Amended in Senate April 14, 2015

Senate Bill No. 286

Introduced by Senator Hertzberg

February 19, 2015

An act to amend Section 365.1 begin delete of end delete begin insert of, and to add Section 395.5 to, end insert the Public Utilities Code, relating to electricity.

LEGISLATIVE COUNSEL’S DIGEST

SB 286, as amended, 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.

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The California Renewables Portfolio Standard Program requires a retail seller, as defined, and local publicly owned electric utilities to purchase specified minimum quantities of electricity products from eligible renewable energy resources, as defined, for specified compliance periods. The program, consistent with the goals of procuring the least-cost and best-fit eligible renewable energy resources that meet project viability principles, requires that all retail sellers procure a balanced portfolio of electricity products from eligible renewable energy resources, as specified.

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This bill would require the commission to adopt and implement a schedule that implements a 2nd phase-in period for expanding direct transactions begin delete 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. end delete begin insert for individual retail nonresidential end-use customers over a period of not more than 3 years, raising the allowable limit of kilowatthours that can be supplied by other providers in each electrical corporation’s distribution service territory to 2 times the amount determined by the commission for the first phase-in period. The bill would require the commission to ensure that 51% of the new direct transactions are for electricity products from end insert begin insert eligible renewable energy resources. The bill would require that an electrical corporation continue to provide direct access customers with support functions, as specified, through its own employees, except that construction of distribution system equipment and line clearance tree trimming may be performed under contract with the electrical corporation. The bill would prohibit an electric service provider from offering consolidated billing beginning January 1, 2016. end insert

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:

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begin insert SECTION 1. end insert   

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The Legislature finds and declares all of the
following:

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(a) As the state’s electrical system evolves to include more
electricity generated by eligible renewable energy resources and
distributed generation, electrical corporations must continue to
facilitate safe and reliable transactions for electricity. Whether it
comes from efficient natural gas powerplants, large wind or solar
facilities, or customer-owned generation, including rooftop
photovoltaics, fuel cells, or combined heat and power systems, the
role of electrical corporations will be to ensure that electricity
moves from suppliers to customers. In effect, the electrical
corporations will become transmission and distribution companies,
connecting customers with the electrical mix they want when and
where they need it.

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(b) California already has a few examples for this business
model, including community choice aggregation and direct access.
Direct access allows a customer to receive electricity through a
direct transaction with an electric service provider, rather than
from the electrical corporation. The electricity is delivered over
the electrical corporation’s transmission and distribution grid and
the direct access customer pays the utility for providing
transmission and distribution service.

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(c) Direct access was suspended in California in 2001, despite
not being a contributing component to the market manipulation,
blackouts, and price spikes that led to the energy crisis of 2000-01.
In 2010, the right of individual retail nonresidential end-use
customers to acquire electric service through a direct transaction
was reopened, but subject to limitations on the amount of electricity
that could be delivered through those transactions.

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(d) Direct access customers currently pay charges for electrical
grid maintenance and pay nonbypassable charges on the
distribution of electricity to support public purpose programs,
including the California Alternate Rates for Energy program,
which supports affordable electric service for low-income
customers, and energy efficiency programs. Other providers of
electric service, including electric service providers and community
choice aggregators, are required to follow the same laws, rules,
and regulations as electrical corporations with respect to resource
adequacy (Section 380 of the Public Utilities Code), procurement
of electricity pursuant to the California Renewables Portfolio
Standard Program (Article 16 (commencing with Section 399.11)
of Chapter 2.3 of Part 1 of Division 1 of the Public Utilities Code),
and for reducing emissions of greenhouse gases pursuant to the
California Global Warming Solutions Act of 2006 (Division 25.5
(commencing with Section 38500) of the Health and Safety Code).

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(e) The Public Utilities Commission is required to ensure local
area reliability needs for the benefit of both bundled and unbundled
electric service customers. If the commission determines that new
resources are needed for reliability, the costs are to be shared
equitably, on a fully nonbypassable basis, amongst all customers,
whether the customer receives their electricity from the electrical
corporation, a community choice aggregator, or an electric service
provider. The cost allocation mechanism ensures that there is no
cost shift to bundled customers of the electrical corporation.

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(f) A growing number of businesses are recognizing the
importance of managing their energy supplies and are seeking
more control over their energy management decisions. Many of
these businesses also want options to contract for electricity, with
up to 100 percent of that electricity coming from eligible renewable
energy resources. However, because of the statutory limitations
placed upon direct transactions, most businesses lack the means
and necessary tools to make cost-effective energy decisions, which
makes California less business friendly than other states with more
direct access options.

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(g) Given high demand for direct transactions, it is in the interest
of the state to expand the right to direct access opportunities,
especially to provide options for acquiring electricity from
renewable sources of generation.

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begin delete SECTION 1. end delete
begin insert SEC. 2. end insert   

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)  begin delete The end delete begin insert During the first phase-in period for expanding
access to direct transactions, the end insert 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. During begin delete the end delete begin insert this end insert 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 the effective date of this section. Within six months
of the effective date of this section, or by July 1, 2010, whichever
is sooner, the commission shall adopt and implement a reopening
schedule that commences immediately 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 the
effective date of this section, 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 phase-in schedule.

(2)  begin delete By July 1, 2016, the end delete begin insert The end insert commission shall adopt and
implement a second direct transactions reopening schedule that
commences begin delete immediately and will phase end delete begin insert January 1, 2016, and
phases end insert in new direct transactions begin insert for individual retail
nonresidential end-use customers end insert over a period of not more than
three years, raising the allowable limit of kilowatthours begin insert that can
be end insert supplied by other providers in each electrical corporation’s
distribution service territory begin delete from that in effect as of the conclusion
of the first phase-in period, so that at the conclusion of the
three-year period, all nonresidential end-use customers may acquire
electric service from other providers in each electrical corporation’s
distribution service territory. At the conclusion of the second
phase-in period, there will cease to be any maximum allowable
annual limit of kilowatthours that can be supplied by other
providers to nonresidential end-use customers in each electrical
corporation’s distribution service territory. end delete begin insert to two times the amount
determined by the commission for the first phase-in period. Not
less than 51 percent of the new direct transactions shall be for
electricity products from eligible renewable energy resources. For
purposes of this section, “eligible renewable energy resource”
has the same meaning as in the California Renewables Portfolio
Standard Program (Article 16 (commencing with Section 399.11)). end insert

(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.

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(f) An electrical corporation shall continue to provide direct
access customers with support functions, including, but not limited
to, billing, customer service, call centers, support services, and
line clearance tree trimming, through its own employees, except
that construction of distribution system equipment and line
clearance tree trimming may be performed pursuant to contracts
between the electrical corporation and another entity.

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begin insert SEC. 3. end insert   

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begin insert Section 395.5 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 395.5. end insert   

Beginning January 1, 2016, no electric service provider
shall offer consolidated billing.

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begin delete SEC. 2. end delete
begin insert SEC. 4. end insert   

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.