BILL ANALYSIS Ó
AB 687
Page 1
ASSEMBLY THIRD READING
AB 687 (Roger Hernández)
As Amended May 24, 2013
Majority vote
UTILITIES & COMMERCE 9-5
ENVIRONMENTAL SAFETY 5-1
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|Ayes:|Bradford, Bonilla, |Ayes:|Alejo, Bloom, Lowenthal, |
| |Buchanan, Fong, Garcia, | |Stone, Ting |
| |Roger Hernández, Rendon, | | |
| |Skinner, Williams | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Patterson, Chávez, Beth |Nays:|Donnelly |
| |Gaines, Gorell, Jones | | |
| | | | |
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APROPRIATIONS 12-5
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|Ayes:|Gatto, Bocanegra, | | |
| |Bradford, | | |
| |Ian Calderon, Campos, | | |
| |Eggman, Gomez, Hall, | | |
| |Ammiano, Pan, Quirk, | | |
| |Weber | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Harkey, Bigelow, | | |
| |Donnelly, Linder, Wagner | | |
| | | | |
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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)States PUC shall ensure that entities currently treating and
remediating groundwater that a federal, state, or local agency
previously identified as contaminated have the highest
priority in acquiring electric service by direct transactions
if either of the following apply:
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a) The treatment or remediation is at a site that is listed
by the U.S. Environmental Protection Agency (USEPA) on the
National Priorities List.
b) The entity is a public drinking water system serving a
disadvantaged or severely disadvantaged community.
2)Specifies that moneys saved as a result of the direct
transaction be used for activities related to treating or
remediating contaminated groundwater at the site.
3)Requires the entity engaged in the direct transaction to
report PUC the total yearly savings resulting from the direct
transaction and the expenditure of those savings. PUC may
include information in the Annual Report to the Legislature.
FISCAL EFFECT : According to the Assembly Appropriations
Committee:
1) Redirection of future direct access programs that were
on a first-come first-serve basis.
2) Increased administrative costs to PUC under $100,000 for
rulemaking.
COMMENTS :
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 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 Department of Water Resources (DWR) during the state
energy crisis, and to prevent additional migration away from the
three largest regulated utilities, the Legislature directed 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.
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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 three to five years. In March 2010, 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 PUC
through a four-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 caps, according to the following schedule of
direct access sales:
1)35% in year two.
2)20% in year three.
3)10% in year four.
After the four-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 PUC, the
allowable direct access is subscribed, some of which may drop
off, while some might be slow in switching.
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
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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 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."
Analysis Prepared by : DaVina Flemings / U. & C. / (916)
319-2083
FN: 0000995