Major Energy Bill is End of Session Play

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

Capitol Update, Aug. 20, 2004 Share this on FacebookTweet thisEmail this to a friend

As is often the case with major legislation, the most significant energy bill this year will be decided in the last week of the legislative session.

AB 2006 (Fabian Nunez, D-Los Angeles) will come before the full Senate, probably by mid-week, and if approved, will go to the Assembly for a final vote. The conventional wisdom is that the Senate vote will be delayed until after the Senate selects a new President Pro Tem to replace termed-out Senator John Burton (D-San Francisco). The Pro-Tem vote is tentatively scheduled for Tuesday, August 24th.

While the Schwarzenegger Administration has not specifically stated that the governor would veto AB 2006, it is likely he will do just that. On August 10th, Resources Secretary Mike Chrisman said the California Resources Agency took an "oppose unless amended" position on the bill. (The amendments essentially strip the bill.) The governor's spokesperson said the governor "has been fully briefed" on Chrisman's position letter and that "he shares that position."

CMTA opposes AB 2006.

Since the 2000-2001 crisis, California has taken an important step in establishing a robust and competitive wholesale market. AB 57 (Wright, Ch. 835, Stat. 2002) created competitive and transparent electricity procurement rules to spur investment in new generation and lower energy costs for both bundled utility and DA customers. To encourage this approach, AB 57 provides upfront utility cost recovery for the wholesale electricity costs incurred in this process. AB 2006 undermines AB 57 by duplicating and adding a new layer of requirements in the procurement planning process currently underway at the California Public Utilities Commission. The requirement for a new and additional planning process will impede and delay resolution of critical resource adequacy proceedings and undermine the goal of bringing new resources on line as soon as possible.

Recent amendments to the bill require the CPUC, prior to adopting any settlement agreement that is contested by any party and that involves a ratepayer obligation of greater than $10 million, to not approve the settlement before it has held a hearing to review the settlement "and any alternative proposed by any party," are unnecessary and will only serve to delay or create more roadblocks for settlements. Any party could use this process to thwart the process, regardless of materiality or merit.

Finally, the bill fails to require the elimination of cross-class subsidies and the establishment of cost-based rates (i.e., rates that are based on sound cost-causation principles and reflect the cost to serve various customer classes).

Legislative and regulatory mandates, including the statutory protection of residential usage up to 130 percent of baseline levels, have caused a massive shifting of costs from residential users to other classes of customers. 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 36 to 85 percent higher than before the 2000-2001 electricity crisis. In contrast, two-thirds of residential users actually pay rates that are lower than rates in effect in 1996.
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