Senate BillNo. 286


Introduced by Senator Hertzberg

February 19, 2015


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

LEGISLATIVE COUNSEL’S DIGEST

SB 286, as introduced, Hertzberg. 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 2nd phase-in period for expanding direct transactions over a 3-year period so that by the end of the 3-year period all nonresidential end-use customers may acquire electric service from other providers in each electrical corporation’s distribution service territory.

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 expanding the operation of a 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:

P2    1

SECTION 1.  

Section 365.1 of the Public Utilities Code is
2amended to read:

3

365.1.  

(a) Except as expressly authorized by this section, and
4subject to the limitations in subdivisions (b) and (c), the right of
5retail end-use customers pursuant to this chapter to acquire service
6from other providers is suspended until the Legislature, by statute,
7lifts the suspension or otherwise authorizes direct transactions. For
8purposes of this section, “other provider” means any person,
9corporation, or other entity that is authorized to provide electric
10service within the service territory of an electrical corporation
11pursuant to this chapter, and includes an aggregator, broker, or
12marketer, as defined in Section 331, and an electric service
13provider, as defined in Section 218.3. “Other provider” does not
14include a community choice aggregator, as defined in Section
15331.1, and the limitations in this section do not apply to the sale
16of electricity by “other providers” to a community choice
P3    1aggregator for resale to community choice aggregation electricity
2consumers pursuant to Section 366.2.

3(b) begin insert(1)end insertbegin insertend insert The commission shall allow individual retail
4nonresidential end-use customers to acquire electric service from
5other providers in each electrical corporation’s distribution service
6territory, up to a maximum allowable total kilowatthours annual
7limit.begin delete Theend deletebegin insert end insertbegin insertDuring the first phase-in period for expanding access
8to direct transactions, theend insert
maximum allowable annual limit shall
9be established by the commission for each electrical corporation
10at the maximum total kilowatthours supplied by all other providers
11to distribution customers of that electrical corporation during any
12sequential 12-month period between April 1, 1998, and the
13effective date of this section. Within six months of the effective
14date of this section, or by July 1, 2010, whichever is sooner, the
15commission shall adopt and implement a reopening schedule that
16commences immediately and will phase in the allowable amount
17of increased kilowatthours over a period of not less than three
18years, and not more than five years, raising the allowable limit of
19kilowatthours supplied by other providers in each electrical
20corporation’s distribution service territory from the number of
21kilowatthours provided by other providers as of the effective date
22of this section, to the maximum allowable annual limit for that
23electrical corporation’s distribution service territory. The
24 commission shall review and, if appropriate, modify its currently
25effective rules governing direct transactions, but that review shall
26not delay the start of the phase-in schedule.

begin insert

27(2) By July 1, 2016, the commission shall adopt and implement
28a second direct transactions reopening schedule that commences
29immediately and will phase in new direct transactions over a period
30of not more than three years, raising the allowable limit of
31kilowatthours supplied by other providers in each electrical
32corporation’s distribution service territory from that in effect as
33of the conclusion of the first phase-in period, so that at the
34conclusion of the three-year period, all nonresidential end-use
35customers may acquire electric service from other providers in
36each electrical corporation’s distribution service territory. At the
37conclusion of the second phase-in period, there will cease to be
38any maximum allowable annual limit of kilowatthours that can be
39supplied by other providers to nonresidential end-use customers
40in each electrical corporation’s distribution service territory.

end insert

P4    1(c) Once the commission has authorized additional direct
2transactions pursuant to subdivision (b), it shall do both of the
3following:

4(1) Ensure that other providers are subject to the same
5requirements that are applicable to the state’s three largest electrical
6corporations under any programs or rules adopted by the
7commission to implement the resource adequacy provisions of
8Section 380, the renewables portfolio standard provisions of Article
916 (commencing with Section 399.11), and the requirements for
10the electricity sector adopted by the State Air Resources Board
11pursuant to the California Global Warming Solutions Act of 2006
12(Division 25.5 (commencing with Section 38500) of the Health
13and Safety Code). This requirement applies notwithstanding any
14prior decision of the commission to the contrary.

15(2) (A) Ensure that, in the event that the commission authorizes,
16in the situation of a contract with a third party, or orders, in the
17situation of utility-owned generation, an electrical corporation to
18obtain generation resources that the commission determines are
19needed to meet system or local area reliability needs for the benefit
20of all customers in the electrical corporation’s distribution service
21territory, the net capacity costs of those generation resources are
22allocated on a fully nonbypassable basis consistent with departing
23load provisions as determined by the commission, to all of the
24following:

25(i) Bundled service customers of the electrical corporation.

26(ii) Customers that purchase electricity through a direct
27transaction with other providers.

28(iii) Customers of community choice aggregators.

29(B) If the commission authorizes or orders an electrical
30corporation to obtain generation resources pursuant to subparagraph
31(A), the commission shall ensure that those resources meet a system
32or local reliability need in a manner that benefits all customers of
33the electrical corporation. The commission shall allocate the costs
34of those generation resources to ratepayers in a manner that is fair
35and equitable to all customers, whether they receive electric service
36from the electrical corporation, a community choice aggregator,
37or an electric service provider.

38(C) The resource adequacy benefits of generation resources
39 acquired by an electrical corporation pursuant to subparagraph (A)
40shall be allocated to all customers who pay their net capacity costs.
P5    1Net capacity costs shall be determined by subtracting the energy
2and ancillary services value of the resource from the total costs
3paid by the electrical corporation pursuant to a contract with a
4third party or the annual revenue requirement for the resource if
5the electrical corporation directly owns the resource. An energy
6auction shall not be required as a condition for applying this
7allocation, but may be allowed as a means to establish the energy
8and ancillary services value of the resource for purposes of
9determining the net costs of capacity to be recovered from
10customers pursuant to this paragraph, and the allocation of the net
11capacity costs of contracts with third parties shall be allowed for
12the terms of those contracts.

13(D) It is the intent of the Legislature, in enacting this paragraph,
14to provide additional guidance to the commission with respect to
15the implementation of subdivision (g) of Section 380, as well as
16to ensure that the customers to whom the net costs and benefits of
17capacity are allocated are not required to pay for the cost of
18electricity they do not consume.

19(d) (1) If the commission approves a centralized resource
20adequacy mechanism pursuant to subdivisions (h) and (i) of Section
21380, upon the implementation of the centralized resource adequacy
22mechanism the requirements of paragraph (2) of subdivision (c)
23shall be suspended. If the commission later orders that electrical
24corporations cease procuring capacity through a centralized
25resource adequacy mechanism, the requirements of paragraph (2)
26of subdivision (c) shall again apply.

27(2) If the use of a centralized resource adequacy mechanism is
28authorized by the commission and has been implemented as set
29forth in paragraph (1), the net capacity costs of generation resources
30that the commission determines are required to meet urgent system
31or urgent local grid reliability needs, and that the commission
32authorizes to be procured outside of the Section 380 or Section
33454.5 processes, shall be recovered according to the provisions of
34paragraph (2) of subdivision (c).

35(3) Nothing in this subdivision supplants the resource adequacy
36requirements of Section 380 or the resource procurement
37procedures established in Section 454.5.

38(e) The commission may report to the Legislature on the efficacy
39of authorizing individual retail end-use residential customers to
P6    1enter into direct transactions, including appropriate consumer
2protections.

3

SEC. 2.  

No reimbursement is required by this act pursuant to
4Section 6 of Article XIII B of the California Constitution because
5the only costs that may be incurred by a local agency or school
6district will be incurred because this act creates a new crime or
7infraction, eliminates a crime or infraction, or changes the penalty
8for a crime or infraction, within the meaning of Section 17556 of
9the Government Code, or changes the definition of a crime within
10the meaning of Section 6 of Article XIII B of the California
11Constitution.



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