Exceptions to the Rule: Bypassing the California Transition Charge
Legislative waivers from the "nonbypassable" CTC could favor
a fortunate few, opening up competitive options even
of 1998.With a fountain pen and a flourish of promises, California Gov. Pete Wilson ushered in the future on September 23 when he signed California's latest legal missive on electric utility restructuring, known as Assembly Bill (AB) 1890.
"Every time a resident of this state flicks on the electric switch, they pay 40 percent more than residents across the United States," Wilson proclaimed. "The legislation I am signing will end that by ushering in a new era of competition, making California the first state to dismantle its electric monopoly."
Whether the legislation matches such a grand vision remains to be seen, but it certainly moves the process forward by putting into law many of the major industry restructuring policies formulated over the past 30 months by the California Public Utilities Commission (CPUC).
The price of this grand package hasn't come cheap. The changes to the state Public Utilities Code envisioned by AB 1890 include a series of compromises by and guarantees to utilities, industry stakeholders, and ratepayers. Among the promises: the power pool (Power Exchange) and
independent transmission system desired by utilities and regulators; "direct access" competition sought by large energy users; even a
10-percent rate decrease for residential and small commercial ratepayers by 1998, with another 10 percent promised by 2003.
But the biggest promise in the new law, in terms of monetary impact, comes from the willingness of the state legislature to honor the CPUC's pledge that investor-owned utilities (IOUs) would get the opportunity to fully recover all of the costs of their stranded assets. Even municipal utilities gained some assurance of protection of stranded-cost recovery, in return for opening their territories to competition and turning transmission control over to the independent system operator (ISO).
The long debate successfully narrowed down the concept of "stranded costs" (em from the utilities' expected lost revenue streams to the net book value of uneconomic generation resources. But AB 1890 also expands the stranded-cost universe a bit by including union labor transition costs, the buyout of independent power contracts, and more than $700 million in support of renewable resources, energy efficiency, and utility research programs from 1998 through 2001.
Most of the cost of these promises will be bundled into the competition transition charge (CTC), which will be assessed against all current customers of the IOUs, to be paid off by the end of 2001 (except for union buyouts, nuclear buydowns, and remaining power-purchase commitments, which extend beyond that date).
The total cost of this promise (em never fully quantified even after two years of public hearings and debate (em could run up to about $30 billion by the time CTC is fully paid off. Without a big number to fix on, it's almost impossible to say how high the CTC will run on a cents-per-kilowatt basis.
With AB 1890 imposing a rate freeze at June 1996 levels for larger customers, the CTC is best calculated as the difference between the pool energy price, the unbundled