Reliable Electric Service Act of 2004
The California legislature is continuing its analysis of a bill addressing electric industry restructuring which would reintroduce retail choice to the state of California. California Assembly Speaker Fabian Nunez introduced the bill, referred to as the Reliable Electric Service Act of 2004 (the “Act”) in February 2004. In May, the California Assembly pproved an amended version of the Act, referring it to the Senate Committee on Energy, Utilities and Communications (EU&C). EU&C amended the bill and referred it to the Senate Committee on Rules. The Act was amended again on July 29, 2004 and rereferred to the Rules Committee. The Rules Committee sent the Act to the Senate Committee on Appropriations for review.

Retail Electric Choice
The Act authorizes the California Public Utilities Commission (“CPUC”) to adopt rules allowing eligible high usage customers to choose electricity suppliers. The Act requires utilities to file a long-term integrated resource plan which must be approved by the CPUC. The Act also requires the CPUC to submit a plan to streamline the transmission siting process and to establish, in consultation with the California Independent System Operator, resource adequacy requirements for ensuring the availability of generating capacity to meet load demands and reserve operating requirements. The Act repeals the state’s earlier attempts at restructuring which were implemented in the mid to late 1990’s, prior to the California energy crisis of the early 2000s.

Cost Recovery
In addition to authorizing a measure of retail choice, the Act expressly requires the CPUC to approve “just and reasonable rates sufficient to ensure that the electrical corporation fully recovers [its] … initial capital investment found reasonable by the commission … [and the] full cost of contracting for generation resources with another entity … in a manner determined to provide the best value to ratepayers.” California Assembly Bill 2006, as amended, July 29, 2004. Such cost recovery extends to costs related to system reliability and local area reliability. Under the Act as revised, these costs “shall be equitably borne by and recoverable from all customers on a pro rata, fully compensatory basis, that cannot be bypassed.”

Effective Date
Under the latest amendments, the CPUC is directed to authorize retail choice on or before December 31, 2005.

Robert A. Olson is a partner in the law firm of Brown, Olson & Gould P.C. which maintains a nationwide practice in energy law, public utility law and related commercial transactions. He can be reached at:

Brown, Olson & Gould, PC
2 Delta Drive, Suite 301
Concord, NH 03301

rolson@bowlaw.com | (603) 225-9716