BILL ANALYSIS Ó
AB 687
Page 1
Date of Hearing: April 8, 2013
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Steven Bradford, Chair
AB 687 (Hernandez) - As Introduced: February 21, 2013
SUBJECT : Electricity
SUMMARY : Permits the California Public Utilities Commission
(PUC) to give priority direct electrical power purchase rights
to public entities cleaning up polluted Superfund groundwater.
Specifically, this bill :
1)Gives priority direct power purchase rights to public entities
currently remediating groundwater that local, state and
federal agencies have identified as contaminated and the
United States Environmental Protection Agency (US EPA) has
placed on its Superfund list.
EXISTING LAW :
1)States the Public Utilities Act requires the PUC, pursuant to
electrical restructuring, to authorize and facilitate direct
transactions between electricity suppliers and retail end-use
customers.
2)Suspends the right of retail end-use customers other than
community choice aggregators to acquire service from certain
electricity suppliers, after a period of time to be determined
by the PUC, until the Department of Water Resources (DWR) no
longer supplies electricity under that law.
3)Requires the PUC to allow individual retail nonresidential
end-use customers to acquire electric service from other
providers in each electrical corporation's distribution
service territory up to a specified maximum allowable total
kilowatthours annual limit.
4)Requires the PUC to undertake specified actions when
authorizing additional direct transactions for retail
nonresidential end-use customers.
FISCAL EFFECT : Unknown.
COMMENTS : According to the author, this bill will ensure that
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entities cleaning up environmental pollution can purchase power
at a significant cost savings to operate the large pump and
treat systems in use in these major contaminated groundwater
cleanup projects. Treatment plans operate around the clock 365
days a year with especially high costs incurred during the peak
periods of power demand during the summer. Qualifying projects
will be able to use the savings they accrue with the purchase of
direct access power to defray capital and annual operating costs
of cleanup for future site cleanup, to the benefit of project
funding entities and to water service ratepayers. In the case of
a single operating unit in the San Gabriel Superfund project
alone, it is estimated that direct access will provide the
facility operator a 7-10% savings on its annual power budget of
over $2 million.
1)Background : Direct Access, first instituted in California in
1996, allows eligible
customers to purchase electricity from a competitive provider,
an Electric Service Provider (ESP), instead of from a regulated
electric utility. The utility delivers the electricity that the
customer purchases from the ESP to the customer over its
distribution system. Thus, in 2001, in order to ensure the
predictable revenue stream necessary for long-term contracts
procured by DWR during the state energy crisis, and to prevent
additional migration away from the three largest regulated
utilities, the Legislature directed the PUC to suspend direct
access power purchases. Moreover, according to PUC rules,
certain customers remained eligible to secure direct access
power after the suspension date and to switch between bundled
service and direct access service.
Pursuant to SB 695 (Kehoe, Chapter 337, Statutes of 2009) the
direct access market opened to individual retail nonresidential
customers up to an annually capped level of service to be phased
in over a period of 3-5 years. In March 2010, the PUC adopted a
plan to increase available direct access power to allow
expansion of direct access service to this new group of
authorized customers within the service territories of
California's three largest regulated utilities. The
authorization for direct access is being implemented by the PUC
through a 4-year annually capped phase-in schedule. As of April
2010, all qualifying nonresidential customers became eligible to
take direct access service, up to the specified maximum annual
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caps, according to the following schedule of direct access
sales:
35% in year two
20% in year three
10% in year four
After the 4-year phase-in period, which ends in 2013, there will
be approximately 12.87% of total retail sales being served by
entities other than the regulated utilities. SB 695 limits any
potential risk associated with reopening direct access to this
broader group of customers by eliminating uncertainty associated
with load migration. The adopted phase-in schedule is designed
to provide enough lead time for the regulated utilities to
account for small shifts in load and thereby avoid unwarranted
cost shifting and stranded load.
As of February 2013, the statewide direct access load is
approximately 12.39%. This amount is largely represented by
commercial and industrial customers. According to the PUC, the
allowable direct access is subscribed, some of which may drop
off, while some it might be slow in switching.
1)Preferential treatment for environmental cleanup projects:
Cleaning up highly contaminated
Superfund sites require large, expensive pump-and-treat systems,
operating around the clock. According to the Department of Toxic
Substance Control, there are approximately 90 such sites in
California. Proponents argue this bill will save ratepayer
funds and accelerates the remediation of contaminated
groundwater at USEPA Superfund sites. Also, another benefit is
replenishing local groundwater supplies as required by
California Water Code.
The ability to purchase direct access power has been on a
first-come, first-served basis. The proposed legislation would
direct the PUC to give priority purchase rights to public
entities operating qualified environmental cleanup projects to
ensure that they can purchase less expensive direct access
power. However, giving priority purchase rights to one entity
over another can be viewed as picking winners and losers for
direct access and this may open "Pandora's Box".
Proponents of this measure claim some of the environmental
cleanup projects that would qualify for priority purchase under
this measure have been submitting applications to purchase
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direct access power and have been unsuccessful. This bill would
allow the PUC to design future implementation of the direct
access in a manner that promotes projects that improve the
environment. Furthermore, proponents argue the measure will
provide significant costs savings for cleanup operators that can
be used to pay for future cleanup costs, to the benefit of the
entities that contribute funding to these cleanups and to the
affected water service ratepayers. However, the bill is silent
on this issue so therefore the author and this committee may
wish to amend the bill as follows: Section 365.1 (d)(2) An
entity that is authorized to engage in a direct transaction
pursuant to this subdivision and subdivisions (b) shall use
moneys saved as a result of the direct transaction for
activities related to treating or remediating contaminated
groundwater at the site.
(3) An entity that is authorized to engage in a direct
transaction pursuant to this subdivision and subdivision(b)
shall electronically report to the Energy Division of the
commission the total yearly savings resulting from the direct
transaction and the expenditure of those savings. The commission
may include this information in the annual report required
pursuant to Section 316.
REGISTERED SUPPORT / OPPOSITION :
Support
San Gabriel Basin Water Quality Authority (Sponsor)
Three Valleys Municipal Water District (TVMWD)
Opposition
None on file.
Analysis Prepared by : DaVina Flemings / U. & C. / (916)
319-2083