Provisions of AB 1890

Prof. Robert B. Laughlin
Department of Physics
Stanford University, Stanford, CA 94305
(Copied 4 May 09)

The text of California Law AB 1890, The Electric Utility Industry Restructuring Act, which is available here, is extremely poorly written and functionally incomprehensible. Below is a summary of its provisions generated by the U. S. Energy Information Agency

The Electric Utility Industry Restructuring Act (Assembly Bill 1890) makes the generation of electricity competitive in California. The legislation became law on September 23, 1996.

Before restructuring, a single utility provided each customer with generation, transmission, distribution, and metering and billing of electricity. As of March 31, 1998, the new structure allows customers in most, but not all, existing electric utility service areas to choose their electric generation supplier.

Restructuring also brings changes to the transmission of electricity. Previously restricted transmission facilities will be opened to power generators on a fair and equitable basis, overseen by a new organization, the Independent System Operator (ISO). The ISO has been given the responsibility for assuring reliability of the high voltage transmission system. Local utilities will continue to distribute electricity.

The following section provides a summary of key concepts of the new restructuring legislation:

The New Market Structure

Transition Cost Recovery

Reducing the CTC Cost

Up to 185 megawatts (MW) of irrigation district load is exempt from paying the CTC costs. Of these, 101 MW have been allocated by the California Energy Commission to qualifying districts as required by AB 1890. At least 50 percent of this exemption is to be used for agricultural pumping. In addition, water pumping loads served by members of the Southern San Joaquin Valley Power Authority and the Eastside Power Authority are exempt from the CTC. The legislation also specifies that the Merced Irrigation District will receive a 75 MW CTC exemption.

These benefits, however, are only available to customers within the selected irrigation district boundaries. Other farmers can reduce the amount paid by taking actions which lower electricity consumption. Since the CTC amount paid with each bill is the CTC rate multiplied by electricity consumption, reduced electricity use will lower the CTC paid. Modifications to production equipment or operations, changes in manufacturing processes, fuel switching, conservation efforts, or other activities which reduce electricity consumption will lower that customer's CTC payment.

Customers who completely terminate electricity service are not responsible for CTC (for example, individuals or firms that physically leave the utility service area). The CTC does not apply to emergency equipment, nor to any load served by non-mobile cogeneration or self-generation after June 30, 2000.

Electric Rate Freeze and Reductions in Rates

Regulated IOU rates for agricultural, residential, industrial, and large commercial customers were frozen at their June 1996, levels until utilities recover their generation related uneconomic costs through the competitive transition charge or until March 31, 2002, whichever is earlier. Starting January 1, 1998, rates for residential and small commercial customers (defined as 20 kilowatts or less peak demand) were reduced by 10 percent and will remain at that level until utilities recover their generation related uneconomic costs through the competitive transition charge, or until March 31, 2002, whichever is earlier.

Public Interest Funding

The restructuring legislation also established funding for public interest programs to be allocated during the four-year transition period: $248 million for the Public Interest Energy Research Program (PIER); $540 million for the Renewable Technology Program; and about $912 million for the California Board for Energy Efficiency.

The Energy Commission will allocate $62 million a year from 1998 to 2001 to fund research, development and demonstration projects in the following areas: renewable energy technologies, environmentally preferred advanced generation, energy-related environmental research, end use energy efficiency and strategic energy research.

The Energy Commission will also provide $540 million to consumers and producers of renewable energy, such as wind, solar, geothermal, biomass, landfill gas and small hydroelectric power. The funding will be collected from ratepayers of investor-owned utilities over the next four years. This program will provide funds to renewable energy generators, as well as credits for consumers purchasing renewable electricity from a non-utility provider.

The California Public Utilities Commission created the California Board for Energy Efficiency to implement energy efficiency programs. The purpose of the Board is to oversee the independent administration of energy efficiency services designed to transform markets by: (a) providing cost-beneficial energy efficiency services to customers not normally served by markets; (b) offering customers meaningful information on the costs and benefits of energy efficiency measures; (c) reducing market barriers to investments in energy efficient products and services; and (d) creating a sustainable and competitive energy efficiency services market./p>
Adopted from:
California Energy Commission, "New Options For Agricultural Customers: California's Electric Industry Restructuring"
(Sacramento, June 1998), pp. 10-13.
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