New Bills will Tackle Electricity Retail Market Design

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

Capitol Update, Feb. 6, 2004 Share this on FacebookTweet thisEmail this to a friend

Two key legislators will author legislation this year relating to direct access (DA) and electricity retail market design.

Within the next couple weeks, Assembly Speaker-designate Fabian Nunez (D-Los Angeles) will introduce legislation, sponsored by Southern California Edison, that establishes a “core-noncore” retail market structure, and addresses an array of issues, including utility cost recovery, obligation to serve and procurement.

The Nunez proposal is still in draft form but the general outline of the bill is clear: utility cost recovery for utility-built and procured generation resources, a broad obligation to serve, and increased requirements and obligations for energy service providers.

The bill will establish a core-noncore retail market subject to significant restrictions, including a five-year advance notice requirement to return from DA to bundled utility service, and a five-year rolling commitment once they return to bundled service. Most significantly, no new DA would be allowed until DA customers’ DWR cost obligations – the DA cost responsibility surcharge (CRS) – are repaid in full.

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.

Assemblyman Keith Richman (R-Northridge), the ranking Republican on the Assembly Utilities and Commerce Committee, also has a “core-noncore” bill, AB 428. The bill failed passage last summer in the Senate Energy, Utilities and Communications Committee but was granted reconsideration.

Under AB 428, utilities would have 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 receive "default service" and pay the "higher of" the spot price or bundled portfolio price (until and unless they make the three year commitment, at which point they would pay the bundled portfolio price).

CMTA has a "support if amended" position on the current version of AB 428, which is likely to be significantly amended prior to being a “reconsideration” vote by the Senate Energy Utilities and Communications Committee.

Assemblyman Richman will also introduce a new bill as a legislative vehicle in case AB 428 fails passage again. The deadline for introducing legislation is Feb. 20.

The political equation for retail market design has changed considerably since the Legislature adjourned last September. Governor Gray Davis more or less stayed out of the debate last year while his successor in office has already indicated his support for DA and a core-noncore approach.

The new administration has not yet moved out front on energy issues, a situation that is likely to continue to be the case until after March 2 when key deadlines will occur relating to the Governor's budget bond and workers' compensation reform proposals.
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