Legislature to Take Up Electricity Retail Market Design in ‘04

By Loretta Macktal, Executive Assistant to the Vice President, Government Relations

Capitol Update, Nov. 14, 2003 Share this on FacebookTweet thisEmail this to a friend

Several key legislators intend to carry legislation next year relating to direct access (DA) and electricity retail market design. Two of the proposals would lift the suspension of DA and establish a core-noncore retail market structure while the third would take a vastly different approach and repeal DA altogether.

A core-noncore market is one in which the market is bifurcated between core customers, typically residential and small-commercial customers with usage below 500 kilowatts, and large users, referred to as non-core customers.

Only one of the three proposals, AB 816 (Sarah Reyes, D-Fresno), is “in print” (contained in legislation); the other two are not yet contained in legislation. Legislation cannot be formally introduced until next January when the Legislature reconvenes in “regular session.”

All three legislators carried legislation earlier this year relating to DA and retail market design. Senator Joseph Dunn (D-Santa Ana) authored SB 888, the high-profile electricity “re-regulation” bill that originally repealed DA, was turned into a core-noncore bill and then had all DA stripped out before it was defeated in the Assembly Utilities and Commerce Committee in July, failing to muster a single vote.

Assemblyman Keith Richman (R-Northridge) authored AB 428, which took a core-noncore approach. Under AB 428, utilities would have had an obligation to provide bundled commodity procurement service to bundled core customers and also to noncore customers who make at least a three-year commitment to bundled utility service. Bundled noncore customers who do not make a minimum three year commitment to bundled service would have received "default service" and paid the "higher of" the spot price or bundled portfolio price (until and unless they make the three year commitment, at which point they would have paid the bundled portfolio price). CMTA had a "support if amended" position, and would have supported the bill if it were amended to require noncore customers to pay the spot price (rather than the "higher of") for default service and if the provisions requiring a non-bypassable charge for “planning reserves” were deleted from the bill. The bill failed passage in the Senate Energy, Utilities and Communications Committee.

The third measure, AB 816, took a core-noncore approach and was held in the Senate Energy Committee and will likely be taken up again next January.

The political equation has changed considerably since the Legislature adjourned in September. While Governor Gray Davis seemed to distance himself from the core-noncore debate Governor-elect Arnold Schwarzenegger has indicated his support for DA and a core-noncore approach.

As was the case during the 2003 session, CMTA will play an active role in legislative deliberations in the upcoming session relating to DA and retail market design. Establishing a distinction between core and noncore customers may be beneficial if implemented in a rational manner. However, it is essential that the right of noncore customers to select DA be fully restored and that reasonable rules be adopted to allow noncore customers to take bundled service from the utilities if they so desire. Noncore customers should not be required to make more than a two-year commitment for bundled service and to provide no more than six-months notice of their desire to take or to exit from bundled service. The two-year commitment and six-month notice provisions will ensure that noncore customers taking bundled service will pay their full share of costs and will prevent customers from engaging in seasonal price arbitrages. Noncore customers taking bundled service should pay their share of the bundled portfolio cost and, upon leaving bundled service after fulfilling their two-year commitment and six-month notice requirements, they should have no further obligation to pay for the bundled portfolio.
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