Electricity retail market bills to be considered

By CMTA Staff

Capitol Update, April 15, 2005 Share this on FacebookTweet thisEmail this to a friend

The legislative policy committees will soon hear legislation lifting the suspension of direct access (DA) and establishing a "core-noncore" market.  AB 1704 by Assemblymember Keith Richman (R – Northridge) will be heard in the Assembly Utilities and Commerce Committee on April 18th.  SB 641 by Senator John Campbell (R – Irvine) will be heard the following day in the Senate Energy, Utilities and Communications Committee.

CMTA has a "support if amended" position on both bills.

AB 1704 and SB 641 would reaffirm customer choice and the ability of customers to manage their own energy requirements.  Energy is a critical component of the manufacturing process.  To remain competitive, manufacturers must have access to reliable supplies and be able to make firm contracts under the best terms available.  DA enables customers to choose an alternate power supplier, and to contract for energy supplies that meet their needs for price, reliability and level of risk.

CMTA appreciates the authors’ intent to set up a workable market and supports the eventual lifting of the suspension of DA, but believes that there are important milestones that must be accomplished first.  CMTA recommends that California policymakers not lift the suspension of DA or impose a core-noncore market until the wholesale market is competitive and the DA Cost Responsibility Surcharge (CRS) methodology is reviewed and changed.

Since the 2000-2001 electricity crisis, California has taken an important step to establish a robust and competitive wholesale market.  AB 57 (Wright, Ch. 835, Stats. 2002) created competitive and transparent electricity procurement rules to spur investment in new generation.  While progress has been made, the wholesale market remains extremely thin and not sufficiently competitive.  Long-term power is not available for current DA customers at cost-effective price levels.  It would be unfair to customers and damaging to the state’s economy to require customers to make one-time decisions on participation in a noncore market before DA is a competitive and viable option.

Additionally, the methodology for determining the DA CRS (exit fee) adopted by the CPUC overstates the CRS and causes significant delays in providing the CRS figures to DA customers.  As of April 2005, DA customers do not have "trued-up" figures for 2003 or even estimates for 2004.  They do not know the status of their CRS under-collection as of the end of 2004, or the accrual rate for 2005.  DA customers should know what their past and prospective CRS liability is in order to make rational business decisions and assess whether to remain on DA, return to bundled service or build self-generation.  The absence of accurate and timely DA figures hinders their ability to make an informed decision in this regard.  Expanding DA to more customers should follow the establishment of a fairer and less costly and uncertain CRS methodology.

Therefore, CMTA would support AB 1704 and SB 641 if the bills were amended as follows:

1. Robust Wholesale Market First – Make the establishment of a core-noncore market contingent upon a finding by the CPUC that the wholesale market is robust and sufficiently competitive.

2. Rational Exit Fees – Direct the CPUC to initiate a process to overhaul the current CRS methodology and replace it with a more simple, fair and timely methodology.

If approved by the policy committees, the bills would be heard next in each house’s Appropriations Committee.

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