1997 AGN OCT 21 I23 - Laserfiche WebLink

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CITY OF COLTON AGENDA REPORT For the Council Meeting of October 21, 1997 DUPLICATE TO: Honorable Mayor and City Council APPROVAL: Len Wood, Interim City Manager 1> FROM: Thomas K. Clarke, Utility Director'; � SUBJECT: Set Public Hearing, Recommendation to the City Council to Adopt A Competition Transition Charge In Response to Electric Utility Restructuring DATE: September 22, 1997 BACKGROUND California State Assembly Bill No. 1890 was approved by Governor Wilson on September 23, 1996, and became effective immediately on that date. The bill provides for the restructuring of the electric utility industry in the State of California. The primary feature of the bill is that electricity customers will have a choice as to their energy provider that is not based solely on their geographic location. - Such a dramatic change in electric utility law by the Federal and State governments has placed electric utilities in a difficult position with respect to their long-term investments in electric generating capacity. Prior to the restructuring laws, Federal and State policies were oriented toward the conservation of natural gas and the development of more expensive, small-scale generating technologies such as wind, geothermal, and solar power. Nuclear and coal-fired generating plants were also encouraged to increase the "energy independence" of the United States. Such policy, therefore, was not exclusively designed to secure the lowest -cost energy possible. AB1890 and recent federal legislation respond to the new realities of global competition, the end of the Cold War, the development of substantial oil and gas reserves throughout the world, the computerization of commodity markets and electric transmission networks, and the advancement of natural gas turbine generating technologies. The result in the United States appears to be a migration from large coal and nuclear power facilities to more medium scale natural gas fired facilities, with cost savings of up to 7 cents per kilowatt-hour in the case of nuclear replacement, and from 0 to 2 cents per kilowatt-hour in the case of coal replacement. The new policy focus is on providing American business with low-cost energy with far less emphasis on non -monetary strategic issues. The Competition Transition Charge (CTC) is a bridge between the old and new policy. Utilities that committed themselves, under prudency review by their regulatory bodies, to long-term investments in generating plants under the old policy have the opportunity to continue to collect revenue to payoff those debts or "stranded costs" by charging the CTC. Investorowned utilities must complete the bulk of this recovery by December 31, 2001. Municipalities were not given any deadline to pay off their stranded investment, but they must consider how competitive \\Server\utim\Counc ii\ctccalcssep97counciloct97.rtf Item No. 23