D?j? vu Legislation

By Published On: April 23, 2005

Bills that would rekindle direct access, require all energy providers to secure a reserve cushion to bolster supply reliability, and encourage repowering for fading power plants passed out of the Assembly Utilities and Commerce Committee April 18. All three measures were debated last year but failed to reach the finish line. The legislation that generated the most controversy, not surprisingly, was a measure reintroduced by Assemblymember Keith Richman (R-Northridge) that would allow energy users who use more than 200 kW to sign their own energy deals for direct access to nonutility providers. Richman?s AB 1704, which passed on a 7-2 vote, would create a core-noncore market. It would provide needed financial incentives for new generation, according to the author. His bill was touted as allowing direct access for big power users while avoiding shifting costs to small ratepayers. Concern about cost shifting has so far kept any direct-access revival stuck in legislative mud. Large energy consumers, Richman said, need to be able to buy power from the provider of their choice to best suit their needs. At the same time, they would also bear their fair share of exit fees when leaving an investor-owned utility. Neither ratepayer advocates nor a utility workers? union were swayed in the least by the new arguments over the old concept. ?How many times are we going to ask to reinstate the worst policy disaster in the state?? asked Marc Joseph of Adams Broadwell, representing the California Unions for Reliable Energy (CURE). Richman rejected Joseph?s characterization of his bill as deregulation. This would be ?a fully regulated market,? he said, noting that the California Public Utilities Commission would create and enforce direct-access rules. The bill is also opposed by Southern California Edison and The Utility Reform Network. Edison and, to a lesser degree, Pacific Gas & Electric and San Diego Gas & Electric fear their customer base will be destabilized. SDG&E also urged that resource adequacy first be imposed on all energy providers so ratepayers don?t get stuck with the bill for beefing up reserves to cover for those receiving power elsewhere?basically an argument to avoid stranded assets. TURN?s main concern was the potential for residential users and small businesses to carry the burden of disproportionate exit fees. The consumer advocate also fears that large energy consumers will have the ability to switch back and forth between utility and merchant generator service. A large business group that generally supported the bill wanted hurdles overcome before it was passed. Joe Lyon, lobbyist for the California Manufacturers & Technology Association, said a precondition to direct access is a viable competitive wholesale market. He also took issue with the CPUC?s process for determining exit fees, saying it needed to be simpler, fairer, and more timely. He noted that CMTA members are still awaiting the 2004 tab. The bill is supported by independent power companies, the CPUC, and the Alliance for Retail Markets. To placate concerns about starting direct access in a noncompetitive market, Richman agreed to tie in the launch of large customer choice with the phase-out of the Department of Water Resources? remaining long-term energy contracts. Legislation requiring all retail electricity providers, including municipal power agencies and community-choice aggregators, to meet resource-adequacy standards set by the CPUC in consultation with the California Independent System Operator passed on an 11-0 vote. AB 380 by speaker Fabian N??ez (D-Los Angeles) would also require all load-serving entities?not just investor-owned utilities?to meet the CPUC?s energy-efficiency and renewables standards. It is unknown whether direct-access providers, which supply about 15 percent of the state, have backup supplies to meet soaring demand, according to the bill analysis. AB 380 exempts from reserve requirements qualifying facilities, the State Water Project, and customers not hooked to the grid. The Western States Petroleum Association insisted the bill not apply to self-generating customers, in particular oil refineries. WSPA asserted that resource adequacy is unnecessary for off-grid generators because they don?t affect surrounding supplies. Committee chair Lloyd Levine (D-Van Nuys), who presented the bill, said the speaker was willing to further refine the measure to address WSPA?s concerns. The Alliance for Retail Markets supports resource-adequacy rules but objected to the extension of the renewables portfolio standard that requires one-fifth of a power portfolio to be green. A bill by N??ez encouraging upgrading inefficient power plants also received considerable support. AB 1576, approved on a 10-0 vote, would declare ?reasonable? for rate-recovery purposes contracts between an investor-owned utility and a generator for repowering aging facilities located in sites desirable from a transmission and consumption standpoint. This measure could result in up to 23 old power plants, many in Southern California, being upgraded. At the top of the list are West Coast Powers? El Segundo and Long Beach power plants. The Natural Resources Defense Council had reservations about the bill, asking that it be amended to specify that repowers result in more efficient and less environmentally harmful power plants. The Independent Power Producers had concerns about the bill. IEP executive director Jan Smutny-Jones wanted clarification on the process used for approving plant upgrades. He noted that new plants and repowers have been stalled because there have been no long-term procurement offers under AB 57. Under another measure passed this week, private and designated public utilities would be required to file demand forecasts with the Energy Commission. AB 1723 by Assemblymember Doug La Malfa (R-Richvale), passed on an 8-0 vote, would also require all load-serving entities to meet the Western Electricity Coordinating Council planning reserve and reliability criteria. The aim of AB 1723 is to make public IOU forecasts that estimate growth and departing customers. It would also provide a ?third party opinion of the number of customers for whom the IOU should procure resources,? states the committee?s bill analysis.

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