With a growing interest in changing the state’s energy landscape, California lawmakers this week will examine three major proposals, one that would create a new regulatory body out of parts of three existing agencies, another that would eliminate the last vestiges of the state’s 1996 electric restructuring law and third dealing with gas price indices. Hearings are set in the Assembly and Senate for Wednesday and Thursday for the respective bills.

One energy stakeholder said the bipartisan proposal in the Assembly (AB 808) to create a new state energy department may be held indefinitely in the appropriations committee, which placed it on its “suspense” file last Wednesday. The bill would collapse the current energy commission, power authority and the policymaking part of the California Public Utilities Commission all under the new department headed by a cabinet-level energy secretary.

A Pacific Gas and Electric Co. utility lobbyist said last week the company generally favors the proposed consolidation of the state’s numerous energy agencies. The state municipal utility association, however, opposes the bill that is being promoted on a bipartisan basis.

In the state Senate, changes were made in the proposal (SB 888) to eliminate what remains of the state’s 1996 electricity restructuring law. The latest changes would establish core/noncore customer categories and permit retail direct access among the largest (noncore) customers.

Current language allows that “to the extent that retail competition is permitted by the legislature, the exisitng direct access program should be replaced by a retail competition program that is more stable and transparent, and that fairly assigns risks and costs between different customer classes, electrical corporations, and retail competitors.” It then goes on to outline criteria for a “core/noncore” customer classification model, with seven objectives, including:

The new language for the so-called “re-regulation” legislation also eliminates some previous prescriptive parts related to the California Independent System Operator’s reports on the infrastructure it controls.

In a third bill, a newly added provision that would require utilities to extend for another five years the current five-year contracts they have with small qualifying facility (QF) generating plants has caused some consternation in the California state Senate. It has sent the legislation back to its energy committee. The original proposal would crack down on alleged misuse of published natural gas price indices that are used by state regulators and market participants to establish contract pricing formulas.

The new amendment by SB 173’s author, Sen. Dunn, caught off guard some of the Senate energy committee members who backed the original legislation, and they are concerned it may be mixing “apples and oranges,” according to insiders in the Senate policy committee. Payments for the renewed QF contracts would be established by the California Public Utilities Commission, which in the past has relied on the gas indices to help set power prices.

While being set for consideration last Thursday by the Senate appropriations committee — its third committee stop — SB 173 last week was referred back to the energy, utilities and communications committee, which approved an earlier version of the bill in early April.

Following revelations last fall in Dunn’s investigative committee that attempts by energy traders were made to manipulate gas price indices, SB 173 took shape conceptually, and eventually earlier this year a bill was devised with the aim of restricting use of the indices by state regulators and penalizing with fines up to $25,000/violation for people giving false information to the price indices reports. Current language says: SB 173 “would restrict the (CPUC) to the use of gas price indexes determined by the commission to be reliable and verified, and meeting listed requirements, and would require the (CPUC) to establish standards for reliability and verification for gas price indexes used to establish or adjust prices paid to QFs by a public utility electrical corporation.” The language goes on to restrict the use of the indexes in determining so-called “incentives” or “bonuses” awarded to utilities based on their performance in energy procurement.

SB 888’s sponsor, Sen. Joe Dunn, who has headed the Senate’s now two-year-old investigation of alleged wholesale energy price manipulation, originally called his proposal the “death blow” to deregulation in the state. Nevertheless, Monday he said the bill was being amended to direct the CPUC to create guidelines for allowing customers to select their own suppliers. A hearing in the Senate appropriations committee will be held on the revised bill Thursday.

“We have always been willing to discuss continuing some form of direct access, ” said Dunn in a Dow Jones Newswire report. “It must be done so that long-term planning is possible for utilities and there is no cost-shifting. Right now, small and residential customers are subsidizing large users on direct access.”

In its current form, SB 888 would allow closely regulated wholesale power trading in the state, restraining it by encouraging utilities to invest in generation and sign long-term contracts. A major response to what Dunn and his supporters consider excesses from the restructuring law (AB 1890) is the provision essentially prohibiting utilities from charging market-based rates for their own generation.

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