BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
SB 176 - Simitian Hearing Date:
May 5, 2009 S
As Introduced: February 14, 2009 Non-FISCAL B
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DESCRIPTION
Existing law requires the California Public Utilities Commission
(CPUC) to suspend the right of investor-owned utility (IOU)
customers to acquire direct access electricity service until the
Department of Water Resources no longer supplies power to IOU
customers.
Existing law authorizes a nonprofit to acquire electric
commodity service through a direct transaction with an electric
service provider, until January 1, 2010, if electric commodity
service is donated free of charge without compensation.
This bill deletes the sunset and permanently establishes the
program.
BACKGROUND
SB 423, Simitian (Chap. 749, Statute 2006) allows an electricity
generator to donate free electricity to non-profit organizations
despite the ban on new "direct access" service arrangements.
Houston, Texas has a similar program; however, in California
suppliers have not provided the opportunity to non-profits to
accept free electricity services.
CPUC rules require current direct-access customers (those that
have maintained direct access service since before the
suspension) to provide a six-month notification to the IOU
before returning to IOU service. If the customer fails to
provide the six-month return notification, the customer must pay
the higher of spot market electricity costs or the IOU's
prevailing rate (to shield the IOU's other customers from the
cost of the customer's experiment with the market). Once
returned, the customer must stay with IOU service for three
years (to give the IOU a reasonable basis to plan for serving
them). After that three-year period, the customer retains its
direct-access eligibility and must provide the IOU with a
six-month notice if it plans to return to direct-access service.
These "coming and going" rules would apply to service permitted
by this bill.
COMMENTS
1. Purpose - The author is seeking to allow energy service
providers (ESPs) to donate free electricity to a non-profit
in lieu of a cash donation. Due to the moratorium on direct
access arrangements, nonprofits cannot take advantage of
the donations that EPS's could provide, unless the sunset
is extended or deleted.
2. Is direct access necessary to achieve the charitable
purpose? - ESP's need not provide retail service to make a
donation to the charities. EPS's could make a donation of
cash, goods or services to help the charities reduce their
energy costs. However, as owner of a power plant with
surplus capacity, an ESP may be able to increase the value
of its donation (as well as its tax deduction) by taking
the cash it would otherwise donate and using it instead to
buy gas to produce electricity. This doesn't require an
exemption from the direct access suspension, ESP's could
sell the electricity they produce at wholesale and donate
the proceeds to the charities (no change in law necessary).
While a retail service arrangement may deliver the
greatest benefit to the charities, the potential benefit is
tempered by the complication of the arrangement and the
risk faced by the customer if the ESP fails to perform.
3. Current Legislation - A bill that the committee passed,
which is to be heard next in Senate Appropriations, SB 695
(Kehoe), would allow for direct access to be reinstated. If
SB 695 were to pass, SB 176 would no longer be necessary
because direct access would be reinstated. Consequently,
rather than make these provisions permanent, the author and
committee may wish to extend the sunset on the bill another
three years.
POSITIONS
Sponsor:
Author
Support:
None on file
Oppose:
None on file
Melissa Macias
SB 176 Analysis
Hearing Date: May 5, 2009