BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                      



           ------------------------------------------------------------ 
          |SENATE RULES COMMITTEE            |                   SB 790|
          |Office of Senate Floor Analyses   |                         |
          |1020 N Street, Suite 524          |                         |
          |(916) 651-1520         Fax: (916) |                         |
          |327-4478                          |                         |
           ------------------------------------------------------------ 
           
                                         
                              UNFINISHED BUSINESS


          Bill No:  SB 790
          Author:   Leno (D)
          Amended:  08/30/11
          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 León

           SENATE APPROPRIATIONS COMMITTEE  :  6-2, 05/26/11
          AYES:  Kehoe, Alquist, Lieu, Pavley, Price, Steinberg
          NOES:  Walters, Runner
          NO VOTE RECORDED:  Emmerson

           SENATE FLOOR  :  24-12, 06/02/11
          AYES:  Alquist, Berryhill, Blakeslee, Corbett, Correa, De 
            León, DeSaulnier, Evans, Gaines, Hancock, Harman, 
            Hernandez, Huff, Kehoe, Leno, Lieu, Lowenthal, Pavley, 
            Price, Rubio, Simitian, Steinberg, Wolk, Yee
          NOES:  Anderson, Calderon, Cannella, Dutton, Emmerson, 
            Fuller, La Malfa, Padilla, Strickland, Walters, Wright, 
            Wyland
          NO VOTE RECORDED:  Liu, Negrete McLeod, Runner, Vargas

           ASSEMBLY FLOOR  :  Not available


           SUBJECT  :    Electricity:  community choice aggregation

           SOURCE  :     Marin Energy Authority
                                                           CONTINUED





                                                                SB 790
                                                                Page 
          2

                      Sierra Club California
                      San Francisco Public Utilities Commission


           DIGEST  :    This bill revises and expands the definition of 
          Community Choice Aggregation (CCA), require the California 
          Public Utilities Commission (PUC) to initiate a Code of 
          Conduct rulemaking, and allow CCAs to receive Public 
          Purpose funds to administer energy efficiency programs.

           Assembly Amendments  (1) make clarifying and technical 
          changes to the Senate version of the bill, and (2) 
          determine that this act shall be known, and may be cited, 
          as the Charles McGlashan Community Choice Aggregation Act. 

           ANALYSIS  :    Existing law:

          1.Allows cities and counties to procure and sell 
            electricity within their community via a direct access 
            arrangement called for CCA. 

          2.Requires electric utilities to cooperate fully with CCAs 
            that investigate, pursue, or implement CCA programs. 

          This bill: 

          1.Memorializes a late-County Supervisor by naming this act. 


          2.Expands the entities defined as CCAs to include the Kings 
            River Conservation District, the Sonoma County Water 
            Agency, and any California public agency possessing 
            statutory authority to generate and deliver electricity 
            at retail within its designated jurisdiction. 

          3.Requires PUC to consider the impact if it finds that an 
            electrical corporation has violated the requirement to 
            cooperate fully with a community choice aggregator. 

          4.Establishes a time period by which the PUC must resolve 
            complaints against an electric utility which allege a 
            violation of statutes and rules governing electric 
            utilities that require the utility to cooperate with 
            CCAs. 

                                                           CONTINUED





                                                                SB 790
                                                                Page 
          3


          5.Affirms that the PUC shall not allow cost shifting of 
            nonbypassable charges from CCA customers to utility 
            ratepayers and specifies that a CCA is solely responsible 
            for all generation procurement activities on behalf of 
            its customers, except where other generation procurement 
            arrangements are expressly authorized by statute. 

          6.Modifies the PUC's current authority to establish 
            procurement requirements from its current requirement in 
            proportion to the costs recovered from ratepayers to 
            instead require fair and equitable distribution of costs. 


          7.Requires PUC, by March 2012 to establish a code of 
            conduct to ensure that an electrical corporation does not 
            market against a CCA except through an independent 
            marketing division. 

           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 

                                                           CONTINUED





                                                                SB 790
                                                                Page 
          4

          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 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 

                                                           CONTINUED





                                                                SB 790
                                                                Page 
          5

          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 
          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 

                                                           CONTINUED





                                                                SB 790
                                                                Page 
          6

          community choice aggregator to aid in its formation.  

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes   
          Local:  Yes

          According to the Assembly Appropriations Committee, the PUC 
          estimates additional workload demands of about $430,000.  
          These costs include two regulatory analysts, one 
          administrative law judge and one legal analyst, to 
          implement the bill, which will include reviewing and 
          certifying CCAs as administrators of energy efficiency and 
          conservation programs; implementing the new stricter rules 
          related to utility marketing with regard to a CCA 
          formation; conducting the complaint review process 
          regarding CCA formation, conducting proceedings to 
          implement the new rules for determining direct and indirect 
          benefits to CCA customers when the utilities are directed 
          to procure generation resources for system and for local 
          area reliability; and addressing issues that may arise if 
          CCAs are no longer local community load aggregators but 
          expand beyond the local communities into other 
          jurisdictions. (Public Utilities Reimbursement Account). 

           SUPPORT  :   (Verified  9/8/11)

          Marin Energy Authority (co-source) 
          Sierra Club California (co-source) 
          San Francisco Public Utilities Commission (co-source) 
          AARP
          California State Association of Counties
          City and County of San Francisco
          City of Arcata
          City of Berkeley
          City of El Cerrito
          City of Petaluma
          City of Richmond
          City of San Jose
          Climate Protection Campaign
          Division of Ratepayer Advocates, CPUC
          Environment California
          Graton Community Services District, County of Sonoma
          Kings River Conservation District
          League of California Cities
          Local Clean Energy Alliance of the Bay Area

                                                           CONTINUED





                                                                SB 790
                                                                Page 
          7

          Marin County Board of Supervisors
          Marin County Council of Mayors and Council Members
          San Francisco Local Agency Formation Commission
          Santa Clara County Board of Supervisors
          Sonoma County Conservation Action
          Sonoma County Regional Climate Protection Authority
          Sonoma County Regional Climate Protection Authority
          Sonoma County Water Agency
          Sustainable Mill Valley
          The Utility Reform Network
          Town of San Anselmo
          Town of Windsor

           OPPOSITION  :    (Verified  9/8/11)

          Associated Builders and Contractors of California
          San Diego Gas & Electric Company (unless amended)
          Sempra Energy (unless amended)
          Southern California Gas Company (unless amended)
          Southern California Edison (unless amended)

           ARGUMENTS IN SUPPORT  :    Kings River Conservation District 
          (KRCD) writes in support of this bill, "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:nl  9/8/11   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

                                ****  END  ****



                                                           CONTINUED





                                                                SB 790
                                                                Page 
          8














































                                                           CONTINUED