Nunez Electricity Bill Heads to Senate

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

Capitol Update, May 28, 2004 Share this on FacebookTweet thisEmail this to a friend

AB 2006, the "core-noncore" utility procurement and cost recovery legislation, authored by Assembly Speaker Fabian Nunez (D-Los Angeles), passed the Assembly by a 50-28 margin and is now headed to the Senate.

The bill lifts the suspension of direct access (DA) in January 2006 but establishes overly restrictive notice and commitment rules for customers moving to and from DA. The measure 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 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.)

CMTA is opposed to AB 2006. The rules currently in place for DA customers should be maintained unless and until the California Public Utilities Commission 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.

AB 2006 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 (Rod Wright, D-So. Central LA), 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 to 90 percent higher than before the 2000-2001 electricity crisis.
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