BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
AB 40 - Fuentes Hearing Date: June
30, 2009 A
As Introduced: December 1, 2008 FISCAL B
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DESCRIPTION
Current law provides the California Public Utilities Commission
(CPUC) with the authority to establish rates and procedures for
public utilities.
This bill requires the CPUC 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 the
Plant Held for Future Use account, thereby effecting electric rates.
If the CPUC revises those guidelines it shall ensure that and gains
or losses from the disposal of such property be allocated between
customers and shareholders proportionately to the risks involved.
BACKGROUND
There have been a number of efforts to improve the transmission
planning and siting process. SB 2565 (Bowen: Chapter 962 of 2004)
required the CEC to develop a strategic transmission plan that
recommended actions to encourage transmission investment. SB 1059
(Escutia: Chapter 638 of 2006) required the CEC to designate
transmission corridors. In its 2007 Strategic Transmission
Investment Plan<1> the CEC had numerous suggestions for improving
transmission planning and siting, including that the CPUC revise its
Plant Held for Future Use guidelines to extend the length of time
investor-owned utilities can retain transmission corridor investment
in their rate base beyond the current five year limit.
COMMENTS
Ratebase and Plant Held for Future Use - Investments by utilities are
accounted for in their ratebase. The depreciation of those
investments and a rate of return, or profit, on the net investment
are costs which customers pay through electric rates. Therefore, it
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<1> "Strategic Transmission Investment Plan", Commission Report.
California Energy Commission, November 2007; CEC-700-2007-018-CMF.
is in the customers' interest to ensure that the utilities make all
the necessary investment but no more, for the surplus investment
unnecessarily raises electric rates. The utility has the opposite
motivation; more investment means higher profits. The job of the
CPUC is to find the appropriate balance, so that sufficient
investment is made to ensure reliable service, but that
"gold-plating" does not occur. With regard to Plant Held for Future
Use, the CPUC has decided that if the plant isn't put to use within
five years there is no reason for customers to have to continue to
pay for retaining that plant.
The bill provides that any gain or loss on the sale of utility assets
will be divided between shareholders and customers based on the
proportionate risks.
This bill is substantially similar to the version of AB 1755
(Fuentes) of 2008 which passed this committee last year 8-0, and
identical to the version which was approved on the Senate floor
31-That bill was vetoed. The veto message indicated that the veto
was because of workload issues in the Governor's Office:
The historic delay in passing the 2008-2009 State
Budget has forced me to prioritize the bills sent
to my desk at the end of the year's legislative
session. Given the delay, I am only signing
bills that are the highest priority for
California. This bill does not meet that
standard and I cannot sign it at this time.
ASSEMBLY VOTES
Assembly Floor (77-0)
Assembly Appropriations Committee (17-0)
Assembly Utilities and Commerce Committee (15-0)
POSITIONS
Sponsor:
Author
Support:
None on file
Oppose:
None on file
Randy Chinn
AB 40 Analysis
Hearing Date: June 30, 2009