Major AB 2006 Elements Still Contentious

A time window for customers to choose direct access, caps on the total load that could vacate utility systems, the structure of exit fees, and the core class ?forced loan? are issues still disputed in the ?deregulation lite? bill AB 2006 despite a workshop July 15 aimed at seeking common ground. The meeting was intended to follow up a June 29 hearing that left several areas of the measure unresolved ( Circuit , July 2, 2004). Participants also responded to a spate of amendments introduced July 6, including a provision that would have state regulators phase in a direct-access customer election process over five years and the establishment of annual limits on how many megawatts would be eligible to depart the utility system. There remains ?an enormous gulf of mistrust? between bill proponents and opponents, declared Bill Booth, California Large Energy Consumers Association attorney. Senate Energy, Utilities and Communications Committee consultant Lawrence Lingbloom wondered whether a five-year window to opt into direct access could prove counterproductive to utilities. He suggested ?weeding out? customers who might be eligible to switch but disinclined to move to direct access. Booth said that a gradual phase-in would seem to go hand in hand with the eventual drop-off of Department of Water Resources contracts, but the short time frame would push utilities to cover only near-term needs at the expense of longer-lasting deals. ?There will be cost consequences,? he warned. Similarly, 10- or 15-year pacts could prove unwieldy if market factors change. The exchange tumbled into the area of setting yearly caps on how much load might be allowed under the bill to switch to direct access. Here, Kurt Schuparra, principal consultant for Assemblymember Joe Canciamilla (D-Pittsburg), reminded that the annual megawatt calculation is more difficult than it appears. Between 2006 and 2009, no more than 1,200 MW to 1,500 MW should be able to make the jump, he said?otherwise, each bundled customer?s share of the nonbypassable exit fee would rise too high. Mona Tierney, director of government affairs for Constellation Energy, maintained that over the years, cost responsibility surcharges will decrease as DWR contracts dry up (and direct-access megawatts increase). Her idea is to ?levelize? surcharges. ?But DWR wants its money now,? said Lingbloom. ?Who?s going to pay for it?? Booth remarked that bundled customers pay DWR costs and in turn are repaid by direct-access accounts. ?But not really,? countered The Utility Reform Network lobbyist Lenny Goldberg, referring to the ?forced loan? that ratepayers currently subsidize in order to make direct access cost-effective for electric choice customers. The tribulations of cost recovery led to another market-makeover conundrum: set the rules that would encourage power plant construction or make sure resources are adequate before settling market policy. Constellation argued that in order for builders to move forward, market parameters must be established. Sempra lobbyist Carolyn McIntyre said that resource adequacy is the primary key for inspiring investment, new generation, and, ultimately, a viable market. She flatly refuted Constellation?s claim that its experience in the eastern U.S., where the company is developing power plants based on one-, two-, and three-year contracts, shows the path for the Golden State. ?That?s not going to work in California in the next five years,? she said. ?Is there a non-IOU generator in this room that would be willing to build a plant on a three-year contract?? No one responded. Sempra and TURN found themselves in rare agreement. Goldberg backed up McIntyre, saying that if noncore customers go to market, there must be a demonstration that resources are available to serve those accounts. Constellation?s Tierney reported that Wall Street financiers would look fondly on contract lengths of 10 months to 3 years?in New Jersey. ?That?s New Jersey,? Schuparra said rhetorically. After the meeting, he added that California?s specific and traumatic recent energy history makes state market circumstances unique. Moreover, long-term contracts would likely give rise to the sort of investor confidence necessary to pump life into the California energy sector. The so-called ?forced loan? that bundled customers currently finance on behalf of accounts having opted for direct access is another area that remains undecided. Under one scenario, bundled customers in an investor-owned utility territory would be prohibited from switching to electric choice until the loan is paid off in that service area. ?The goal is not to make the problem worse,? said Lingbloom; otherwise, each remaining bundled customer would suffer a higher share of exit fee coverage costs as others leave the system. AB 2006 now makes no provision for dealing with the ratepayer-backed loan. The bill is likely to be heard the first or second week of August, though the exact forum is not certain. The Senate Rules Committee, where the measure now resides, could opt to send the bill back to the Senate Energy Committee or on to appropriations.

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Major AB 2006 Elements Still Contentious

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