BILL ANALYSIS Ó
AB 895
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Date of Hearing: April 27, 2015
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Anthony Rendon, Chair
AB 895
(Rendon) - As Introduced February 26, 2015
SUBJECT: Utility rate refunds: energy crisis litigation
SUMMARY: Directs money collected from litigation claims
associated with the 2000 to 2002 energy crisis away from the
Public Utilities Commission programs and towards the Ratepayer
Relief Fund, ensuring legislative oversight over the use of
these funds.
Specifically, this bill:
a)Prohibits the Public Utilities Commission from distributing
proceeds collected from litigation claims to obtain ratepayer
recovery for the effects of the 2000 to 2002 energy crisis,
and
b)Requires that all proceeds collected from litigation claims be
deposited into the Ratepayer Relief Fund to be appropriated by
the Legislature for the benefit of ratepayers.
EXISTING LAW:
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1)Authorizes the commission to fix the rates and charges for
every public utility, and requires that those rates and
charges be just and reasonable. (Public Utilities Code
Section 451) When the commission orders rate refunds to be
distributed, existing law requires the commission to require
the public utility to pay refunds to all current utility
customers, and, when practicable, to prior customers. (Public
Utilities Code Section 453.5)
2)Establishes the Ratepayer Relief Fund in the State Treasury to
benefit electricity and natural gas ratepayers, and to fund
investigation and litigation costs of the state in pursuing
allegations of overcharges and unfair business practices.
(Public Utilities Code Section 16428.15)
3)Requires that any energy settlement agreement direct
settlement funds to the following purposes in priority order:
(1) to reduce ratepayer costs of those utility ratepayers
harmed by the actions of the settling parties; and (2) for
deposit in the Ratepayer Relief Fund. (Public Utilities Code
Section 16428.3)
4)Authorizes funds deposited in the Ratepayer Relief Fund to be
appropriated by the legislature for purposes that benefit
ratepayers. (Public Utilities Code Section 16428.3)
FISCAL EFFECT: Unknown.
COMMENTS: The purpose of this bill is to ensure legislative
oversight of the use of ratepayer refunds resulting from
electricity crisis litigation.
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1)2000 to 2002 Energy Crisis: In 1996, legislation established
a competitive deregulated electricity market in California
which worked well until May 2000, after a serious drought
diminished the supply of inexpensive hydropower. This led to
the Western Electricity Crisis of 2000 to 2001. California's
increasing electricity prices, partnered with inadequate
infrastructure and the deteriorating financial stability of
major investor-owned utilities triggered a crisis in
California. These problems made market manipulation possible,
and caused all-time high retail electricity prices and power
outages throughout California.
Since that time, various lawsuits have sought billions of
dollars in refunds. Litigation continues to this day,
resulting in settlements and judgments in favor of California
electric ratepayers. The Attorney General's Office has
negotiated upwards of $2 billion in settlement agreements
related to the energy crisis.
2)CPUC Handling of Electric Crisis Settlement Funds: The CPUC
has directed most funds from the energy crisis litigation to
ratepayers. Currently, there are about 10 more contracts
being litigated.
A recent out-of-court case settlement (Dynegy 2012),
negotiated by the CPUC, resulted in money being spent on
developing a statewide electric vehicle charging program,
rather than on refunding ratepayers. This program is not
meeting the milestones specified in the settlement order,
raising questions about the supposed benefit to ratepayers and
the effectiveness of the current process.
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Litigation continues to work its way through the court system.
Most recently, on April 21, 2015 the United States Supreme
Court ruled that a federal law governing the natural gas
market does not shield energy companies from state antitrust
claims made over the 2000 to 2001 energy crisis.
3)Role of the Ratepayer Relief Fund: The Ratepayer Relief Fund
was established primarily to benefit ratepayers, and fund
investigation and litigation costs of the state in pursuing
allegations of overcharges or unfair practices that adversely
affected ratepayers. In directing settlement money into the
Ratepayer Relief Fund, this bill ensures that the money truly
benefits ratepayers and is spent in accordance with the
principles of the Ratepayer Relief Fund and the legislature.
4)Related legislation:
AB 1756 (Committee on Budget): Provides that any funds paid
to the state as a result of energy litigation are to be
allocated in the following priority order: "(1) to reimburse
state funds for, or to finance, litigation and investigation
expenses," (2) to reduce ratepayer costs of those utility
ratepayers harmed by the actions of the defendants, and (3)
to reduce or pay debt service on the energy bonds issued by
the Department of Water Resources. (Chapter 228, Statutes of
2003)
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REGISTERED SUPPORT / OPPOSITION:
Support
California Manufacturers and Technology Association
Office of Ratepayer Advocates
Opposition
None on file.
Analysis Prepared by:Allegra Roth / U. & C. / (916) 319-2083
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