Legislative Weekly

All press calls on Leg Weekly information should be directed toward Gino DiCaro at 916-498-3347

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May 3, 2001

ENERGY CRUNCH TIME

This month of May is a critical time for customers planning for summertime blackouts. Decisions on multimillion dollar investments in self-generation, moving production to more reliable regions, scheduling workforces for off peak production are being made in the midst of great uncertainty: Some of the uncertainty is outside of our control, such as how the hot summer will be and how many power plants may accidentally trip off-line.

But the extremely frustrating aspect of this crisis is how many issues remain uncertain when it has been within our power for many months to address and solve them. For example:

Customers must make a decision within a week whether to opt-in or opt-out of the interruptible programs. (This could have been resolved last fall if the CPUC had not suspended the opt-out window.) But it’s hard to make that decision when the rate design for the rate increase will not be decided until May 14. A four cent rate increase adopted in January (instead of one cent in January and another three cents in March) could have avoided this dilemma now.

Customers that want exemptions from blackouts are wrestling with the utilities over unresolved issues in the Optional Binding Mandatory Curtailment Program (OBMC). But contracts for the OBMC must be signed by May 7 at the latest, or the customer risks being blacked out if rotating outages are called next week. This issue could have been addressed last fall when the CPUC first directed the utilities to include transmission level customers in the rotating blackout lists.

Here’s a quandary – PG&E is taking the view that a customer cannot be in both the interruptible and the OBMC program. The CPUC decision on this is unclear. Many customers may drop from the interruptible program in order to protect themselves from blackouts under the OBMC. Do we want this result? We need many megawatts of load reduction under interruptible programs to keep the lights on this summer.

The local air districts are taking different views on whether customers may use backup diesel generators in the OBMC program. If a customer does not join the OBMC, they could invest in many generators to back up their entire load during blackouts. Under OBMC, they could invest in enough to back-up 15%, and run them whenever anyone in the system is being blacked out. Which is more cost-effective and the least impact on air quality? We don’t know, and it’s almost too late to figure this out.

CALIFORNIA ELECTRICITY WHOLESALE PRICE CAP DISGUISED AS A TAX
Jail Time for Keeping the Lights On

Certain Legislators frustrated with complexities of the energy crisis, feeling great pressure to “do something” have devised two methods of punishing electricity generators for their recent large profits: confiscating their future California profits or putting their executives in jail. Far from solving the problem, they would make it worse by diminishing energy supply.

Soto

SBX1 1 (Soto D-Pomona) introduces a price cap in the guise of a tax, and to the extent that it were operative, it would force California businesses to pay for the “windfall profit” out of their pockets. Under this scheme, any amount that a generator charged over $80 per megawatt would be regarded as excess. The purchasing entity such as the ISO or DWR would be required to remit the excess to the state instead of to the generator. The state would use the excess for a tax credit for personal income taxpayers. The ISO or DWR would have to send the charge out to business consumers for the “excess” in order to break even. Of course, the expectation is that the tax would be irrelevant as no generator would sell its commodity for more than the $80 cap as that “excess” would not be collected by the generator.

In fact, no generator would sell electricity into California for $80 if it could get a higher price elsewhere. Since the energy shortage is a regional problem, other states would provide a willing market for the energy not sold here. The result would be shortage, extensive blackouts, business shut downs and lay-offs. While high energy costs are a terrible problem for manufacturers, shut downs for lack of any energy are even worse.

Cardoza

If passed, ABX1 67 (Cardoza D-Merced) would make conspiring to charge “unreasonable rates” by energy generators a felony offense and expose executives of producer companies to long jail terms. It would also impose a fine of up to 10% of gross corporate assets. The subject matter of this bill is already covered by existing federal antitrust law. One would expect that few would ever be prosecuted under this law as the possible threat of prosecution and confiscation would tend to cause generators to shy away from the California market, especially in times when demand were high, supply low and market forces were driving up the cost. Again, the foreseeable result would be blackouts and layoffs.

BILL CALLS FOR STATE RUN HEALTH PLAN

Aroner

Assembly Member Dion Aroner (D-Berkeley) has introduced AB 1321 that would create a California Health Utilities Board charged with providing comprehensive quality health care for all Californians. CMTA, along with other employer organizations, is opposed to the bill because employers would be taxed to fund the program without any input on coverage.

While the intent of AB 1321, to provide health care for all Californians, is to be applauded, California based employers have little confidence that a state run program could live up to the expectations of the bill. As a result, employers are concerned that a newly created state health insurance system would supersede employer sponsored health plans that are tailored to attract and retain good employees. Most applicants for employment are aware that employers’ health and welfare benefits program may be the difference in choosing between otherwise competitive employers who must recruit from the same employee talent pool.

In addition, California based employers would no longer be able to design cost effective health benefits plans suited to the needs of their employees. Another concern for many CMTA members who have multi-state locations is that the bill would also create problems of fairness and equity that could be divisive and harmful to the morale of their employees.

The bill is in Assembly Health Committee and a hearing date has not been set.



LEGISLATING LAND USE

SB 243 by Senator Sheila Kuehl (D-Santa Monica) is a new take on an old theme – when available information does not support your case, simply legislate the desired outcome.

Kuehl

Among numerous problems with the Bill is that it prohibits any site contaminated by radioactive waste from a nuclear reactor from being rezoned for residential use. While the scope of the prohibition is narrow, the precedent of legislating land use limitations for contaminated properties without regard to state and federal corrective action procedures sets a dangerous precedent for any cleanup involving a controversial substance. Cleanup standards are generally established using site-specific data and scientific analyses that support a target end use. More often than not, residential use is the default standard, invoking very conservative assumptions in determining cleanup levels that in turn offer a wide margin of safety against exposures that could result in adverse health consequences. This process is not perfect, but it attempts to substitute objective, scientific analysis and due process for ideological mandates. SB 243 undermines this process. Land use decisions regarding contaminated properties are best left to local agencies acting on the recommendations of the state and federal agencies responsible for establishing cleanup standards and overseeing cleanup actions.

SB 243 also imposes various limitations on the handling and disposal of low-level radioactive waste generated by various sources including public and private research facilities (e.g., biotechnology). These limitations would not contribute to the safe and effective management of such waste and would further increase California’s dependence on out of state service providers. Our ongoing energy crisis offers ample evidence of the consequences of such shortsighted policy.


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