BILL ANALYSIS Ó
AB 687
SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
Senator Jerry Hill, Chair
2013-2014 Regular Session
BILL NO: AB 687
AUTHOR: Hernandez
AMENDED: May 24, 2013
FISCAL: Yes HEARING DATE: July 3, 2013
URGENCY: No CONSULTANT: Rachel Machi
Wagoner
SUBJECT : ELECTRICITY
SUMMARY :
Existing law :
1)Pursuant to both federal and state law, establishes an
extensive and complex series of programs authorizing public
agencies to order owners of contaminated property to conduct
cleanups of these properties, including the following:
a) The federal Comprehensive Environmental Cleanup, Response
and Liability Act (CERCLA 42 U.S.C. 9601 et seq.), commonly
referred to as the federal Superfund law; and
b) The California Carpenter-Presley-Tanner Hazardous
Substance Account Act (commencing with Section 25300 of the
Health and Safety Code), commonly referred to as the State
Superfund Program.
2)Requires the California Public Utilities Commission (PUC),
pursuant to electrical restructuring, to authorize and
facilitate direct transactions between electricity suppliers
and retail end-use customers.
3)Requires 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 kilowatt hours annual
limit.
This bill requires PUC to give priority direct electrical power
purchase rights to entities cleaning up polluted groundwater.
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Specifically, this bill:
1)Gives priority direct power purchase rights to:
a) Entities currently remediating groundwater that local,
state and federal agencies have identified as contaminated
and that the United States Environmental Protection Agency
(US EPA) has placed on its National Priority List (NPL)
Superfund list; or
b) A public water system serving a disadvantaged community
or severely disadvantaged community.
2)Requires the public entity receiving the direct power purchase
to use moneys saved for activities related to treating or
remediating contaminated groundwater at the site and report the
amount of savings to the Energy Division of the PUC.
COMMENTS :
1) Purpose of Bill . According to the author, public entities
cleaning up polluted superfund groundwater and many public
drinking water systems operate 365 days a year with especially
high costs incurred during the summer power demand peak
period. Some community water systems cannot afford treatment
or lack alternative water sources, and have served water that
exceeds the public drinking water standards. In a 2013 report
to the Legislature, the State Water Resources Control Board
(SWRCB) found that 680 community water systems rely on a
contaminated groundwater source. Of those water systems, 265
have served water that did not meet the minimum public
drinking water standards. According to the author, this
measure ensures that public entities cleaning up environmental
pollution can defray costs to advance the restoration of
hazardous waste sites to safe and productive use. This
provides for the long-term protection of human health and the
environment.
2) Federal Superfund sites in California . Superfund is the name
given to the environmental program established to address
abandoned hazardous waste sites. It is also the name of the
fund established by CERCLA. It allows US EPA to clean up such
sites and to compel responsible parties to perform cleanups or
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reimburse the government for US EPA-lead cleanups. California
currently has 94 federal Superfund sites.
3) San Gabriel Valley groundwater contamination . This bill is
sponsored by the San Gabriel Basin Water Quality Authority
which is involved in the cleanup of the Superfund sites in the
San Gabriel Valley. These sites include multiple areas of
contaminated groundwater in the 170-square mile San Gabriel
Valley. The contaminated area is most of the San Gabriel
Valley Water Basin: significant portions of the cities of
Alhambra, Arcadia, Azusa, Baldwin Park, Industry, Irwindale,
El Monte, La Puente, Monrovia, Rosemead, South El Monte, and
West Covina.
According to US EPA, the groundwater contamination in the San
Gabriel Valley was first detected in 1979. Following this
discovery, the California Department of Health Services
initiated a well sampling program to assess the extent of
contamination. By 1984, when US EPA added four areas of
contamination to the Superfund National Priorities List, 59
wells were known to be contaminated with high levels of
volatile organic compounds. US EPA's Superfund projects are
assisting in restoring water supplies that have been affected
by the contamination.
4) Cleaning up contaminated drinking water . There are
currently a total of 94 federal superfund sites eligible for
direct access under this bill, additional sites of
groundwater contamination face many of the same high-energy
uses for water treatments.
In February, 2013, SWRCB released a report, "Communities that
Rely on A Contaminated Groundwater Source for Drinking
Water." The report states that from 2002 to 2010, 680 (out
of 3,032) community water systems serving nearly 21 million
residents, relied on a contaminated groundwater source
affected by one or more 'principal contaminants.' A
principal contaminant is a chemical detected above a public
drinking water standard on two or more occasions during that
cycle. 31 principal contaminants were identified: arsenic
was the most detected naturally occurring principal
contaminant (287 community water systems), and nitrate was
the most detected human caused principal contaminant (205
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community water systems). Of the 680 community water
systems, 507 (75%) rely entirely on groundwater. Community
water systems that are entirely reliant on groundwater may be
highly vulnerable to groundwater contamination, since these
systems may not have alternative, uncontaminated sources of
water. Some community water systems cannot afford treatment
or they lack alternative water sources and have served water
that exceeds a public drinking water standard.
5) Direct Access . Through direct access (DA), eligible
retail customers have the choice to purchase electric power
directly from an independent electric service provider (ESP)
rather than only through an investor-owned utility (IOU).
DA was first instituted as an option for retail electric
service in 1998, as part of an industry restructuring
program to bring retail competition to California electric
power markets.
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, PUC adopted a plan to increase available direct
access power to allow expansion of DA 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 4-year annually capped phase-in schedule. 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. The current
DA users are largely represented by commercial and
industrial customers.
According to the Senate Committee on Energy, Utilities and
Communications, enrollment in the DA program has been capped
due to the legacy of the energy crisis and market
manipulations.
According to the Senate Committee on Energy, Utilities and
Communications, enrollment in the DA program is capped to
approximately 12% the state's electric load in the
territories of the state's three largest investor-owned
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utilities (IOUs). It is fully subscribed. Any additional
availability of direct access will involve customers on
direct access returning to bundled utility service or a
separate action of the Legislature to increase the statutory
cap. Because of the lower cost of the system power under
the DA program, demand for subscriptions is much greater
than available supply and each of the three IOUs have
waiting lists. In the event that a current direct access
subscriber drops out of the program, the IOU, by lottery,
picks new subscribers for the supply of kilowatt hours that
have been made available.
The wait list for the three IOUs combined has more than 850
customers with more than 10,000 electric accounts for a
total demand of 2,800 gigawatt hours.
Because this bill would prioritize Superfund and
disadvantaged and severely disadvantage communities above
everyone else, this bill will effectively preclude any other
private or public customer from qualifying for direct access
in the future and would likely also preclude any of those
customers currently on the wait list from ever being
enrolled.
What is disadvantaged or severely disadvantaged ? The bill
does not define disadvantaged or severely disadvantaged
communities. The standard definition used in California
environmental law is Public Resources Code Section 75005(g),
providing that "Disadvantaged community" means a community
with a median household income less than 80% of the
statewide average. "Severely disadvantaged community" means
a community with a median household income less than 60% of
the statewide average.
The bill needs to be amended to reference this definition.
6) Why this priority ? While it is laudable to make
groundwater cleanup projects less expensive, by giving the
project proponents priority for less expensive energy
acquisition, are there not perhaps other projects or
facilities that would be just as worthy of prioritization
for instance, a hospital facility? Is it appropriate for
this bill to list one priority and thereby put it above all
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other priorities?
7) Why federally listed NPL, Superfund sites ? There are
many properties in California that have severely
contaminated groundwater that may have not received this
priority by the federal government. Additionally, the
designation as a Superfund site does not necessarily
correlate with a need for financial assistance. It is
possible to have an NPL Superfund site that has a
responsible party that should be paying for the remediation
of the groundwater. Therefore, the cost for energy
acquisition should be passed on to the responsible party.
Additionally, the bill allows private water, for-profit,
companies to utilize this advantage. Is it appropriate to
allow for-profit companies to go to the head line in front
of line?
8) Environmental Inconsistencies ? Enrollment in the DA
program has been capped due to the legacy of the energy
crisis and market manipulations but also because the
business model under the DA program is generally not
reflective of the state's clean energy goals. Entities
which serve DA customers are referred to as energy service
providers (ESPs) which are required to comply with the
Renewables Portfolio Standard. However, most ESPs purchase
power on the short-term, spot market which tends to be
"left-over" electricity of a myriad of out-of-state,
fossil-fueled, generation facilities that are not subject to
California's air quality standards. The power is also
referred to as system power. So the entities that would be
remediating contamination of groundwater in one location
would be likely contributing to contamination somewhere else
by purchasing this system power.
9) Arguments in support . According to the sponsor of the
bill, San Gabriel Basin Water Quality Authority, "This bill
saves ratepayer funds and accelerates the remediation of
contaminated groundwater at US EPA Superfund sites. Another
benefit, as required by California public policy, is
replenishing local groundwater supplies. Ability to
purchase direct access power has been on a first come first
served basis. Given the limited supply of direct access
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power, the proposed legislation directs the CPUC to give
priority purchase rights to public entities operating
qualified environmental cleanup projects to ensure that they
can purchase this less expensive direct access power. The
measure will provide significant cost 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."
10) Argument in opposition . According to the California
Manufacturers and Technology Association, the organization
opposes AB 687 to provide certain customers preferential
treatment for the limited amount of direct access available
on the utility system. Many manufacturers use direct access
contracts to manage their electric bills and remain
competitive in California's high cost operating environment.
This bill would put manufacturers and other customers
behind public entities performing environmental clean-up
work.
SOURCE : San Gabriel Basin Water Quality Authority
SUPPORT : Association of California Water Agencies
Central Basin Municipal Water District
San Gabriel Valley Municipal Water District
San Gabriel Valley Water Association
Three Valleys Municipal Water District
Walnut Valley Water District
OPPOSITION : California Manufacturers & Technology Association