BILL ANALYSIS
AB 40
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Date of Hearing: April 20, 2009
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Felipe Fuentes, Chair
AB 40 (Fuentes) - As Introduced: December 1, 2008
SUBJECT : Electricity: plant held for future use account.
SUMMARY : Requires the California Public Utilities Commission
(PUC) to review certain guidelines pertaining to real property
located within a designated transmission corridor zone.
EXISTING LAW:
1) Requires the California Energy Commission (CEC), in
consultation with the (PUC) , the California Independent System
Operator (ISO), transmission owners, users, and consumers, to
adopt a strategic plan for the state's electric transmission
grid to identify and recommend actions required to implement
investments needed to ensure reliability, relieve congestion,
and meet future growth in load and generation, including, but
not limited to, renewable resources, energy efficiency, and
other demand reduction measures.
2) Authorizes the CEC to designate of a transmission corridor
zones to identify feasible corridors where one or more future
high-voltage electric transmission lines can be built that are
consistent with the state's needs and objectives.
3) Requires cities and counties to consider the designated
transmission corridor zone when making a determination regarding
a land use change within or adjacent to the transmission
corridor zone that could affect its continuing viability to
accommodate a transmission line planned within the transmission
corridor zone.
4) PUC guidelines limit the maximum time a transmission line and
substation that is not related to a new power plant can be held
for future use to no more than five years.
THIS BILL:
1) Requires the PUC to review its Plant Held for Future Use
Guidelines and determine whether it needs to open a proceeding
to adjust the time period allowed for property to be carried in
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the Plant Held for Future Use account.
2) Requires that if the PUC amends the existing guidelines, or
adds a separate guideline, it will ensure that any gains or
losses from the sale or reassignment of any interest in real
property acquired by the electrical corporation that is subject
to the amended or new guideline, are allocated between customers
and shareholders proportionately to the risks involved.
FISCAL EFFECT : Unknown.
COMMENTS : According to the author, the purpose of this bill is
to ensure that the legislature's intent is being realized in the
transmission corridor zone designation process. Due to a current
regulatory restriction utilities are only allowed to rate-base
property purchased in transmission corridor zones for five
years. This restriction has since become problematic because
transmission planning horizons are generally 10-15 years. This
bill corrects this discrepancy by requiring the PUC to
re-evaluate these guidelines in light of the passage of the
transmission corridor designation process.
1) Background: SB 1059 (Escutia and Morrow), Chapter 638,
Statutes of 2006, permitted the CEC to designate transmission
corridor zones on state and private lands. The stated intent of
SB 1059 was to create an integrated, statewide approach to
transmission planning and permitting that addresses the state's
critical energy and environmental policy goals.
A transmission corridor zone is defined as the geographic area
necessary to accommodate the construction and operation of one
or more high-voltage electric transmission lines.
In comments filed with the CEC as part of its transmission
corridor zone workshop, Southern California Edison (SCE)
indicated that one of the most important issues that could
impede the corridor designation process is the restriction on
the length of time a utility can hold lands purchased for future
use in its rate base. Without changes to these restrictions,
SCE stated that utilities are unable to procure and set aside
land for long-term planning needs. It wrote, "Currently,
regulatory policy prohibits utilities from rate-basing land for
more than a five-year period. As more homes are constructed and
more customers move into the SCE service territory, the land
available for siting transmission lines and substations is
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becoming scarce. If utilities are able to purchase land in an
area where they will likely construct transmission facilities in
the future and hold that land for more than five years ahead of
project construction, the utilities will likely be able to
procure the land at a lower cost and with less concern over
right-of-way issues and eminent domain proceedings." Comments
filed by San Diego Gas and Electric (SDG&E) for the same
workshop also noted that the inability of the utilities to
rate-base lands acquired for future purposes for longer than
five years as problematic.
In the 2007 Strategic Transmission Policy Report, the CEC
provided the following legislative recommendation: "The PUC has
failed to take action to extend the length of time
investor-owned utilities can retain transmission corridor
investments in their respective rate bases; the current limit is
five years. Because this issue is critical to the success of
the Senate Bill 1059 corridor designation process, the CEC
recommends pursuing legislation that would allow investor-owned
utilities to retain transmission corridor investments in their
rate bases for as long as the CEC designates the transmission
corridor zone in the subsequent Strategic Plan."
2) The five-year limit: The responsibility for building the
transmission lines lies with the transmission-owning utilities.
When utilities apply to the PUC for a Certificate of Public
Convenience or Necessity (CPCN), they can make the case to the
PUC that acquiring land in corridors is reasonable; however, a
PUC Decision (D.87 12-066) allows the maximum time a
transmission line and substation that's not related to a new
power plant can be held for future use, to no more than five
years. According to the PUC, the reasoning was that five years
would be enough time to know if the land would be developed for
transmission or not. The reason for this limitation was to
ensure utilities don't invest in real estate using ratepayer
funds with no intention of siting a facility. This bill deals
with this potential problem by specifying that any gains or
losses from these transactions are allocated between customers
and shareholders proportionately to the risks involved.
3) Reintroduction : This bill is identical to AB 1755 (Fuentes)
of the 2007-2008 session. This bill was vetoed by the Governor
for non-policy related reasons during the budget delay.
REGISTERED SUPPORT / OPPOSITION :
AB 40
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Support
None on file.
Opposition
None on file.
Analysis Prepared by : Nina Kapoor / U. & C. / (916) 319-2083