N??ez Explores Fixes for AB 2006, Gov?s ?Ill-Advised? Energy Draft

Following discussions with energy stakeholders?and in light of Governor Arnold Schwarzenegger?s recent call for reestablishing direct access?Assembly speaker Fabian N??ez is working out changes to AB 2006 that could allow more electricity users to switch providers and prevent some companies from returning to bundled service. Under one potential amendment, customers who leave utilities for a direct-access provider and then want to ditch that arrangement would be deposited in a separate tier. This ?interim? sector would be served by independent service providers, perhaps through long-term contracts. ?They would come back to a market that?s always there,? explained Arnie Sowell, policy director for N??ez (D-Los Angeles). The approach could help create a market for new service providers and stem the shifting of system-departure costs to other ratepayers. The general policies outlined in Governor Schwarzenegger?s declaration last week in a letter to the California Public Utilities Commission represent a shift from the current direction of AB 2006 (see Circuit , April 30, 2004). In a statement issued April 28, N??ez welcomed Schwarzenegger?s participation but suspected that the draft plan would send the state careening down the failed path of deregulation once more. ?I think he has been ill-advised,? N??ez wrote. Sowell said the speaker is also concerned about the resource-adequacy provision set down by the governor?but about the time frame, not the figure. Schwarzenegger wants utilities to have their 15 percent reserve locked in by 2006 instead of 2008. Accelerating that goal could shift the energy market to favor sellers rather than buyers, which could result in higher prices, according to Sowell. In addition, N??ez?s bill would require utilities to conduct competitive bids for all nonutility generation they procure. The governor?s CPUC letter simply requested state regulators to implement procurement law AB 57, which has no such requirement. N??ez anticipates working with Schwarzenegger on their divergence of views. Other possible bill improvements under discussion include lowering the load threshold for direct-access eligibility from 500 kW (peak use) to 200 kW and dropping a provision that would allow customers to aggregate load for the purpose of pursuing electric choice. Also, the five-year notice that a company would be required to give utilities before leaving the system might be shortened to two or three years. AB 2006 will eventually end up in the Senate before the Energy, Utilities and Communications Committee, which is chaired by Debra Bowen (D-Redondo Beach). The senator has not taken a stated position on the bill, but her wariness of unfair cost shifting between electric customer classes is well known. In pondering the bill, Bowen?s chief of staff, Evan Goldberg, pointed out the conundrum of direct access: the less notice customers have to give before switching, the more likely that utility power contracts will be short-term—and expensive. A longer notification period could yield cheaper, more lengthy pacts, but it could throw a wet blanket on direct access. ?This is part of the due diligence we?re doing on the core-noncore issue,? said Sowell. Goldberg also noted that in the natural gas market?the origin of the core-noncore label being considered for the electric market?customers have a one-time election: when they opt out, they?re out. Sowell wouldn?t say that this approach would work for the electricity business, maintaining that the two situations aren?t necessarily analogous. AB 2006 proponent Southern California Edison this week professed to be pleased with Governor Schwarzenegger?s interest in energy but said that AB 57 alone would not be enough to settle the state?s energy policy framework. The bill is pending before the Assembly Appropriations Committee and must receive a floor vote in that house by May 28 in order to move on to the Senate. AB 2006 could then be heard by Bowen?s committee in June or in August, after the Legislature?s July recess. According to Sowell, amendments to the bill could be issued during the next few weeks. Above all, the N??ez camp wants the measure to simplify and clarify the state?s energy picture, Sowell said. ?AB 1890 was exceedingly complicated,? he said. ?We have no interest in adding to that.?

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N??ez Explores Fixes for AB 2006, Gov?s ?Ill-Advised? Energy Draft

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