March 3, 2001

The Honorable Byron Sher
California State Senate
State Capitol, 
Sacramento, CA 95814

RE:  SB x 28 

Dear Senator Sher:

The staff of the Office of Ratepayer Advocates (ORA) is supportive of the overall direction of SBx1 28 as presented at the hearing on February 26, before the Senate Committee on Environmental Quality.  SBx1 28 removes barriers to the repowering of existing electricity generation, and to the siting and installation of new generation.  Moreover, SBx1 28 also reasonably balances the need to expand California’s in-state generating capacity with the need to protect California’s environment.  Such a balanced approach can go a long way toward meeting California’s electricity needs without unduly risking public health, or the progress that California has made in cleaning the air. 

We understand that this bill may deal with the issue of incentives for distributed energy resources (DER), such as clean and renewable on site generation.  In the current supply climate where new generation and storage resources are at a premium, ORA supports the concept of incentives such as temporarily waiving standby charges that would otherwise discourage the installation of new clean and renewable DER.  ORA believes that the proposed suspension of standby tariffs should not be permanent,  that it should solely encourage the installation of new clean and renewable DER, and should be fair to residential and small commercial consumers who do not yet have access to DER.  Specifically:

•	ORA is concerned that a permanent abolition of standby tariffs could lead to permanent cost-shifting.  We recommend that standby tariffs be waived for a period of time, such as four years, and that new standby tariffs be developed to take effect at the end of the waiver period.  The new standby tariffs should be based on a thorough evaluation of the costs of providing standby services that consumers actually need.

•	ORA is concerned that indefinitely grandfathering the waiver of standby tariffs could shift to other customer classes millions of dollars of standby costs that may outweigh the benefits to the public of the new DER.
 
•	ORA is also concerned that a waiver of standby tariffs for existing DER would add no new generating capacity in California and would shift tens of millions of dollars of standby costs. 

•	Finally, ORA wants to be assured that a standby charge waiver not result in unfair cost shifting to other customer classes, such as residential and small commercial consumers.  ORA recommends that foregone standby revenues be tracked by the PUC so that any rate increases to recover those revenues can be based on the reasonableness of the standby tariffs, the benefits all consumers receive from new DER, and the need to avoid the shifting of costs that are net of those benefits.

We look forward to working with you and your staff on the bill.  ORA analyst Jay Morse (415/703-1587) has been working in this area for many years and is available to work with your staff on specific language in this area.  
 
Please let me know if ORA can be of any further assistance to you.  We would be more than happy to help in any way we can.  

Sincerely,

David E. Morse
	
Cc: 	Senator Debra Bowen
       	Senator  Bill Morrow
       	Senator Deirdre Alpert
       	Linda Adams, Chief Deputy Legislative Secretary, Office of the Governor
       	Loretta Lynch, President, California Public Utilities Commission (CPUC)
	Commissioner Richard Bilas, CPUC
	Commissioner Henry Duque, CPUC
	Commissioner Carl Wood, CPUC
	Commissioner Geoffrey Brown, CPUC