONTINUED
SB 790
Page
2
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
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.
This bill:
1. Authorizes the Kings River Conservation District, the
Sonoma County
Water Agency 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
SB 790
Page
3
purpose programs shall be charged and how those
charges can be spent.
2. Specifies that if the Public Utilities Commission (PUC)
authorizes or
orders and electrical corporation to obtain generation
resources, the
commission shall ensure that those resources meet a
system or local
reliability need in a manner that benefits all
customers of the electrical
corporation in proportion to the costs recovered from
those ratepayers.
3. Requires the PUC 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 customers, the state will share in
those costs. The extent of this impact is unknown.
SB 790
Page
4
Background
CCAs are governmental entities formed by cities and
counties to serve the energy requirements of their local
residents and businesses. The state Legislature has
expressed the state's policy to permit and promote CCAs by
enacting AB 117 (Migden, 2001) which authorized the
creation of CCAs, described essential CCA program elements,
required the state's IOUs to provide certain services, and
established methods to protect existing utility customers
from liabilities that they might otherwise incur when a
portion of the IOU's customers transfer their energy
services to a CCA.
Cities and counties have become increasingly involved in
implementing energy efficiency programs, advocating for
their communities in power plant and transmission line
siting cases, and developing distributed generation and
renewable resource energy supplies. The CCA program takes
these efforts one step further by enabling communities to
purchase power on behalf of the community.
Although adopted several years ago, to date only one region
has been successful in implementing a CCA. Several cities
joined together in Marin County and formed, under a joint
powers authority, "Marin Clean Energy." The CCA program
is new in California and there is little experience with
such a program anywhere. The CPUC has sought to anticipate
every contingency on the one hand and permit some
flexibility on the other with the expectation that the IOUs
and CCAs may be able to tailor operational arrangements
according to circumstances in ways that promote program
efficiency and fairness. The CPUC must adopt rules for the
IOU in order that it may provide adequate service to the
CCA and its customers while simultaneously protecting IOU
bundled customers and grid reliability. Nothing in the
statute directs the CPUC to regulate the CCA's program
except to the extent that its program elements may affect
utility operations and the rates and services to other
customers.
Deregulation
California's experiment with deregulation was launched in
SB 790
Page
5
1996 when the Legislature passed AB 1890 (Brulte, 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
residents.
Before the energy crisis in 2001, non-IOU providers (direct
access providers) had enrolled customers but then failed to
provide the power ordered. The customers returned to the
IOUs for service but the utilities did not have the
electric generation resources to serve those customers
because they had left IOU service. In response the
Legislature mandated that the IOUs maintain resource
adequacy for current customers and those customers that
could return to IOU service. This experience has guided
the CCA law and rules adopted by the CPUC which are the
subject of this bill.
IOU Responsibility Does Not End
A critical driver of CCA and direct access policies is that
any CCA or DA customer can terminate service on a moment's
notice and return to IOU service. Should they do so, or
should the DA or CCA provider fail to provide sufficient
power, the IOU is always and ultimately responsible to
provide that power.
Comments
According to the author's office, SB 790 strengthens
existing law by clarifying, amending and adding key
provisions that enable CCA to function as originally
intended, foster fair market competition, and allow
jurisdictions to pursue CCA without undue barriers and
excessive burdens.
Much has been learned from the experience of communities
that have unsuccessfully attempted community choice
aggregation in the last few years, and from Marin County,
the only county that has succeeded in launching a CCA in
SB 790
Page
6
the state of California. That experience has demonstrated
certain deficiencies in existing law that has rendered CCA
excessively difficult to implement and operate. The
California Public Utilities Commission recently found that
utility opposition, coupled with lack of clarity regarding
certain statutory provisions, have forced some CCA efforts
to be abandoned. This has had the damaging effect of
discouraging other communities from considering CCA, thus
impeding the environmental, consumer choice, and economic
benefits associated with community aggregation.
SB 790 seeks to level the playing field for local
governments seeking to establish a CCA program. A genesis
of this bill has been PG&E's atrocious behavior surrounding
the establishment of the Marin Energy Authority and its CCA
program Marin Clean Energy. PG&E representatives attending
local hearings commonly misrepresented how the CCA
mechanism works, commonly stated that taxpayers were liable
for the costs of failed CCA programs despite CPUC decision
08-04-056, and the utility was reprimanded for soliciting
opt-outs from outside the official process and for implying
that to receive public good charge funded energy efficient
benefits, customers must opt out of CCA.
Related Legislation
AB 976 (I. Hall) prohibits a CCA from procuring electricity
or energy services from any entity that provided any
analysis, advice, consultation, or other services to the
community choice aggregator to aid in its formation.
Status: Passed Assembly Appropriations Committee 17-0, May
18. 2011.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to Senate Appropriations Committee:
Fiscal Impact (in
thousands)
Major Provisions 2011-12
2012-13 2013-14 Fund
Updating regulations and $325 $325
SB 790
Page
7
$325 Special *
providing oversight
Costs to state agencies Unknown
Various
due to higher electricity costs
* Public Utilities Commission Utilities Reimbursement
Account.
The Public Utilities Commission indicates that it will need
three additional, ongoing positions to adopt rules and
oversee the implementation of the new requirements, totally
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 customers, the state will share in
those costs. The extent of this impact is unknown.
SUPPORT : (Verified 5/27/11)
Marin Energy Authority (co-source)
Sierra Club California (co-source)
San Francisco Public Utilities Commission (co-source)
AARP
California State Association of Counties
City of Petaluma
City of Richmond
Climate Protection Campaign
Kings River Conservation District
League of California Cities
Local Clean Energy Alliance of the Bay Area
Marin County Board of Supervisors
Marin County Council of Mayors and Council Members
San Francisco Local Agency Formation Commission
Sustainable Mill Valley
Sonoma County Water Agency
Sonoma County Conservation Action
Sonoma County Regional Climate Protection Authority
SB 790
Page
8
The Utility Reform Network
Town of San Anselmo
ARGUMENTS IN SUPPORT : Kings River Conservation District
(KRCD) writes in support of SB 790. In our effort to
implement a Community Choice Aggregation (CCA) in the San
Joaquin Valley, KRCD experienced numerous obstacles. SB
790 would promote competition by lifting as many of the
barriers that have prevented local agencies including KRCD
and its surrounding communities from implementing CCA in
their regions. SB 790 would also expand authorization to
implement CCA to limited number of special districts,
including KRCD, which are authorized and qualified to
generate and deliver electricity. SB 790 will help bring
to fruition the consumer choice, environmental and economic
benefits associated with and originally envisioned in
community aggregation programs.
RM:rm 5/31/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****