Amended in Assembly April 15, 2013

Amended in Assembly April 1, 2013

California Legislature—2013–14 Regular Session

Assembly Bill No. 1350

Introduced by Assembly Member Roger Hernández

February 22, 2013

An act to amend Section 365.1 of the Public Utilities Code, relating to electricity.

LEGISLATIVE COUNSEL’S DIGEST

AB 1350, as amended, Roger Hernández. Electricity: direct transactions.

The Public Utilities Act requires the Public Utilities Commission, pursuant to electrical restructuring, 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 not more than the department’s acquisition costs and to recover those costs through the issuance of bonds to be repaid by ratepayers. 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 that will phase in over a period of not less than 3 years and not more than 5 years, and is subject to an annual maximum allowable total kilowatthour limit established, as specified, for each electrical corporation.

This bill would require the commission to adopt and implement a schedule that implements a second phase-in period for expanding direct transactions, as specified, over a reasonable time commencing not later than July 1, 2014. begin delete The bill would require the commission to ensure that nonprofit and government customers, as defined, are given priority to acquire electric service through direct transactions and to ensure that not less than 25% of the allowable kilowatthours in any phase-in period are reserved for nonprofit and governmental customers. end delete The bill would establish as a condition precedent to the second phase-in of the expansion of direct transactions that the commission find that other providers supplying electricity through a direct transaction are procuring eligible renewable energy resources sufficient to meet their procurement requirements pursuant to the California Renewables Portfolio Standard Program.

Under existing law, a violation of the Public Utilities Act or any order, decision, rule, direction, demand, or requirement of the commission is a crime.

Because the provisions of this bill would be a part of the act and because a violation of an order or decision of the commission implementing its requirements would be a crime, the bill would impose a state-mandated local program by creating a new crime.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: yes.

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

SECTION 1.  

Section 365.1 of the Public Utilities Code is
amended to read:

365.1.  

(a) Except as expressly authorized by this section, and
subject to the limitations in subdivisions (b) and (c), the right of
retail end-use customers pursuant to this chapter to acquire service
from other providers is suspended until the Legislature, by statute,
lifts the suspension or otherwise authorizes direct transactions. For
purposes of this section, “other provider” means any person,
corporation, or other entity that is authorized to provide electric
service within the service territory of an electrical corporation
pursuant to this chapter, and includes an aggregator, broker, or
marketer, as defined in Section 331, and an electric service
provider, as defined in Section 218.3. “Other provider” does not
include a community choice aggregator, as defined in Section
331.1, and the limitations in this section do not apply to the sale
of electricity by “other providers” to a community choice
aggregator for resale to community choice aggregation electricity
consumers pursuant to Section 366.2.

(b) (1) The commission shall 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 maximum allowable total kilowatthours annual
limit.

(2) During the first phase-in period for expanding access to
direct transactions, the maximum allowable annual limit shall be
established by the commission for each electrical corporation at
the maximum total kilowatthours supplied by all other providers
to distribution customers of that electrical corporation during any
sequential 12-month period between April 1, 1998, and October
11, 2009. The commission shall adopt and implement the first
direct transactions reopening schedule commencing April 11, 2010,
and will phase in the allowable amount of increased kilowatthours
over a period of not less than three years, and not more than five
years, raising the allowable limit of kilowatthours supplied by
other providers in each electrical corporation’s distribution service
territory from the number of kilowatthours provided by other
providers as of October 11, 2009, to the maximum allowable annual
limit for that electrical corporation’s distribution service territory.
The commission shall review and, if appropriate, modify its
currently effective rules governing direct transactions, but that
review shall not delay the start of the first phase-in schedule.

(3) The commission shall adopt and implement a schedule that
implements a second phase-in period for expanding access to direct
transactions over a reasonable time, commencing not later than
July 1, 2014. During the second phase-in period, the allowable
amount of kilowatthours supplied by other providers in each
electrical corporation’s distribution service territory, in addition
to the amounts authorized pursuant to paragraph (2), shall be
increased by the following amounts: for Pacific Gas and Electric
Company, 3,946 gigawatthours; for Southern California Edison
Company, 3,946 gigawatthours; and for San Diego Gas and Electric
Company, 462 gigawatt hours. begin delete The commission shall ensure that
nonprofit and government customers are given priority to acquire
electric service through direct transactions and shall ensure that
not less than 25 percent of the allowable kilowatthours in any
phase-in period are reserved for nonprofit and governmental
customers. Should nonprofit and governmental customers not
acquire service through direct transactions up to 25 percent, the
commission shall make direct transactions available to other
customers up to the limits established by the commission for each
period. end delete As a condition precedent to the authorization of additional
direct transactions pursuant to this paragraph, the commission shall
find that other providers are procuring eligible renewable energy
resources sufficient to meet their procurement requirements
pursuant to the renewables portfolio standard established pursuant
to Article 16 (commencing with Section 399.11). The commission
may review and, if appropriate, modify its then effective rules
governing direct transactions, but that review shall not delay the
start of the second phase-in schedule. begin delete For purposes of this
paragraph, the following terms have the following meanings: end delete

begin delete

(A) “Governmental customers” means a city, county, whether
general law or chartered, a city and county, special district, school
district, political subdivision, or other local public agency, but
shall not mean a joint powers authority, the state or any agency or
department of the state other than an individual campus of the
University of California, the California State University, or a
community college.

(B) “Nonprofit customer” means any customer that is a nonprofit
organization described in Section 501(c)(3) of the Internal Revenue
Code (26 U.S.C. Sec. 501(c)(3)), that is exempt from taxation
under Section 501(a) of the Internal Revenue Code (26 U.S.C.
Sec. 501(a)).

end delete

(c) Once the commission has authorized additional direct
transactions pursuant to subdivision (b), it shall do both of the
following:

(1) Ensure that other providers are subject to the same
requirements that are applicable to the state’s three largest electrical
corporations under any programs or rules adopted by the
commission to implement the resource adequacy provisions of
Section 380, the renewables portfolio standard provisions of Article
16 (commencing with Section 399.11), and the requirements for
the electricity sector adopted by the State Air Resources Board
pursuant to the California Global Warming Solutions Act of 2006
(Division 25.5 (commencing with Section 38500) of the Health
and Safety Code). This requirement applies notwithstanding any
prior decision of the commission to the contrary.

(2) (A) Ensure that, in the event that the commission authorizes,
in the situation of a contract with a third party, or orders, in the
situation of utility-owned generation, an electrical corporation to
obtain generation resources that the commission determines are
needed to meet system or local area reliability needs for the benefit
of all customers in the electrical corporation’s distribution service
territory, the net capacity costs of those generation resources are
allocated on a fully nonbypassable basis consistent with departing
load provisions as determined by the commission, to all of the
following:

(i) Bundled service customers of the electrical corporation.

(ii) Customers that purchase electricity through a direct
transaction with other providers.

(iii) Customers of community choice aggregators.

(B) If the commission authorizes or orders an electrical
corporation to obtain generation resources pursuant to subparagraph
(A), the commission shall ensure that those resources meet a system
or local reliability need in a manner that benefits all customers of
the electrical corporation. The commission shall allocate the costs
of those generation resources to ratepayers in a manner that is fair
and equitable to all customers, whether they receive electric service
from the electrical corporation, a community choice aggregator,
or an electric service provider.

(C) The resource adequacy benefits of generation resources
acquired by an electrical corporation pursuant to subparagraph (A)
shall be allocated to all customers who pay their net capacity costs.
Net capacity costs shall be determined by subtracting the energy
and ancillary services value of the resource from the total costs
paid by the electrical corporation pursuant to a contract with a
third party or the annual revenue requirement for the resource if
the electrical corporation directly owns the resource. An energy
auction shall not be required as a condition for applying this
allocation, but may be allowed as a means to establish the energy
and ancillary services value of the resource for purposes of
determining the net costs of capacity to be recovered from
customers pursuant to this paragraph, and the allocation of the net
capacity costs of contracts with third parties shall be allowed for
the terms of those contracts.

(D) It is the intent of the Legislature, in enacting this paragraph,
to provide additional guidance to the commission with respect to
the implementation of subdivision (g) of Section 380, as well as
to ensure that the customers to whom the net costs and benefits of
capacity are allocated are not required to pay for the cost of
electricity they do not consume.

(d) (1) If the commission approves a centralized resource
adequacy mechanism pursuant to subdivisions (h) and (i) of Section
380, upon the implementation of the centralized resource adequacy
mechanism the requirements of paragraph (2) of subdivision (c)
shall be suspended. If the commission later orders that electrical
corporations cease procuring capacity through a centralized
resource adequacy mechanism, the requirements of paragraph (2)
of subdivision (c) shall again apply.

(2) If the use of a centralized resource adequacy mechanism is
authorized by the commission and has been implemented as set
forth in paragraph (1), the net capacity costs of generation resources
that the commission determines are required to meet urgent system
or urgent local grid reliability needs, and that the commission
authorizes to be procured outside of the Section 380 or Section
454.5 processes, shall be recovered according to the provisions of
paragraph (2) of subdivision (c).

(3) Nothing in this subdivision supplants the resource adequacy
requirements of Section 380 or the resource procurement
procedures established in Section 454.5.

(e) The commission may report to the Legislature on the efficacy
of authorizing individual retail end-use residential customers to
enter into direct transactions, including appropriate consumer
protections.

SEC. 2.  

No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of
the Government Code, or changes the definition of a crime within
the meaning of Section 6 of Article XIII B of the California
Constitution.