“Core-Noncore” Energy Bill Put on Hold

By CMTA Staff

Capitol Update, May 27, 2005 Share this on FacebookTweet thisEmail this to a friend

The Schwarzenegger Administration-sponsored retail electric "core-noncore" bill was held in committee on May 26th, making it very unlikely the Legislature will take action this year on reopening the direct access (DA) market.

The Assembly Appropriations Committee voted to keep the bill and not send it to the Assembly floor.

AB 1704 by Assemblymember Keith Richman (R-Northridge) lifts the suspension of DA and establishes a "core-noncore" market.

CMTA, which has a "support if amended" position on the bill, appreciates Assemblymember Richman’s 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 (Roderick 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 California Public Utilities Commission (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" cost responsibility obligations for 2003 or even estimates for 2004.   Expanding DA to more customers should follow the establishment of a fairer and less costly and uncertain CRS methodology.

Meanwhile, California voters may have an opportunity to take action on DA if a labor-supported initiative prohibiting new DA is put on a statewide ballot this November.  The so-called "Repeal of Electricity Deregulation and Blackout Prevention Act" prohibits new DA beginning in 2006, subjects existing DA customers to more restrictive coming-and-going rules (between DA and bundled utility service) than the CPUC-approved rules currently in place.  The initiative would also subject energy service providers (ESPs) to CPUC regulation, which would have a chilling effect on ESPs willingness to do business in the California DA market.  The Governor has until June 13 to decide whether to call a special election in November.  Otherwise the initiative would be on the June, 2006 primary ballot.

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