PUC “Draft Rate Agreement” vs. SB x2 18

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Checks and Balances at Stake in Upcoming Energy Policy Decisions

Two competing proposals — Senate Bill x2 18 (Burton) and the California Public Utility Commission’s (PUC) proposed “Draft Rate Agreement” — are poised to dictate the future of California’s energy procurement policies and procedures. These proposals share the same central focus of guaranteeing the security of revenue bonds to be issued by theCalifornia Department of Water Resources (DWR). Beyond that critical foundation, however, the two proposals differ greatly in their implications for open, accountable and just energy practices for decades to come.

What is the urgency behind these proposals?

The California State General Fund has been significantly depleted as a result of the exorbitantly high electricity prices charged to the state during the eight months in which the state has procured power on behalf of the beleaguered utilities. Earlier this year, Governor Davis signed legislation authorizing an issuance of revenue bonds to repay the Treasury. Wall Street bond buyers, before purchasing bonds, require assurances that they will be repaid. The primary concern of each proposal — SB x2 18 and the draft Rate Agreement — is to create the secure rate stream to pay the principal and interest on these bonds necessary to make this bond issuance viable.

How are the proposals similar?

  • Both create an irrevocable, dedicated rate stream from utility ratepayers to pay the costs of issuing, servicing and retiring the bonds.

  • Both proposals ensure that the CPUC will permit the DWR to recover costs of purchasing power on behalf of consumers.

How do the proposals differ?

FEATURE: SB x2 18 “Draft Rate Agreement”
Review of DWR Revenue Requirements CPUC is required to review the DWR’s revenue requirements and is entitled to any information necessary to do so. DWR is exempt from any PUC review. Moreover, PUC is obligated to pass through to ratepayers, without review or adjustment, all requested DWR revenue requirements.
Opportunity for Public Process and Review CPUC is required to conduct at least one public hearing and provide an opportunity for public comment on the revenue requirements prior to their adoption. No public process or comments are permitted for as long as the bonds are outstanding.
Oversight of DWR Costs All DWR administrative costs must be reviewed as part of their annual budget which must be approved and appropriated by the Legislature. No legislative or CPUC oversight of any DWR costs.
Payment of DWR consultant and professional services costs DWR costs incurred for consulting, legal, technical, professional or engineering services may only be paid for from appropriations by the Legislature and may not exceed those appropriations. DWR may pass all such costs directly onto ratepayers without review.
Pass-through of Demand-Management costs to ratepayers Does not include load-management or conservation costs in DWR rate revenue requirement. Costs of programs passed on to ratepayers without review.
DWR Accountability DWR decisions, procedures and documents are open for review by the Legislature, the PUC and the Public. DWR is accountable only to Governor.

In the wake of the energy deregulation disaster, California leaders must ensure a reliable, affordable and accountable energy future.

Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

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