BILL ANALYSIS � 1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
SB 656 - Wright Hearing Date:
April 30, 2013 S
As Amended: April 22, 2013 FISCAL B
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DESCRIPTION
Current law authorizes some retail end-use customers of an
electrical corporation (IOU) to purchase electric service
directly from non-utility providers (energy service providers or
ESPs), a program commonly referred to as Direct Access (DA).
Participation is capped as a percentage of total electric load
based on a specified formula.
Current law requires ESPs to register with the California Public
Utilities Commission (CPUC) which is required to make specified
information regarding DA service available to the public.
This bill requires the CPUC to update information on direct
access every six months.
This bill strikes the requirement that the Office of Ratepayer
Advocate (now Division of Ratepayer Advocates, DRA) within the
CPUC prepare information guides and tools to help customers
evaluate competing service options under DA.
BACKGROUND
Deregulation - In 1996 the California State Legislature led the
nation by deregulating the sale of electricity to
non-residential customers and a few residential customers
through a program commonly referred to as DA. The reform was
historic and intended to transition the state to a more
competitive electricity market structure that allowed its
citizens and businesses to achieve the economic benefits of
industry restructuring, create a new market structure that
provided competitive, low cost and reliable electric service,
provide assurances that electricity customers in the new market
would have sufficient information and protection, and preserve
California's commitment to developing diverse, environmentally
sensitive electricity resources. Those goals were not achieved.
The practical effect of the program was that non-residential
customers could buy electricity direct from private sector
wholesale sellers and use the IOU only for distribution and
transmission services. As consequence the vertical monopoly of
electricity delivery provided by heavily regulated electric
utilities was upended and those utilities were largely required
to sell off power plants and transfer management of their
transmission systems to the newly created California Independent
System Operator. Within a few years the state suffered
electricity shortages which resulted in rolling blackouts,
skyrocketing prices, and bankrupt or nearly bankrupt utilities.
The electricity crisis of 2001 resulted in a suspension of the
program but any customer enrolled at the time was permitted to
remain with their ESP. In 2009, the cap on DA enrollment was
increased but only for non-residential customers.
COMMENTS
1. Author's Purpose . The author reports that the
requirement for the DRA to assist customers in evaluating
DA options was created in 1997 as part of legislation that
deregulated California's retail electric market. At the
time, policymakers were hoping that market competition
would bring in multiple market players and dramatically
reduce electric generation prices. The cornerstone of this
policy was the creation of DA, which would be available to
all customer classes, including small commercial and
residential. Some policymakers were concerned that the
smaller consumers would need some help in navigating the
multiple providers competing to provide them with service,
and as a result, section 392.1(c) was created. The
experiment in Direct Access and wholesale electric
deregulation was a disaster, and completely unraveled in
the energy crisis of 2001, when AB 1x was enacted which
froze direct access enrollment.
The requirements of 392.1(c) are no longer required.
Direct Access firms are not competing to sign up
residential accounts, and therefore, there is no need for
the DRA to "help [customers] make informed choices."
2. Technical Clean-up . It has been reported that there
were approximately 18,000 residential DA customers by 2001
when the program was suspended for all customers. Since
the time, through attrition, residential participation has
dropped by a third. The Legislature authorized an increase
in the program in 2009 but only for non-residential
customers. This bill reflects actual practice of the CPUC
and DRA due to the suspension of DA imposed on residential
customers as a result of the energy crisis of 2001. As
bill progresses, the author may also want to consider
striking the necessity of a six-month update for the CPUC
report since activity in the DA program is minimal.
POSITIONS
Sponsor:
Author
Support:
Division of Ratepayer Advocates
Oppose:
None on file.
Kellie Smith
SB 656 Analysis
Hearing Date: April 30, 2013