BILL NUMBER: ABX1 6 AMENDED
BILL TEXT
AMENDED IN SENATE JANUARY 16, 2001
INTRODUCED BY Assembly Members Dutra and Pescetti
(Principal coauthor: Senator Bowen)
JANUARY 11, 2001
An act to amend Sections 216 , 330, and 377 of the
Public Utilities Code, relating to public utilities , and
declaring the urgency thereof, to take effect immediately .
LEGISLATIVE COUNSEL'S DIGEST
AB 6, as amended, Dutra. Electrical restructuring.
(1) Existing law requires generation assets owned by any public
utility prior to June 1, 1997, and subject to rate regulation by the
Public Utilities Commission, to continue to be subject to regulation
by the commission until those assets have undergone market valuation,
as specified.
This bill , in addition, would require those assets to
continue to be subject to that regulation until the commission has
authorized the disposition of those assets pursuant to prescribed
provisions of law would delete those provisions
.
(2) Existing law requires the commission to continue to regulate
the nonnuclear generation assets owned by any public utility prior to
January 1, 1997, that are subject to regulation by the commission
until those assets have been subject to market valuation, as
prescribed.
This bill , in addition, would include
nuclear facilities for the generation of electricity within those
provisions.
The bill would require those assets
facilities to continue to be subject to that regulation until
the commission has authorized the disposition of those
assets facilities pursuant to prescribed
provisions of law. The bill would prohibit a facility for the
generation of electricity owned by a public utility from being
disposed of prior to January 1, 2006. The bill would require the
commission to ensure that public utility assets remain dedicated to
service for the benefit of the public.
Because, under existing law, a violation of the above provisions
with regard to regulation by the commission would be a crime, this
bill would impose a state-mandated local program by changing the
definition of a crime.
(3) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
(4) The bill would declare that it is to take effect immediately
as an urgency statute.
Vote: majority 2/3 .
Appropriation: no. Fiscal committee: yes. State-mandated local
program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 216 of the Public Utilities Code is amended to
read:
216. (a) "Public utility" includes every common carrier, toll
bridge corporation, pipeline corporation, gas corporation, electrical
corporation, telephone corporation, telegraph corporation, water
corporation, sewer system corporation, and heat corporation, where
the service is performed for, or the commodity is delivered to, the
public or any portion thereof.
(b) Whenever any common carrier, toll bridge corporation, pipeline
corporation, gas corporation, electrical corporation, telephone
corporation, telegraph corporation, water corporation, sewer system
corporation, or heat corporation performs a service for, or delivers
a commodity to, the public or any portion thereof for which any
compensation or payment whatsoever is received, that common carrier,
toll bridge corporation, pipeline corporation, gas corporation,
electrical corporation, telephone corporation, telegraph corporation,
water corporation, sewer system corporation, or heat corporation, is
a public utility subject to the jurisdiction, control, and
regulation of the commission and the provisions of this part.
(c) When any person or corporation performs any service for, or
delivers any commodity to, any person, private corporation,
municipality, or other political subdivision of the state, that in
turn either directly or indirectly, mediately or immediately,
performs that service for, or delivers that commodity to, the public
or any portion thereof, that person or corporation is a public
utility subject to the jurisdiction, control, and regulation of the
commission and the provisions of this part.
(d) Ownership or operation of a facility that employs cogeneration
technology or produces power from other than a conventional power
source or the ownership or operation of a facility which employs
landfill gas technology does not make a corporation or person a
public utility within the meaning of this section solely because of
the ownership or operation of that facility.
(e) Any corporation or person engaged directly or indirectly in
developing, producing, transmitting, distributing, delivering, or
selling any form of heat derived from geothermal or solar resources
or from cogeneration technology to any privately owned or publicly
owned public utility, or to the public or any portion thereof, is not
a public utility within the meaning of this section solely by reason
of engaging in any of those activities.
(f) The ownership or operation of a facility that sells compressed
natural gas at retail to the public for use only as a motor vehicle
fuel, and the selling of compressed natural gas at retail from that
facility to the public for use only as a motor vehicle fuel, does not
make the corporation or person a public utility within the meaning
of this section solely because of that ownership, operation, or sale.
(g) Ownership or operation of a facility that has been certified
by the Federal Energy Regulatory Commission as an exempt wholesale
generator pursuant to Section 32 of the Public Utility Holding
Company Act of 1935 (Chapter 2C (commencing with Section 79) of Title
15 of the United States Code) does not make a corporation or person
a public utility within the meaning of this section, solely due to
the ownership or operation of that facility.
(h) Generation assets owned by any public utility prior to January
1, 1997, and subject to rate regulation by the commission, shall
continue to be subject to regulation by the commission until the
owner of those assets has applied to the commission, in accordance
with procedures established by the commission under Section 851, to
dispose of those assets and has been authorized by the commission to
undertake that disposal.
(i)
(h) The ownership, control, operation, or management of an
electric plant used for direct transactions or participation directly
or indirectly in direct transactions, as permitted by subdivision
(b) of Section 365, sales into the Power Exchange referred to in
Section 365, or the use or sale as permitted under subdivisions (b)
to (d), inclusive, of Section 218, shall not make a corporation or
person a public utility within the meaning of this section solely
because of that ownership, participation, or sale.
SEC. 2. Section 330 of the Public Utilities Code is amended
to read:
330. In order to provide guidance in carrying out this chapter,
the Legislature finds and declares all of the following:
(a) It is the intent of the Legislature that a cumulative rate
reduction of at least 20 percent be achieved not later than April 1,
2002, for residential and small commercial customers, from the rates
in effect on June 10, 1996. In determining that the April 1, 2002,
rate reduction has been met, the commission shall exclude the costs
of the competitively procured electricity and the costs associated
with the rate reduction bonds, as defined in Section 840.
(b) The people, businesses, and institutions of California spend
nearly twenty-three billion dollars ($23,000,000,000) annually on
electricity, so that reductions in the price of electricity would
significantly benefit the economy of the state and its residents.
(c) The Public Utilities Commission has opened rulemaking and
investigation proceedings with regard to restructuring California's
electric power industry and reforming utility regulation.
(d) The commission has found, after an extensive public review
process, that the interests of ratepayers and the state as a whole
will be best served by moving from the regulatory framework existing
on January 1, 1997, in which retail electricity service is provided
principally by electrical corporations subject to an obligation to
provide ultimate consumers in exclusive service territories with
reliable electric service at regulated rates, to a framework under
which competition would be allowed in the supply of electric power
and customers would be allowed to have the right to choose their
supplier of electric power.
(e) Competition in the electric generation market will encourage
innovation, efficiency, and better service from all market
participants, and will permit the reduction of costly regulatory
oversight.
(f) The delivery of electricity over transmission and distribution
systems is currently regulated, and will continue to be regulated to
ensure system safety, reliability, environmental protection, and
fair access for all market participants.
(g) Reliable electric service is of utmost importance to the
safety, health, and welfare of the state's citizenry and economy. It
is the intent of the Legislature that electric industry
restructuring should enhance the reliability of the interconnected
regional transmission systems, and provide strong coordination and
enforceable protocols for all users of the power grid.
(h) It is important that sufficient supplies of electric
generation will be available to maintain the reliable service to the
citizens and businesses of the state.
(i) Reliable electric service depends on conscientious inspection
and maintenance of transmission and distribution systems. To
continue and enhance the reliability of the delivery of electricity,
the Independent System Operator and the commission, respectively,
should set inspection, maintenance, repair, and replacement
standards.
(j) It is the intent of the Legislature that California enter into
a compact with western region states. That compact should require
the publicly and investor-owned utilities located in those states,
that sell energy to California retail customers, to adhere to
enforceable standards and protocols to protect the reliability of the
interconnected regional transmission and distribution systems.
(k) In order to achieve meaningful wholesale and retail
competition in the electric generation market, it is essential to do
all of the following:
(1) Separate monopoly utility transmission functions from
competitive generation functions, through development of independent,
third-party control of transmission access and pricing.
(2) Permit all customers to choose from among competing suppliers
of electric power.
(3) Provide customers and suppliers with open, nondiscriminatory,
and comparable access to transmission and distribution services.
(l) The commission has properly concluded that:
(1) This competition will best be introduced by the creation of an
Independent System Operator and an independent Power Exchange.
(2) Generation of electricity should be open to competition
and utility generation should be transitioned from regulated
status to unregulated status through means of commission-approved
market valuation mechanisms .
(3) There is a need to ensure that no participant in these new
market institutions has the ability to exercise significant market
power so that operation of the new market institutions would be
distorted.
(4) These new market institutions should commence simultaneously
with the phase-in of customer choice, and the public will be best
served if these institutions and the nonbypassable transition cost
recovery mechanism referred to in subdivisions (s) to (w), inclusive,
are in place simultaneously and no later than January 1, 1998.
(m) It is the intention of the Legislature that California's
publicly owned electric utilities and investor-owned electric
utilities should commit control of their transmission facilities to
the Independent System Operator. These utilities should jointly
advocate to the Federal Energy Regulatory Commission a pricing
methodology for the Independent System Operator that results in an
equitable return on capital investment in transmission facilities for
all Independent System Operator participants.
(n) Opportunities to acquire electric power in the competitive
market must be available to California consumers as soon as
practicable, but no later than January 1, 1998, so that all customers
can share in the benefits of competition.
(o) Under the existing regulatory framework, California's
electrical corporations were granted franchise rights to provide
electricity to consumers in their service territories.
(p) Consistent with federal and state policies, California
electrical corporations invested in power plants and entered into
contractual obligations in order to provide reliable electrical
service on a nondiscriminatory basis to all consumers within their
service territories who requested service.
(q) The cost of these investments and contractual obligations are
currently being recovered in electricity rates charged by electrical
corporations to their consumers.
(r) Transmission and distribution of electric power remain
essential services imbued with the public interest that are provided
over facilities owned and maintained by the state's electrical
corporations.
(s) It is proper to allow electrical corporations an opportunity
to continue to recover, over a reasonable transition period, those
costs and categories of costs for generation-related assets and
obligations, including costs associated with any subsequent
renegotiation or buyout of existing generation-related contracts,
that the commission, prior to December 20, 1995, had authorized for
collection in rates and that may not be recoverable in market prices
in a competitive generation market, and appropriate additions
incurred after December 20, 1995, for capital additions to generating
facilities existing as of December 20, 1995, that the commission
determines are reasonable and should be recovered, provided that the
costs are necessary to maintain those facilities through December 31,
2001. In determining the costs to be recovered, it is appropriate
to net the negative value of above market assets against the positive
value of below market assets.
(t) The transition to a competitive generation market should be
orderly, protect electric system reliability, provide the investors
in these electrical corporations with a fair opportunity to fully
recover the costs associated with commission approved
generation-related assets and obligations, and be completed as
expeditiously as possible.
(u) The transition to expanded customer choice, competitive
markets, and performance based ratemaking as described in Decision
95-12-063, as modified by Decision 96-01-009, of the Public Utilities
Commission, can produce hardships for employees who have dedicated
their working lives to utility employment. It is preferable that any
necessary reductions in the utility work force directly caused by
electrical restructuring, be accomplished through offers of voluntary
severance, retraining, early retirement, outplacement, and related
benefits. Whether work force reductions are voluntary or
involuntary, reasonable costs associated with these sorts of benefits
should be included in the competition transition charge.
(v) Charges associated with the transition should be collected
over a specific period of time on a nonbypassable basis and in a
manner that does not result in an increase in rates to customers of
electrical corporations. In order to insulate the policy of
nonbypassability against incursions, if exemptions from the
competition transition charge are granted, a fire wall shall be
created that segregates recovery of the cost of exemptions as
follows:
(1) The cost of the competition transition charge exemptions
granted to members of the combined class of residential and small
commercial customers shall be recovered only from those customers.
(2) The cost of the competition transition charge exemptions
granted to members of the combined class of customers other than
residential and small commercial customers shall be recovered only
from those customers. The commission shall retain existing cost
allocation authority provided that the fire wall and rate freeze
principles are not violated.
(w) It is the intent of the Legislature to require and enable
electrical corporations to monetize a portion of the competition
transition charge for residential and small commercial consumers so
that these customers will receive rate reductions of no less than 10
percent for 1998 continuing through 2002. Electrical corporations
shall, by June 1, 1997, or earlier, secure the means to finance the
competition transition charge by applying concurrently for financing
orders from the Public Utilities Commission and for rate reduction
bonds from the California Infrastructure and Economic Development
Bank.
(x) California's public utility electrical corporations provide
substantial benefits to all Californians, including employment and
support of the state's economy. Restructuring the electric services
industry pursuant to the act that added this chapter will continue
these benefits, and will also offer meaningful and immediate rate
reductions for residential and small commercial customers, and
facilitate competition in the supply of electric power.
SEC. 3. Section 377 of the Public Utilities Code is amended
to read:
377. The commission shall continue to regulate the
nonnuclear generation assets facilities for the
generation of electricity owned by any public utility prior to
January 1, 1997, that are subject to commission regulation until the
owner of those assets facilities has
applied to the commission to dispose of those assets under
Section 851 and has received approval from the commission
facilities and has been authorized by the commission under
Section 851 to undertake that disposal. Notwithstanding
any other provision of law, no facility for the generation of
electricity owned by a public utility may be disposed of prior to
January 1, 2006. The commission shall ensure that public utility
generation assets remain dedicated to service for the benefit of
California ratepayers.
SEC. 3.
SEC. 4. No reimbursement is required by this act pursuant to
Section 6 of Article XIIIB of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIIIB of the California Constitution.
SEC. 5. This act is an urgency statute necessary for the immediate
preservation of the public peace, health, or safety within the
meaning of Article IV of the Constitution and shall go into immediate
effect. The facts constituting the necessity are:
In order to ensure that public utility generation assets remain
dedicated to service for the benefit of California ratepayers, and
are not deregulated as a consequence of market valuation, without
appropriate review and authorization of the Public Utilities
Commission pursuant to Section 851 of the Public Utilities Code, it
is necessary that this act take effect immediately.