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Agenda Item # 12

BOARD MEMORANDUM

RECOMMENDATION:

Adopt a support position for the following bills:

• AB 428 (Richman) Electric power:  direct access.
• AB 816 (Reyes) Electric power:  direct access.
• AB 1233 (Horton) Highway capacity enhancement projects.

BACKGROUND/DISCUSSION:

Both AB 428 (Richman) and AB 816 (Reyes) propose to make various changes to state statues that deal with energy.  Of particular interest are provisions in both measures that would require the California Public Utilities Commission (CPUC) to reinstate the right of retail end-use electricity customers with a load requirement of more than 500 kilowatts to acquire power from energy service providers other than the investor-owned utilities.

At one time, California state law granted the customers of the investor-owned utilitiesPacific Gas and Electric (PG&E), San Diego Gas and Electric, and Southern California Edisonthe right to instead choose to purchase their electric power from a number of approved energy service providers.  This process was called direct access.  Under direct access, the customers host investor-owned utility was required to provide the necessary transmission and distribution services needed to deliver the power supplied by the energy service provider.  The customer received a monthly bill from the host utility that included charges for transmission, distribution, competition transition, and generation, as well as a credit based upon the host utilitys avoided cost of energy.  The customer also received an invoice from its energy service provider for electricity sold to the customer.  As long as the sum of this charge was less than the total credit from the host utility, the customer saved money through direct access.

However, as a result of the states recent energy crisis, legislation was enacted to indefinitely suspend direct access beginning September 21, 2001.  Although this legislation only required direct access to remain suspended until the California Department of Water Resources had returned the energy purchasing obligation back to the investor-owned utilities, which occurred on January 1, 2003, the CPUC has not provided any clear indication of if, or when, it may reinstate direct access.

In 2003, VTA received a report from R.W. Beck, Inc., an energy consulting firm that was tasked with evaluating VTAs electric accounts and identifying cost saving options.  In this report, the consultant analyzed five strategic options for reducing VTAs energy costs, and found that the greatest potential savings to VTA would result with the resumption of direct access.  The consultant estimated that the potential savings would be between $600,000 and $1.9 million per year based upon current energy market forecasts if VTA opted to purchase electricity from an energy service provider, rather than from PG&E.

However, because direct access was indefinitely suspended through prior legislation, VTA currently does not have the statutory authority to utilize this option for purchasing power.  Therefore, we recommend that the Board of Directors support AB 428 and AB 812, both of which would require the resumption of direct access.

AB 1233 (Horton) establishes the Highway Capacity Enhancement Project Delivery Demonstration Act, a pilot program designed to evaluate the potential benefits of using a new coordinated environmental review and permit process during the environmental phase of project delivery.  Specifically, it requires Caltrans to identify and the California Transportation Commission (CTC) to select three highway capacity enhancement projects to demonstrate this alternative approach.  In order to be selected, a project must meet the following criteria:  (a) the project will increase capacity on one or more state highways;  (b) the project will improve mobility and decrease congestion by increasing highway capacity;  (c) the project will result in an overall benefit to the environment by increasing highway capacity;  (d) the project requires environmental review and consultation in order to address potential environmental impacts; and  (e) the project is programmed in the State Transportation Improvement Program (STIP).

Project delivery continues to be a major concern.   Oftentimes, projects on the state highway system can take a considerable amount of time from inception to construction and operation.  Project sponsors must maneuver through a multi-stage development and review process that includes design and engineering, right-of-way acquisition, environmental impact review and mitigation, financing, construction, and other related requirements at various levels of government.  Delays are common and, because of the traditional sequential project approval and permitting process, they can greatly extend the length of time needed to complete a particular project.

AB 1233 will enact a pilot program to test a new streamlined approach for state highway projects during the environmental phase of project delivery.  This program is intended to focus specifically on testing a coordinated environmental review process for projects that enhance highway capacity.  Since steps in the environmental clearance process often happen consecutively, the timeline could be reduced by speeding up this process and allowing separate phases to begin concurrently.

It is important to explore different and innovative ways to expedite the delivery of transportation capital improvement projects.  A coordinated environmental review and permitting process is an approach that may have some merit in terms of being able to speed up the completion of improvements to projects on the state highway system.  Therefore, we recommend that the Board of Directors support AB 1233.

ALTERNATIVES:

The Board of Directors could decide to adopt positions different from those being recommended, or could decide to take no position on any of these bills at this time.

FISCAL IMPACT:

There is no immediate fiscal impact associated with these recommendations.

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