The origin of the exit fee can be traced back to California Assembly Bill 1890 (Statutes of 1996), when the state legislature determined that “direct access” customers who choose to purchase power from non-utility sources must still be responsible for paying their share of the generation investment made by the utility on the customers’ behalf. This was originally known as the Competition Transition Charge, or CTC, and was expected to last through 2002 applying primarily to departing customers.  With the meltdown of the California energy market in late 2000, the California Public Utilities Commission (CPUC) expanded the exit fee concept to include repayment of the costs associated with the power contracts entered into by the California Department of Water Resources (DWR) on behalf of the private utilities during the electricity crisis.

Exit fees (Cost Responsibility Surcharges), as defined by the CPUC, currently include three major components: 

• DWR Bond Charge – applies to costs incurred by DWR to purchase electricity on behalf of the IOUs from January 17, 2001 to December 31, 2002.
• DWR Power Charge – applied to costs incurred by DWR to purchase long-term contracts on behalf of the IOUs for the period beginning January 1, 2003.
• CTC – includes costs associated with the transition to a “deregulated” market under the provisions of AB 1890.

In ongoing proceedings at the CPUC, there are two types of annexations for which exit fees have been proposed. Brownfield annexations refer to areas of annexation by a community or district where existing electric customers currently reside and, by virtue of annexation as part of that community’s normal course of business, these customers are brought into public power service territory. Greenfield annexations refer to unpopulated and undeveloped land that is annexed into a city or district as part of its normal expansion – and any new development that takes place in this area is subsequently served by a public power system.