Bill Text: CA AB3264 | 2023-2024 | Regular Session | Amended

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Energy: cost framework: residential rates: demand-side management programs report: electrical transmission grid study.

Spectrum: Partisan Bill (Democrat 2-0)

Status: (Passed) 2024-09-27 - Chaptered by Secretary of State - Chapter 762, Statutes of 2024. [AB3264 Detail]

Download: California-2023-AB3264-Amended.html

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Amended  IN  Senate  June 10, 2024

CALIFORNIA LEGISLATURE— 2023–2024 REGULAR SESSION

Assembly Bill

No. 3264

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Introduced by Assembly Member Petrie-Norris

February 16, 2024

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An act to amend Sections 330, 331, 335, 339, 340, 341.2, 341.5, 361, 365, 367, 373, 376, and 390 of, to repeal Sections 338 and 367.7 of, and to repeal Article 4 (commencing with Section 355) of Chapter 2.3 of Part 1 of Division 1 of, the Public Utilities Code, relating to electricity. An act to add Section 25325 to the Public Resources Code, and to amend Sections 381, 850, and 8386.3 of, and to add Sections 380.7, 835, and 937.5 to, the Public Utilities Code, relating to electricity.

LEGISLATIVE COUNSEL'S DIGEST

AB 3264, as amended, Petrie-Norris. Electricity: Power Exchange. Electricity.

Existing law establishes the State Energy Resources Conservation and Development Commission (Energy Commission) and prescribes its authorities, duties, and responsibilities pertaining to energy matters. Existing law vests the Public Utilities Commission (PUC) with regulatory jurisdiction over public utilities, including electrical corporations. Existing law requires all charges demanded or received by a public utility for a product or commodity furnished, or to be furnished, or any service rendered, or to be rendered, to be just and reasonable.

This bill would state the intent of the Legislature that the Energy Commission, in consultation with the PUC, review all feasible options for the allocation to ratepayers of costs required to meet the needs of the state’s electrical grid. The bill would state the intent of the Legislature that the PUC, in collaboration with the Energy Commission, produce an affordability metric for use in general rate cases and any application for the recovery of costs from ratepayers.

Existing law requires the PUC to allocate certain funds collected from ratepayers for various purposes, including cost-effective energy efficiency and conservation activities.

This bill would make nonsubstantive changes to that provision.

Existing law authorizes the PUC to issue a financing order to allow recovery through fixed recovery charges of certain costs and expenses, if an electrical corporation files for recovery of recovery costs, as defined, and the PUC finds that some or all of those costs and expenses are just and reasonable, as specified, or the PUC allocates to the ratepayers some or all of those costs and expenses, as provided. Existing law defines various terms for these purposes.

This bill would make nonsubstantive changes to the provision related to the costs and expenses eligible for a financial order and to those definitions. The bill would state the intent of the Legislature that the recovery of costs and expenses for which a financing order is issued is to be recovered through a fixed charge pursuant to requirements established by the Legislature. The bill would state the intent of the Legislature that the financing entity of an electrical corporation authorized by the PUC under a financing order be authorized to issue recovery bonds upon approval by the PUC in a financing order. The bill would state the intent of the Legislature to prevent the inclusion in the rate base of an electrical corporation funds securitized by the electrical corporation.

Existing law requires each electrical corporation to annually prepare and submit a wildfire mitigation plan to the Office of Energy Infrastructure Safety for review and approval, as provided. Existing law specifies the duties of the office in overseeing the electrical corporations’ compliance with their approved wildfire mitigation plans.

This bill would make nonsubstantive changes to the provisions specifying the duties of the office in overseeing the electrical corporations’ compliance with their approved wildfire mitigation plans.

Existing law establishes a Power Exchange as a nonprofit public benefit corporation to provide an efficient competitive auction, open on a nondiscriminatory basis to all suppliers of electricity, that meets the loads of all of its customers at efficient prices.

This bill would abolish the Power Exchange and would make various conforming changes.

Digest Key

Vote: MAJORITY   Appropriation: NO   Fiscal Committee: NO   Local Program: NO  

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Bill Text

The people of the State of California do enact as follows:

SECTION 1.

 Section 25325 is added to the Public Resources Code, to read:

25325.

 It is the intent of the Legislature that the commission, in consultation with the Public Utilities Commission, review all feasible options for the allocation to ratepayers of costs required to meet the needs of the state’s electrical grid.

SEC. 2.

 Section 380.7 is added to the Public Utilities Code, to read:

380.7.

 It is the intent of the Legislature that the commission, in collaboration with the Energy Commission, produce an affordability metric for use in general rate cases and any application for the recovery of costs from ratepayers.

SEC. 3.

 Section 381 of the Public Utilities Code is amended to read:

381.

 (a) To ensure that the funding for the programs described in subdivision (b) and Section 382 are not commingled with other revenues, the commission shall require each electrical corporation to identify a separate rate component to collect the revenues used to fund these those programs. The rate component shall be a nonbypassable element of the local distribution service.

(b) The commission shall allocate funds collected pursuant to subdivision (a), and any interest earned on collected funds, to programs that enhance system reliability and provide in-state benefits as follows:

(1) Cost-effective energy efficiency and conservation activities.

(2) Public interest research and development not adequately provided by competitive and regulated markets.

(3) In-state operation and development of existing and new and emerging eligible renewable energy resources, as defined in Section 399.12.

(c) The commission shall order the respective electrical corporations to collect and spend these funds at the levels and for the purposes required in Section 399.8.

(d) Each electrical corporation shall allow customers to make voluntary contributions through their utility bill payments as either a fixed amount or a variable amount to support programs established pursuant to paragraph (3) of subdivision (b). Funds collected by electrical corporations for these purposes shall be forwarded in a timely manner to the appropriate fund as specified by the commission.

SEC. 4.

 Section 835 is added to the Public Utilities Code, to read:

835.

 (a) It is the intent of the Legislature that, for the purpose of mitigating the impacts to ratepayers of capital investments, if an electrical corporation submits an application for recovery of costs and expenses in rates and the commission finds that some or all of the costs and expenses identified in the electrical corporation’s application are just and reasonable pursuant to Section 451, the electrical corporation may file an application requesting the commission to issue a financing order to authorize the recovery of those just and reasonable costs and expenses by means of a financing order, with those costs and expenses being recovered through a fixed charge pursuant to requirements that shall be established by the Legislature.

(b) It is the further intent of the Legislature that the financing entity of an electrical corporation so authorized by the commission may issue recovery bonds upon approval by the commission in a financing order.

SEC. 5.

 Section 850 of the Public Utilities Code is amended to read:

850.

 (a) This article applies in any of the following circumstances:

(1) If an electrical corporation applies to the commission for recovery of costs and expenses related to a catastrophic wildfire and the commission finds some or all of the costs and expenses to be reasonable pursuant to Section 451.1, or for the amount of costs and expenses determined pursuant to subdivision (c) of Section 451.2, then the electrical corporation may file an application requesting the commission to issue a financing order to authorize these costs and expenses to be recovered through fixed recovery charges pursuant to this article.

(2) If an electrical corporation submits an application for recovery of costs and expenses related to catastrophic wildfires, including fire risk mitigation capital expenditures identified in subdivision (e) of Section 8386.3, in a proceeding to recover costs and expenses in rates and the commission finds that some or all of the costs and expenses identified in the electrical corporation’s application are just and reasonable pursuant to Section 451, the electrical corporation may file an application requesting the commission to issue a financing order to authorize the recovery of those just and reasonable costs and expenses by means of a financing order, with those costs and expenses being recovered through a fixed charge pursuant to this article. This paragraph does not apply for costs and expenses incurred by the electrical corporation after December 31, 2035.

(3) (A) An electrical corporation may file an application requesting the commission to issue a financing order to authorize the recovery of verified incremental undercollection amounts for calendar year 2020 through fixed recovery charges pursuant to this article, if an electrical corporation’s annual true-up advice letter is accepted and either or both of the following incremental undercollection amounts are verified for calendar year 2020:

(i) An incremental undercollection amount equal to the difference between the forecasted amount of billed revenues for that year, based on the authorized sales forecast, and the revenues actually billed by an electrical corporation with respect to all revenue balancing accounts, if the incremental amount as a percent of the forecasted amount of billed revenues for that year is at least 5 percent.

(ii) An incremental undercollection amount equal to the residential and small business customer bad debt expense recorded for that year that exceeds the bad debt expense for that year that was adopted by the commission in the general rate case, if the incremental undercollection amount is otherwise eligible for recovery in rates.

(B) The incremental undercollection amounts subject to a commission-approved financing order shall be prohibited from being recovered through any other cost recovery application, mechanism, or request by the electrical corporation.

(C) The commission shall ensure any costs included in incremental undercollections described in this paragraph and subject to a financing order are just and reasonable consistent with the requirements of subdivision (a) of Section 850.1.

(D) In resolving a request for the issuance of a financing order, the commission may assign cost recovery to each customer class based on their contribution to the incremental undercollection described in this paragraph.

(b) For the purposes of this article, the following terms shall have the following meanings: definitions apply:

(1) “Ancillary agreement” means a bond insurance policy, letter of credit, reserve account, surety bond, swap arrangement, hedging arrangement, liquidity or credit support arrangement, or other similar agreement or arrangement entered into in connection with the issuance of recovery bonds that is designed to promote the credit quality and marketability of the bonds or to mitigate the risk of an increase in interest rates.

(2) “Catastrophic wildfire amounts” means the portion of costs and expenses the commission finds to be just and reasonable pursuant to Section 451.1 or the amount determined pursuant to subdivision (c) of Section 451.2.

(3) “Consumer” means any an individual, governmental body, trust, business entity, or nonprofit organization that consumes electricity that has been transmitted or distributed by means of electric electrical transmission or distribution facilities, whether those electric electrical transmission or distribution facilities are owned by the consumer, the electrical corporation, or any other party.

(4) “Financing costs” means the costs to issue, service, repay, or refinance recovery bonds, whether incurred or paid upon issuance of the recovery bonds or over the life of the recovery bonds, if they are approved for recovery by the commission in a financing order. “Financing costs” may include any of the following:

(A) Principal, interest, and redemption premiums that are payable on recovery bonds.

(B) A payment required under an ancillary agreement.

(C) An amount required to fund or replenish reserve accounts or other accounts established under an indenture, ancillary agreement, or other financing document relating to the recovery bonds.

(D) Taxes, franchise fees, or license fees imposed on fixed recovery charges.

(E) Costs related to issuing and servicing recovery bonds or the application for a financing order, including, without limitation, servicing fees and expenses, trustee fees and expenses, legal fees and expenses, accounting fees, administrative fees, underwriting and placement fees, financial advisory fees, original issue discount, capitalized interest, rating agency fees, and any other related costs that are approved for recovery in the financing order.

(F) Other costs as specifically authorized by a financing order.

(5) “Financing entity” means the electrical corporation or any a subsidiary or affiliate of the electrical corporation that is authorized by the commission to issue recovery bonds or acquire recovery property, or both.

(6) “Financing order” means an order of the commission adopted in accordance with this article, which shall include, without limitation, a procedure to require the expeditious approval by the commission of periodic adjustments to fixed recovery charges and to any associated fixed recovery tax amounts included in that financing order to ensure recovery of all recovery costs and the costs associated with the proposed recovery, financing, or refinancing thereof, including the costs of servicing and retiring the recovery bonds contemplated by the financing order.

(7) “Fixed recovery charges” means those nonbypassable rates and other charges, including, but not limited to, distribution, connection, disconnection, and termination rates and charges, that are authorized by the commission in a financing order to recover both of the following:

(A) Recovery costs specified in the financing order.

(B) The costs of recovering, financing, or refinancing those recovery costs through a plan approved by the commission in the financing order, including the costs of servicing and retiring recovery bonds.

(8) “Fixed recovery tax amounts” means those nonbypassable rates and other charges, including, but not limited to, distribution, connection, disconnection, and termination rates and charges, that are needed to recover federal and State of California income and franchise taxes associated with fixed recovery charges authorized by the commission in a financing order, but are not approved as financing costs financed from proceeds of recovery bonds.

(9) “Recovery bonds” means bonds, notes, certificates of participation or beneficial interest, or other evidences of indebtedness or ownership, issued pursuant to an executed indenture or other agreement of a financing entity, the proceeds of which are used, directly or indirectly, to recover, finance, or refinance recovery costs, and that are directly or indirectly secured by, or payable from, recovery property.

(10) “Recovery costs” means any of the following:

(A) The catastrophic wildfire amounts or costs pursuant to paragraph (2) of subdivision (a) authorized by the commission in a financing order for recovery.

(B) The incremental undercollection amounts that the commission authorizes for recovery in a financing order pursuant to paragraph (3) of subdivision (a).

(C) Federal and State of California income and franchise taxes associated with recovery of the amounts pursuant to subparagraph (A) or (B).

(D) Financing costs.

(E) Professional fees, consultant fees, redemption premiums, tender premiums, and other costs incurred by the electrical corporation in using proceeds of recovery bonds to acquire outstanding securities of the electrical corporation, as authorized by the commission in a financing order.

(11) (A) “Recovery property” means the property right created pursuant to this article, including, without limitation, the right, title, and interest of the electrical corporation or its transferee:

(i) In and to the fixed recovery charges established pursuant to a financing order, including all rights to obtain adjustments to the fixed recovery charges in accordance with Section 850.1 and the financing order.

(ii) To be paid the amount that is determined in a financing order to be the amount that the electrical corporation or its transferee is lawfully entitled to receive pursuant to the provisions of this article and the proceeds thereof, and in and to all revenues, collections, claims, payments, moneys, or proceeds of or arising from the fixed recovery charges that are the subject of a financing order.

(B) “Recovery property” shall not include a right to be paid fixed recovery tax amounts.

(C) “Recovery property” shall constitute a current property right, notwithstanding the fact that the value of the property right will depend on consumers using electricity or, in those instances where consumers are customers of the electrical corporation, the electrical corporation performing certain services.

(12) (A) “Revenue balancing account” means a balancing account reflecting the balance between the electrical corporation’s authorized revenue requirements relating to the volumetric sale of electricity and billed revenues associated with those sales. A revenue balancing account includes accounts reflecting the balance between the electrical corporation’s authorized distribution base revenue requirements and recorded billed revenues from authorized distribution rates, and accounts reflecting the difference between the amount of the discount provided to consumers enrolled in the California Alternative Rates for Energy (“CARE”) program and the CARE surcharge charged to non-CARE consumers.

(B) “Revenue balancing account” shall not include amounts reflecting the balance between costs and expenses relating to fuel and purchased electricity by the electrical corporation.

(13) “Service territory” means the geographical area that the electrical corporation provides with electric distribution service.

(14) “True-up adjustment” means a formulaic adjustment to the fixed recovery charges as they appear on customer bills that is necessary to correct for any overcollection or undercollection of the fixed recovery charges authorized by a financing order and to otherwise ensure the timely and complete payment and recovery of recovery costs over the authorized repayment term.

SEC. 6.

 Section 937.5 is added to the Public Utilities Code, to read:

937.5.

 It is the intent of the Legislature to enact provisions to prevent the inclusion in the rate base of an electrical corporation any funds securitized by that electrical corporation.

SEC. 7.

 Section 8386.3 of the Public Utilities Code is amended to read:

8386.3.

 (a) The Wildfire Safety Division office shall approve or deny each wildfire mitigation plan and update submitted by an electrical corporation within three months of its submission, unless the division office makes a written determination, which shall include reasons supporting the determination, that the three-month deadline cannot be met. Each electrical corporation’s approved plan shall remain in effect until the division office approves the electrical corporation’s subsequent plan. The division office shall consult with the Office of the State Fire Marshal on the review of each wildfire mitigation plan and update. In rendering its decision, the division office shall consider comments submitted pursuant to subdivision (d) of Section 8386. Before approval, the division office may require modifications of the plan. After approval by the division, office, the commission shall ratify the action of the division. office.

(b) The Wildfire Safety Division’s office’s approval of a plan is not a defense to any enforcement action by the office or for a violation of a commission enforcement action, decision, order, or rule.

(c) Following approval of a wildfire mitigation plan, the Wildfire Safety Division office shall oversee compliance with the plan consistent with all of the following:

(1) Three months after the end of an electrical corporation’s initial compliance period, as established by the Wildfire Safety Division office pursuant to subdivision (b) of Section 8386, and annually thereafter, each electrical corporation shall file with the division office a report addressing the electrical corporation’s compliance with the plan during the prior calendar year.

(2) (A) Before March 1, 2021, and before each March 1 thereafter, the Wildfire Safety Division, of each year, the office, in consultation with the Office of the State Fire Marshal, shall make available a list of qualified independent evaluators with experience in assessing the safe operation of electrical infrastructure.

(B) (i) Each electrical corporation shall engage an independent evaluator listed pursuant to subparagraph (A) to review and assess the electrical corporation’s compliance with its plan. The engaged independent evaluator shall consult with, and operate under the direction of, the office. The independent evaluator shall issue a report on July 1 of each year in which a report required by paragraph (1) is filed. As a part of the independent evaluator’s report, the independent evaluator shall determine whether the electrical corporation failed to fund any activities included in its plan.

(ii) The Wildfire Safety Division office shall consider the independent evaluator’s findings, but the independent evaluator’s findings are not binding on the division, office, except as otherwise specified.

(iii) The independent evaluator’s findings shall be used by the Wildfire Safety Division office to carry out its obligations under Article 1 (commencing with Section 451) of Chapter 3 of Part 1 of Division 1.

(iv) The independent evaluator’s findings do not apply to events that occurred before the initial plan is approved for the electrical corporation.

(3) The commission shall authorize the electrical corporation to recover in rates the costs of the independent evaluator.

(4) The Wildfire Safety Division office shall complete its compliance review within 18 months after the submission of the electrical corporation’s compliance report.

(5) (A) An electrical corporation shall notify the Wildfire Safety Division, office, within one month after it completes a substantial portion of the vegetation management requirements in its wildfire mitigation plan, of the completion. Upon receiving the notice from the electrical corporation, the division office shall, consistent with its authority pursuant to paragraph (1) of subdivision (a) of Section 326, promptly audit the work performed by, or on behalf of, the electrical corporation. The audit shall specify any failure of the electrical corporation to fully comply with the vegetation management requirements in the wildfire mitigation plan. The division office shall provide the audit to the electrical corporation. The electrical corporation shall have a reasonable time, as determined by the division, office, to correct and eliminate any deficiency specified in the audit.

(B) The Wildfire Safety Division office may engage its own independent evaluator, who shall be a certified arborist and shall have any other qualifications determined appropriate by the division, office, to conduct the audit specified in subparagraph (A). The independent evaluator shall consult with, and operate under the direction of, the division. office.

(C) Within one year of the expiration of the time period for an electrical corporation to correct and eliminate any deficiency identified in the audit, the independent evaluator shall issue a report to the electrical corporation, the Wildfire Safety Division, office, and the Safety and Enforcement Division of the commission specifically describing any failure of the electrical corporation to substantially comply with the substantial portion of the vegetation management requirements in the electrical corporation’s wildfire mitigation plan. The report shall be made publicly available. The Wildfire Safety Division office shall include the report in its compliance review prepared pursuant to paragraph (4).

(6) Each electrical corporation shall reimburse the Wildfire Safety Division office for the division’s office’s costs to implement this section with respect to that electrical corporation.

(d) (1) An electrical corporation shall not divert revenues authorized by the commission to implement the wildfire mitigation plan to any activities or investments outside of the plan. An electrical corporation shall notify the commission by advice letter of both of the following:

(A) The date when the electrical corporation projects that it will have spent, or incurred obligations to spend, its entire annual revenue requirement for vegetation management in its wildfire mitigation plan not less than 30 days before that date.

(B) A detailed summary of the electrical corporation’s workforce development efforts completed in compliance with the Office of Federal Contract Compliance Programs, including, but not limited to, all of the following:

(i) A description of and data on the extent to which the electrical corporation advertises job openings to members of California Conservation Corps crews and members of community conservation corps, as defined in Section 14507.5 of the Public Resources Code.

(ii) A description of and data on the extent to which the electrical corporation, in seeking to develop potential members of its workforce, has links to or otherwise works with community-based or other organizations that work with current members of California Conservation Corps crews and current members of community conservation corps, as defined in Section 14507.5 of the Public Resources Code, and formerly incarcerated conservation crew members.

(iii) A description of the extent to which the electrical corporation supports skill-development efforts that would assist current and former members of California Conservation Corps crews, members of community conservation corps, as defined in Section 14507.5 of the Public Resources Code, formerly incarcerated conservation crew members, and others with similar skillsets in acquiring skills needed to complete work on or near electrical facilities. Nothing in this clause alters This clause does not alter the requirements imposed on an employer pursuant to Section 12952 of the Government Code.

(2) An electrical corporation shall provide to the office a copy of the advice letter pursuant to paragraph (1) at the same time the advice letter is submitted to the commission.

(e) The commission shall not allow a large electrical corporation to include in its equity rate base its share, as determined pursuant to the Wildfire Fund allocation metric specified in Section 3280, of the first five billion dollars ($5,000,000,000) expended in aggregate by large electrical corporations on fire risk mitigation capital expenditures included in the electrical corporations’ approved wildfire mitigation plans. An electrical corporation’s share of the fire risk mitigation capital expenditures and the debt financing costs of these fire risk mitigation capital expenditures may be financed through a financing order pursuant to Section 850.1 subject to the requirements of that financing order.

(f) This section does not impose any liability on the Wildfire Safety Division office regarding the performance of its duties.