“Core-Noncore” Bill to be Heard April 19th

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

Capitol Update, April 16, 2004 Share this on FacebookTweet thisEmail this to a friend

The first legislative hearing on AB 2006 (Fabian Nunez, D-Los Angeles), the so-called "Edison bill," will take place on Monday, April 19th, when the bill is heard in the Assembly Utilities and Commerce Committee.

The bill establishes a "core-noncore" retail market structure, beginning in 2006, subject to significant restrictions, including a five-year advance notice requirement for customers to return from direct access (DA) to bundled utility service, and a five-year rolling commitment once they return to bundled service.

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.

AB 2006, which is strongly supported by Southern California Edison, also addresses an array of other weighty issues, including utility cost recovery, obligation to serve and resource procurement.

CMTA has an "oppose unless amended" position on the bill.

The bill fails to establish a level playing field for competitive wholesale procurement and will thus undermine the establishment of a robust and competitive wholesale market. A healthy wholesale market is needed to increase investment in new generation and lower energy costs for both bundled utility and DA customers. The way to accomplish this is through a competitive wholesale procurement process as provided in AB 57, signed into law in 2002.

The bill also fails to directly address the high energy rates being paid by industrial customers, and may actually put upward pressure on those rates through a less than fully competitive wholesale market. Industrial customers were hit hard with massive rate increases three years ago and desperately need lower electricity rates to stay competitive in California. Rates for the largest industrial customers are still 60 percent to 90 percent higher than before the 2000-2001 electricity crisis.

Finally, while the bill lifts the suspension of DA in January 2006, it establishes overly restrictive notice and commitment rules for customers moving to and from DA. The rules currently in place for DA customers should be maintained unless and until the CPUC determines that changes in those rules are required to promote customer choice and at the same time protect customers from cost-shifting.

Expanding DA to more customers should follow efforts to establish a healthy wholesale market and determine the rules for load serving entities, such as resource adequacy requirements. At that point, a system that allows more customers to elect non-core or DA status, with reasonable notice and commitments, would be appropriate.

CMTA would remove its opposition to AB 2006 if the bill were amended as follows:

1. The utilities should be required to conduct an open and fair competitive bid solicitation process to meet future needs. (This will support the development of a competitive wholesale market.) Utility distribution companies should not be permitted to construct new generation facilities, except in those situations where it can be demonstrated that utility ownership is the most cost-effective alternative.

2. After the competitive bid process, the winner should not be allowed to recover costs in excess of those accepted within the competitive bid process.

3. Delete the provisions relating to "core/non-core." Require the California Public Utilities Commission to make findings and submit a recommendation to the Legislature, by a date certain, relating to lifting the suspension of DA and establishment of a core/non-core system.

If approved in the Assembly U&C Committee, the bill would be heard next in the Assembly Appropriations Committee and then on the Assembly floor. The fact that the measure is authored by Assembly Speaker Nunez greatly improves the odds of its approval in the Assembly, but the measure is likely to face a tougher time in the Legislature’s upper house.
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