Amended in Assembly March 21, 2013

California Legislature—2013–14 Regular Session

Assembly Bill No. 923

Introduced by Assembly Member Bigelow

February 22, 2013

An act to begin delete amend Section 368 of end delete begin insert add Section 365.2 to end insert the Public Utilities Code, relating to begin delete electrical rates end delete begin insert energy end insert .

LEGISLATIVE COUNSEL’S DIGEST

AB 923, as amended, Bigelow. begin delete Electrical rates. end delete begin insert Public Utilities Commission: direct transaction proceedings. end insert

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Under existing law, the Public Utilities Commission has regulatory authority over public utilities, including electrical corporations and gas corporations, as defined. Existing law authorizes the commission to fix the rates and charges for every public utility, and requires that those rates and charges be just and reasonable.

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Existing law, relative to electrical restructuring, requires the commission to authorize and facilitate direct transactions between electricity suppliers and retail end-use customers. Existing law, enacted during the energy crisis of 2000-01, authorized the Department of Water Resources, until January 1, 2003, to enter into contracts for the purchase of electricity, and to sell electricity to retail end-use customers at specified costs and procedures. That law suspended the right of retail end-use customers, other than community choice aggregators and a qualifying direct transaction customer, as defined, to acquire service through a direct transaction until the Department of Water Resources no longer supplies electricity under that law. Existing law continues the suspension of direct transactions except as expressly authorized, until the Legislature, by statute, repeals the suspension or otherwise authorizes direct transactions. Existing law requires the commission to authorize direct transactions for nonresidential end-use customers subject to a reopening schedule adopted and implemented by July 1, 2010, that will phase in over a period of not less than 3 years and not more than 5 years, and subject to an annual maximum allowable total kilowatthour limit established for each electrical corporation.

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The federal Flood Control Act of 1962 provides that specified amounts of electricity generated by the Central Valley Project power system are to be made available to Tuolumne County and Calaveras County on a first-preference basis.

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This bill would require the commission, in a proceeding relating to direct transactions, to consider the federal restrictions on a preference power electricity provider, as defined, to engage in direct transactions.

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Under existing law, the restructuring of the electrical services industry provides for a rate reduction of not less than 10% for residential and small commercial customers of electrical corporations, to remain in effect until the earlier of March 31, 2002, or the date on which specified costs have been fully recovered.

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This bill would make technical, nonsubstansive changes to that provision.

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Vote: majority. Appropriation: no. Fiscal committee:  begin delete no end delete begin insert yes end insert . State-mandated local program: no.

The people of the State of California do enact as follows:

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begin insert SECTION 1. end insert   

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begin insert Section 365.2 is added to the end insert begin insert Public Utilities
Code end insert begin insert , to read: end insert

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begin insert 365.2. end insert   

(a) In a proceeding relating to direct transactions, the
commission shall consider the federal restrictions on a preference
power electricity provider to engage in direct transactions.

(b) As used in this section, the following terms mean the
following:

(1) “Federal act” means the federal Flood Control Act of 1962
(Public Law 87-874).

(2) “Preference power electricity provider” means a public
power authority, or its successors, that receives all its electricity
pursuant to a preference right adopted and authorized by the
United States Congress pursuant to Section 203 of the federal act.

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SECTION 1.  

Section 368 of the Public Utilities Code is
amended to read:

368.  

Each electrical corporation shall propose a cost recovery
plan to the commission for the recovery of the uneconomic costs
of an electrical corporation’s generation-related assets and
obligations identified in Section 367. The commission shall
authorize the electrical corporation to recover the costs pursuant
to the plan if the plan meets the following criteria:

(a) The cost recovery plan shall set rates for each customer class,
rate schedule, contract, or tariff option, at levels equal to the level
as shown on electric rate schedules as of June 10, 1996, if rates
for residential and small commercial customers are reduced so that
these customers receive rate reductions of no less than 10 percent
for 1998 continuing through 2002. These rate levels for each
customer class, rate schedule, contract, or tariff option shall remain
in effect until the earlier of March 31, 2002, or the date on which
the commission-authorized costs for utility generation-related
assets and obligations have been fully recovered. The electrical
corporation shall be at risk for those costs not recovered during
that time period. Each utility shall amortize its total uneconomic
costs, to the extent possible, such that for each year during the
transition period its recorded rate of return on the remaining
uneconomic assets does not exceed its authorized rate of return
for those assets. For purposes of determining the extent to which
the costs have been recovered, any over-collections recorded in
Energy Costs Adjustment Clause and Electric Revenue Adjustment
Mechanism balancing accounts, as of December 31, 1996, shall
be credited to the recovery of the costs.

(b) The cost recovery plan shall provide for identification and
separation of individual rate components, such as charges for
energy, transmission, distribution, public benefit programs, and
recovery of uneconomic costs. The separation of rate components
required by this subdivision shall be used to ensure that customers
of the electrical corporation who become eligible to purchase
electricity from suppliers other than the electrical corporation pay
the same unbundled component charges, other than energy, that a
bundled service customer pays. Cost shifting among customer
classes, rate schedules, contract, or tariff options shall not result
from the separation required by this subdivision. Nothing in this
provision is intended to affect the rates, terms, and conditions or
to limit the use of any Federal Energy Regulatory
Commission-approved contract entered into by the electrical
corporation prior to the effective date of this provision.

(c) In consideration of the risk that the uneconomic costs
identified in Section 367 may not be recoverable within the period
identified in subdivision (a) of Section 367, an electrical
corporation that, as of December 20, 1995, served more than four
million customers, and was also a gas corporation that served less
than four thousand customers, shall have the flexibility to employ
risk management tools, such as forward hedges, to manage the
market price volatility associated with unexpected fluctuations in
natural gas prices, and the out-of-pocket costs of acquiring the risk
management tools shall be considered reasonable and collectible
within the transition freeze period. This subdivision applies only
to the transaction costs associated with the risk management tools
and shall not include any losses from changes in market prices.

(d) In order to ensure implementation of the cost recovery plan,
the limitation on the maximum amount of cost recovery for nuclear
facilities that may be collected in any year adopted by the
commission in Decision 96-01-011 and Decision 96-04-059 shall
be eliminated to allow the maximum opportunity to collect the
nuclear costs within the transition cap period.

(e) As to an electrical corporation that is also a gas corporation
serving more than four million California customers, so long as
any cost recovery plan adopted in accordance with this section
satisfies subdivision (a), it shall also provide for annual increases
in base revenues, effective January 1, 1997, and January 1, 1998,
equal to the inflation rate for the prior year plus two percentage
points, as measured by the consumer price index. The increase
shall do both of the following:

(1) Remain in effect pending the next general rate case review,
which shall be filed not later than December 31, 1997, for rates
that would become effective in January 1999. For purposes of any
commission-approved performance-based ratemaking mechanism
or general rate case review, the increases in base revenue authorized
by this subdivision shall create no presumption that the level of
base revenue reflecting those increases constitute the appropriate
starting point for subsequent revenues.

(2) Be used by the utility for the purposes of enhancing its
transmission and distribution system safety and reliability,
including, but not limited to, vegetation management and
emergency response. To the extent the revenues are not expended
for system safety and reliability, they shall be credited against
subsequent safety and reliability base revenue requirements. Any
excess revenues carried over shall not be used to pay any monetary
sanctions imposed by the commission.

(f) The cost recovery plan shall provide the electrical corporation
with the flexibility to manage the renegotiation, buy-out, or
buy-down of the electrical corporation’s power purchase
obligations, consistent with review by the commission to assure
that the terms provide net benefits to ratepayers and are otherwise
reasonable in protecting the interests of both ratepayers and
shareholders.

(g) An example of a plan authorized by this section is the
document entitled “Restructuring Rate Settlement” transmitted to
the commission by Pacific Gas and Electric Company on June 12,
1996.

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