BILL ANALYSIS Ó
SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS
Senator Ben Hueso, Chair
2015 - 2016 Regular
Bill No: SB 1298 Hearing Date: 4/19/2016
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|Author: |Hertzberg |
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|Version: |2/19/2016 As Introduced |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Jay Dickenson |
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SUBJECT: Electrical restructuring: financing orders
DIGEST: This bill extends, by one year, the authority of the
California Public Utilities Commission (CPUC) to issue financing
orders.
ANALYSIS:
Existing law:
1)Authorizes CPUC, until December 31, 2016, to issue financing
orders, upon application of an electric utility (IOU), to
facilitate the provision, recovery, financing, or refinancing
of transition costs.
2)Defines "transition costs" to mean the costs, and categories
of costs, of an IOU for generation-related assets and
obligations approved by the CPUC that were being collected in
CPUC-approved rates on December 20, 1995, and that may become
uneconomic as a result of a competitive generation market.
(Public Utilities Code §840 et seq.)
3)Authorizes the CPUC to enter into an agreement with the
Department of Water Resources (DWR) with respect to charges
for electric utility service, and states that the agreement
shall have the force and effect of a financing order adopted
in accordance Section 840 of the Public Utilities Code. (Water
Code §80110(d))
This bill extends, from December 31, 2016, to December 31, 2017,
SB 1298 (Hertzberg) Page 2 of ?
the authority of the CPUC to issue financing orders, upon
application of an IOU, to facilitate the provision, recovery,
financing, or refinancing of transition costs.
Background
The hapless restructuring of California's electricity market in
the late 1990s and early 2000s presented IOUs with prospect of
the inability to recover from ratepayers the cost of
generation-related investments made by the IOUs prior to the
restructuring. To ensure IOUs were not stuck with the costs of
these investments, statute authorizes an IOU to apply to the
CPUC to recover certain transition cost through fixed transition
amounts. Statute conditions CPUC's approval of recovery of the
fixed transition amount upon a finding that the designation of
the fixed transition amounts, and issuance of rate reduction
bonds in connection with some or all of the fixed transition
amounts, would reduce rates that residential and small
commercial customers would have paid if the financing order were
not adopted. Statute specifies that these customers shall
continue to pay fixed transition amounts after December 31,
2001, until the bonds are paid in full by the financing entity.
The statutory mechanism by which CPUC authorizes the recovery of
such costs is known as a "financing order." The CPUC's
authority to issue financing orders sunsets on December 31,
2017.
During the energy crisis that followed restructuring of
California's electricity market, the DWR procured electricity on
behalf of the IOUs. To cover the costs of this procurement, DWR
issued bonds, known as Electric Power Fund bonds. Acting under
its authority to issue financing orders, the CPUC authorized the
IOUs to collect the cost of the Electric Power Fund bonds from
ratepayers. Ratepayers will continue to pay the cost of the
bonds until fully paid, according to the CPUC, in 2022.
According to CPUC, it has exercised its ability to issue
financing orders to authorize refinancing of Electric Power Fund
bonds at lower rates, thereby saving ratepayers money. The CPUC
contends its authority to allow such refinancing is not directly
dependent upon the explicit statutory authority provided to CPUC
to issue financing orders. This is because the Water Code
provides the CPUC the authority to enter into an agreement with
the DWR for electric utility service; however, the Water Code
explicitly ties this authority to the CPUC's authority, found in
SB 1298 (Hertzberg) Page 3 of ?
the Public Utilities Code, to issue financing orders. The CPUC
reasonably fears that it has no authority to refinance Electric
Power Fund bonds, absent its explicit authority to issue
financing orders. This bill will lay the fear to rest, at least
for calendar year 2017.
The author contends the CPUC needs extension of its authority to
issue financing orders for only one year. This is because,
according to the author, the Electric Power Fund bonds retire in
2022; CPUC has no need to authorize refinancing of the bonds in
their final five years. The CPUC, in contrast, expresses a
desire to see its authority to issue financing orders extended
to 2022.
Prior/Related Legislation
SB 697 (Hertzberg, Chapter 612, Statutes of 2015) extended the
bond authority sunset.
SB 38 (Padilla, 2014) would have repealed or modified several
sections of the
Public Utilities Code added in 1996 as part of statutes enacted
to restructure the electricity market. The bill was vetoed.
SB 1195 (Padilla, Statutes 2014) was chaptered with different
subject matter. An earlier version of the bill included the
provisions of SB 38.
FISCAL EFFECT: Appropriation: No Fiscal
Com.: Yes Local: No
SUPPORT:
California Public Utilities Commission (Source)
OPPOSITION:
None received
ARGUMENTS IN SUPPORT: According to the author, this bill
ensures that bonds can be refinanced at lower rates when they're
available, reducing costs to ratepayers.
SB 1298 (Hertzberg) Page 4 of ?
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