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Enron Mail |
Legislative Weekly=20
July 5, 2001=20 Issue 27, Volume 3=20 A weekly publication from the=20 California Manufacturers & Technology Association=20 detailing legislative and regulatory developments in Sacramento A DEDICATED REVENUE STREAM=20 Department of Water Resources Wants Money to Flow Their Way=20 Six months ago Department of Water Resources took over power purchasing=20 responsibility from the nearly insolvent investor-owned utilities. The=20 general fund was first tapped, then a short-term loan allowed the purchasin= g=20 to continue.? Now the state needs to issue $13.4 billion in bonds authorize= d=20 in SBX1 31 (Burton D-San Francisco), to be paid back by utility ratepayers= =20 for more than a decade.=20 On July 12 the CPUC must decide how much of utility rates should be siphone= d=20 off to pay off the bonds and the ongoing costs of power being purchased on= =20 the spot market and under short and long term power contracts signed by DWR= .=20 This =01&dedicated revenue stream=018 (DRS) will be based on the latest ana= lysis by=20 utility and administration financial experts. The big question is whether= =20 current rates are high enough to cover all utility generation costs (nuclea= r,=20 qualifying facilities, hydro, etc.), DWR power costs, and all the other=20 elements of rates (public purpose charges, transmission and distribution,= =20 etc.).? Many assumptions about the spot market, the effects of the FERC pri= ce=20 mitigation order and the level of customer demand enter into the calculatio= n=20 of the DRS.? Wholesale spot prices have recently dropped, but there still= =20 could be a shortfall that would need to be made up in higher rates or with= =20 more borrowing to push off repayment to the future.=20 In related news, last week the CPUC nearly ordered the suspension of direct= =20 access in order to ensure that customers would not be able to leave utility= =20 service and thus escape the payment of bond and DWR power costs.? Customer= =20 groups were able to persuade regulators to put off the decision pending=20 legislation that could clarify a direct access customer's obligation to pay= a=20 fair share of these costs.? To that end, ABX2 10 (Hertzberg D-Van Nuys) is= =20 being amended to make the bonds secured by the DRS rather than DWR contract= s,=20 thus creating more regulatory flexibility regarding the terms of direct=20 access, and SBX2 27 (Bowen D-Marina del Rey) and ABX2 42 (Kelley R-Idyllwil= d)=20 are the competing vehicles for how exit fees should be calculated.=20 ?=20 LOCKYER CONVENES NEW GRAND JURY ON ALLEGED PRICE GOUGING=20 California Attorney General Bill Lockyer appointed 19 new members to a=20 Sacramento County Grand Jury this week to consider the growing volume of=20 evidence from both sides on the continuing investigations of alleged price= =20 gouging by power generators. The Grand Jury to be convened later this week= =20 will be issuing subpoenas for testimony and documents and is expected to be= =20 impaneled for several months.=20 In a related development, Lt. Governor Cruz Bustamante and Assemblywoman=20 Barbara Matthews reportedly will introduce two new =01&whistleblowers=018 a= t the=20 state capitol on Thursday from a San Diego power plant. Recent testimony fr= om=20 three employees before a legislative committee investigating charges of=20 wrongdoing on the part of a San Diego power plant claimed their employer,= =20 Duke Energy, manipulated the supply of electricity from the plant to increa= se=20 the company's profits. In response, generators have produced documents=20 showing they were simply following the direction from the State Independent= =20 System Operator to modify their electricity output.=20 ?=20 WINDFALL PROFITS TAX LEGISLATION TO BE CONSIDERED=20 SBX2 1 (Soto D-Pomona) would impose a =01&windfall profits=018 tax on elect= rical=20 power generators and is scheduled for hearing on Monday, July 9th in the=20 Assembly Revenue and Taxation Committee. CMTA opposes the bill.=20 SBX2 1 pertains to all types of electricity generation including=20 co-generation produced and sold by manufacturers and generation by other=20 qualified facilities such as bio-mass and solar plants.? It causes the=20 =01&excess profit=018 to be confiscated by the state from a middleman in th= e supply=20 chain: a 100% tax.? This revenue is then distributed to individual taxpayer= s=20 but not to business taxpayers (who paid the middleman the excess in the fir= st=20 place).=20 The bill is a state-imposed price cap.? Excess profit is defined as anythin= g=20 exceeding a cost-based rate established by the PUC on a plant-by-plant=20 basis.?? If enacted, SBX2 1 would have almost no effect on merchant=20 generators, as most of them have entered into contracts with the state that= =20 pass on the cost of any increased taxes to the state.? Furthermore, this=20 legislation would violate federal law which preempts state law in this area= .?=20 In accordance with the 1979 federal law, the PUC has set the price at which= =20 co-generators and other QFs can sell their energy.? It is the cost that the= =20 utility would have charged had it performed the sale. This formula was=20 devised to encourage manufacturers to build on-site generation and sell=20 excess power for public use.? This formula did not guarantee a profit for= =20 such generators but gave them an incentive to build generation facilities a= nd=20 operate efficiently.? Changing the formula would result in manufacturers=20 refusing to build more generation facilities and increased litigation costs= =20 until the courts wipe away SBX2 1 (Soto).=20 ?=20 LIABILITY FOR ELECTRICAL NON-GENERATION=20 CMTA strongly opposed ABX2 51 (Reyes D-Fresno) which would make any retail = or=20 wholesale operator of an electric generation facility strictly liable for a= ny=20 damages proximately caused by that generator's reduction or discontinuance = of=20 service for economic reasons. Neither negligence nor intent must be proven in order to establish strict= =20 liability.? Under this legislation, a generator could be held strictly liab= le=20 for damages that resulted if electricity supplies were curtailed when the= =20 generator was temporarily shut down to perform routine maintenance,=20 unscheduled maintenance or due to other external business factors (i.e. the= =20 high cost of fuel).? ABX2 51 also would make it difficult for a generator t= o=20 permanently close a facility, even if the facility was not operating=20 profitably.=20 Generators are only one component of many that work together to provide=20 reliable electricity supplies throughout the State.? However, ABX2 51 would= =20 result in generators shouldering the responsibility for all damages,=20 liability and responsibility for electricity shortages.=20 Amendments were taken to remove co-generation from the bill.? However, CMTA= =20 will continue to oppose the measure on the principal that imposing strict= =20 liability on generators will only discourage generators from siting new=20 facilities and selling their electricity within the State.=20 The measure passed from the Assembly Judiciary Committee on July 2 and next= =20 will be heard in the Assembly Energy Costs and Availability Committee. ?=20 STREAMLINING THE PIPELINE PERMITTING PROCESS=20 The CMTA is supporting ABX2 47 (Diaz D-San Jose) which would increase the= =20 financial threshold necessary to obtain a Public Utilities Commission (PUC)= =20 Certificate of Public Convenience and Necessity (CPCN) from $50 million to= =20 $100 million.? Increasing this threshold will allow for expedited=20 construction of new natural gas pipelines and will help to shore up the=20 infrastructure needed to increase the State's natural gas capacity. The measure also streamlines the permitting process for new pipeline=20 construction, requiring the PUC to act on a permit request within 12 months= =20 of receiving a completed application.? Failure to act on the permit would= =20 result in the automatic issuance of a CPCN.=20 Natural gas is a necessary component of many CMTA members=01, industrial an= d=20 manufacturing operations.? Given the State's heavy reliance on imported=20 natural gas, CMTA supports expediting the construction of new pipelines to= =20 ensure that a sufficient supply of this critical fuel is available for use. ?=20 REPORTING TO THE EOB MAY OPEN RECORDS FOR PUBLIC REVIEW=20 A measure that allows the Energy Oversight Board (EOB) to inspect and make= =20 public all of a facility's records, data, accounts, books or documents=20 related to reliability, availability, and the cost of electric service was= =20 heard in the Senate Energy, Utilities and Communications Committee on June= =20 27.=20 CMTA testified in opposition to ABX2 28 (Migden D-San Francisco) which=20 substantially expands the authority of the Independent System Operator (ISO= )=20 to adopt operating and availability standards for electricity generation an= d=20 transmission.=20 ABX2 28 also would allow the ISO to regulate a facility's co-generation=20 scheduling and maintenance practices, which would have the practical effect= =20 of giving the ISO regulatory authority over a business=01, primary industri= al=20 operations.=20 Since many of the co-generation facilities do not keep separate records for= =20 the electricity component of their facilities, this requirement could open = up=20 much of the facility's private operational records for their competitors=01= , and=20 public review.=20 Committee members expressed concern regarding the effect of expanding the= =20 authority of the Energy Oversight Board, how the measure affects the handli= ng=20 of documents subject to the Public Records Act, and clarification regarding= =20 the purpose for which documents would be used.=20 The measure was subject to testimony and discussion, however a vote was not= =20 taken. The measure will again be heard on July 10.=20 ?=20 NEW FISHING LIMITS FOR REGIONAL WATER BOARDS=20 In late May, Assemblymember Fran Pavley=01,s (D-Agoura Hills) AB 1664, whic= h=20 makes various changes to state and regional water board penalty authority,= =20 was amended on the Assembly Floor to remove language that would have create= d=20 major new penalty exposures for manufacturers.? Shortly thereafter, questio= ns=20 surfaced concerning a subtle change to a section of the water code that=20 grants authority to the regional boards to issue orders for investigation o= f=20 waste discharges.? The concern pertains to the ability of the regional boar= ds=20 to issue investigation orders to parties =01&suspected of having discharged= =018=20 waste at some point in the past.? Orders issued under these circumstances= =20 typically involve contentious property access issues and costly monitoring= =20 requirements.? This section of the code is already used liberally by the=20 regional boards and the change in AB 1664 arguably invites more orders that= =20 lack a clear nexus between the discharger=01,s past activities and the susp= ected=20 discharge.=20 AB 1664 was amended earlier this week in Senate Environmental Quality=20 Committee to address this issue.? The bill's sponsor, the State Water=20 Resources Control Board, and Assemblymember Pavley agreed to take language= =20 requiring that any new investigation order be accompanied by a written=20 statement identifying the evidence upon which the order is based.? This=20 clarification applies to all circumstances under which investigation orders= =20 are issued and should help to ensure that regional boards do not abuse this= =20 authority.=20 ?=20 CAL-OSH STANDARDS BOARD TO CONSIDER ERGONOMIC RULE=20 On the agenda for the July 19, 2001 meeting in San Diego, the California=20 Occupational Safety and Health Standards Board (Standards Board) will=20 consider a petition from organized labor to adopt the recently overturned= =20 federal Occupational Safety and Health Act (OSHA) ergonomic rule as a state= =20 rule for California.? If adopted, it would replace California's repetitive= =20 motion standard (Title 8, CCR 5110).=20 Employers opposed the federal rule because most employers believed it was= =20 based on dubious science that could not accurately identify the cause of=20 repetitive motion injuries attributable to work.? The federal rule containe= d=20 restrictions that would prohibit doctors from providing information on=20 non-occupational causation of injury that would interfere with an employer'= s=20 ability to determine the compensability of a claim under California workers= =01,=20 compensation law =01&arising out of and in the course of employment=018.? O= ther=20 onerous provisions include:? Requiring employers to pay work restrictions= =20 benefits that require a 90% or 100% replacement rate of an injured worker's= =20 gross pay; and the continuation of employer provided fringe benefits for up= =20 to 3 months in the case of a musculoskeletal disorder related to work.? The= =20 federal rule would have carved out a completely different standard for=20 musculoskeletal disorders (injuries due to repetitive motion) with remedies= =20 substantially more costly than other injuries under the workers=01, compens= ation=20 system.=20 CMTA is requesting that members send letters to the Standards Board or atte= nd=20 the meeting to urge board members to reject the petition.? Write to:? John= =20 MacLeod, Executive Officer, Cal-OSH Standards Board, 2520 Venture Oaks Way,= =20 Suite 350, Sacramento, CA 95833.? If you plan to attend the meeting, the=20 address is 1350 Front Street, State Building Auditorium, San Diego,=20 California.? Please call Willie Washington at (916) 441 5420 if you have=20 questions.=20 ?=20 ?=20 www.cmta.net=20 California Manufacturers & Technology Association=20 980 9th Street, Suite 2200=20 Sacramento, CA? 95814=20 (916) 441-5420 phone=20 (916) 447-9401 fax=20 ?
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