BILL NUMBER: SBX2 73 INTRODUCED
BILL TEXT
INTRODUCED BY Senator Alpert
MAY 17, 2001
An act to amend Section 330 of, and to add Sections 743.10 and
743.11 to, the Public Utilities Code, relating to public utilities.
LEGISLATIVE COUNSEL'S DIGEST
SB 73, as introduced, Alpert. Electrical restructuring:
interruptible service.
(1) Existing law sets forth certain findings and declarations
relating to electrical restructuring.
This bill would find and declare that where cost-effective
electric supply cannot be secured by the Independent System Operator
or the state, any system outages should be managed so as to minimize
disruption to the customers.
(2) Existing law permits the Public Utilities Commission to
approve contracts between an electrical corporation and its heavy
industrial customers for interruptible electrical service contracts.
Existing law permits the commission to amend these contracts.
This bill would require the Governor, if cost-effective electric
supply cannot be secured by the Independent System Operator or the
state, in collaboration with certain entities, to establish certain
purchasing guidelines and to create a system of managing any
interruptions in a manner so as to minimize disruption to the
customers.
This bill would also require the commission to create
interruptibility programs in which larger customers or communities
desiring higher levels of reliability may secure that reliability in
exchange for fees established by the commission. The bill would
require the programs to require public utility electrical
corporations to configure their distribution so that selective and
identifiable blocks of customers can be provided differing levels of
reliability, and to alert customers of potential outages.
Because, under existing law, a violation of the above would be a
crime, the bill would impose a state-mandated local program by
creating a new 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.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. 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 and cost-effective 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.
(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 intent 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 workforce directly caused by
electrical restructuring, be accomplished through offers of voluntary
severance, retraining, early retirement, outplacement, and related
benefits. Whether workforce 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 firewall 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 firewall 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.
(y) Where cost-effective electric supply cannot be secured by the
Independent System Operator or the state, any system outages should
be managed so as to minimize disruption to the customers.
SEC. 2. Section 743.10 is added to the Public Utilities Code, to
read:
743.10. If cost-effective electric supply cannot be secured by
the Independent System Operator or the state, the Governor, in
collaboration with the Independent System Operator, the commission,
and public utility electrical corporations, shall do both of the
following:
(a) Establish purchasing guidelines that allow the state and the
Independent System Operator to define cost-effectiveness of
short-term or "real-time" power.
(b) Create a system of managing any interruptions in a manner so
as to minimize disruption to end-use customers.
SEC. 3. Section 743.11 is added to the Public Utilities Code, to
read:
743.11. The commission, in consultation with the Independent
System Operator, shall create interruptibility programs in which all
of the following apply:
(a) Large customers or communities that desire higher levels of
reliability may secure that higher reliability in exchange for fees
established by the commission, to be applied by the commission to
offset costs to those customers who are subject to service
interruptions.
(b) Public utility electrical corporations shall give notice of
any outages pursuant to these shall configure their distribution
systems so that selective and identifiable blocks of customers can be
provided differing levels of reliability.
(c) Public utility electrical corporations shall give notice of
any outages pursuant to these interruptibility programs sufficient to
alert all customers, in advance, to the potential outages.
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.