BILL NUMBER: SB 1876 AMENDED
BILL TEXT
AMENDED IN SENATE MAY 28, 2002
AMENDED IN SENATE MAY 20, 2002
AMENDED IN SENATE MAY 1, 2002
AMENDED IN SENATE APRIL 17, 2002
INTRODUCED BY Senator Bowen
(Coauthors: Senators Sher and Speier)
FEBRUARY 22, 2002
An act to amend Sections 348, 352, 367, 372, and 377 of, to amend
and renumber Section 454.1 of, to add Sections 334, 337,
341.5, 367.5, 761.7, and 858 to, to repeal Sections 330,
338, 340, 341.1, 341.5, 346, 367.7, 368, 369, 370, 371,
373, 376, 378, and 397 of, to repeal Article 2 (commencing
with Section 334), and Article 5 (commencing with Section
359) of Chapter 2.3 of Part 1 of, and to repeal and add Section 350
of, the Public Utilities Code, relating to public utilities.
LEGISLATIVE COUNSEL'S DIGEST
SB 1876, as amended, Bowen. Electrical restructuring.
(1) The existing restructuring of the electrical services industry
within the Public Utilities Act provides for the establishment of an
Independent System Operator and a Power Exchange as separately
incorporated public benefit nonprofit corporations. An Electricity
Oversight Board (Oversight Board) is also established to oversee the
Independent System Operator and the Power Exchange in order to ensure
the success of the electrical industry restructuring and to ensure a
reliable supply of electricity in the transition to a new market
structure. The Oversight Board is granted various powers including,
but not limited to, requiring the revision of the bylaws of the
Independent System Operator and the approval of the entry of
the Independent System Operator into a multistate entity or a
regional organization .
This bill would repeal those provisions establishing, and granting
powers to, the Oversight Board over the composition of the
governing board by the Power Exchange and the incorporation of the
Independent System Operator and the Power Exchange . The bill
would require the Independent System Operator to revise its own
bylaws , and would require legislative approval prior to the
entry of the Independent System Operator into a multistate entity or
a regional organization . Because any violation of the
Public Utilities Act is a crime, the bill, by establishing new duties
for the Independent System Operator, would impose a state-mandated
local program by changing the definition of a crime.
(2) The existing restructuring requires the Public Utilities
Commission to establish an effective mechanism that ensures recovery,
by electrical corporations, of certain transition costs from their
customers, as determined by the commission, including costs for
generation related assets and obligations, that were being collected
in commission-approved rates on December 20, 1995, that may become
uneconomic as a result of a competitive generation market. The
restructuring provides the calculation mechanism on which these costs
are to be based and requires that these costs be limited in the case
of utility-owned fossil generation. The restructuring requires the
costs to be allocated among various classes of customers, rate
schedules, and tariff options and requires that there be a firewall
segregating the recovery of the costs of competition transition
charge exemptions between certain customers.
This bill would delete the provisions providing for a certain
calculation mechanism, the provisions limiting the recovery of costs
in the case of utility-owned fossil generation, and the provisions
requiring a firewall to segregate the recovery of certain costs.
(3) The existing restructuring requires each electrical
corporation to propose a cost recovery plan for the recovery of the
uneconomic costs. The restructuring authorizes electrical
corporations to apply to the commission for an order determining that
the uneconomic costs not be collected from a particular class of
customer or category of electricity consumption. The restructuring
also authorizes electrical corporations to recover utility generation
related plant and regulatory assets to the extent that they remain
unrecovered after December 31, 2001, due to the electrical
corporations' ability to recover costs related to the implementation
of direct access, the Power Exchange, and the Independent System
Operator. The restructuring also requires the commission to
authorize new optional rate schedules and tariffs, including new
service offerings, that accurately reflect the loads, locations,
conditions of service, cost of service, and market opportunities of
customer classes and subclasses.
This bill would delete these provisions.
(4) The existing restructuring requires the commission to ensure
that public utility generation assets remain dedicated to service for
the benefit of California ratepayers.
This bill would recast this provision to require the commission to
ensure that utility retained generation remain dedicated to service
for the benefit of California ratepayers and would define "utility
retained generation" as utility owned generation, qualifying facility
contracts, and other bilateral contracts entered into prior to
January 17, 2001. The bill would exempt the transfer or sale of
generation plants that are located outside the state and are owned
exclusively by companies not based in the state from these
provisions. The bill would require the commission to establish rates
designed to provide the public utility electrical corporation with a
reasonable opportunity to recover the reasonable costs of producing
power and ancillary service from utility retained generation
dedicated to the service of bundled service customers, operating and
capital costs, as defined, and a reasonable return of and on the
electrical corporation's depreciated book cost of investments in
retained generation assets, as defined.
(5) The existing restructuring requires the commission to
authorize an electrical corporation that is also a gas corporation
and served fewer than four million customers as of December 20, 1995,
to implement a rate cap mechanism that reflects price changes in the
fuel market under certain circumstances.
This bill would delete these provisions.
(6) Under existing law, the Public Utilities Act, the commission
is authorized to supervise and regulate every public utility in the
state and to take all actions that are necessary and convenient in
the exercise of that power and jurisdiction. The act also
establishes the California Consumer Power and Conservation Financing
Authority to finance generating facilities and other energy related
projects and programs.
This bill would grant the commission jurisdiction over any
corporation or holding company, as defined, that owns, controls,
operates or manages a public utility, for the limited purpose of
monitoring and enforcing any promises, commitments, conditions, or
written representations made to the commission or to the ratepayers
of the public utility.
This bill would require that any gain or loss on sale associated
with the sale, transfer, or disposition of assets be allocated
exclusively to the ratepayers serviced by the electrical corporation.
Since a violation of the act is a crime under existing provisions
of law, the bill would impose a state-mandated local program by
expanding the definition of a crime.
This bill would establish a Ratepayer Refund Account for each
electrical corporation and would require that all refunds recovered
by an electrical corporation resulting from any litigation or
agreement relative to the charging of excessive costs for wholesale
power by electric power generators and suppliers that have been
recovered, or are recoverable, from ratepayers in commission-approved
rates be credited to the electrical corporation's account and would
provide that those funds be held in trust on behalf of the
ratepayers.
(7) This bill would declare that its provisions are severable.
(8) 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 repealed.
SEC. 2. Article 2 (commencing with Section 334) of Chapter 2.3 of
Part 1 of the Public Utilities Code is repealed.
SEC. 3. Section 334 is added to the Public Utilities Code, to
read:
334. The Legislature finds and declares that, in order to ensure
the success of the electrical industry restructuring in the
transition to a new market structure, it is important to ensure a
reliable supply of electricity. Reliable electric service is of
paramount importance to the safety, health, and comfort of the people
of California. Transmission connections among electric utilities
allow them to share generation resources and reduce the number of
powerplants necessary to maintain a reliable system. The connections
among utilities also create exposure to events that can cause
widespread and extended transmission and service outages that reach
far beyond the originating utility service area. California
utilities and those in the western United States voluntarily adhere
to reliability standards developed by the Western Systems
Coordinating Council. The economic cost of extended electricity
outages, such as those that occurred in California and throughout the
Western Systems Coordinating Council on July 2, 1996, and August 10,
1996, to California's residential, commercial, agricultural, and
industrial customers is significant. The proposed restructuring of
the electricity industry would transfer responsibility for ensuring
short- and long-term reliability away from electric utilities and
regulatory bodies to the Independent System Operator and various
market-based mechanisms. The Legislature has an interest in ensuring
that the change in the locus of responsibility for reliability does
not expose California citizens to undue economic risk in connection
with system reliability.
SEC. 4. Section 337 is added to the Public Utilities Code, to
read:
337. (a) The Independent System Operator governing board shall be
composed of a five-member independent governing board of directors
appointed by the Governor and subject to confirmation by the Senate.
Any reference in this chapter or in any other provision of law to
the Independent System Operator governing board means the independent
governing board appointed under this subdivision.
(b) A member of the independent governing board appointed under
subdivision (a) may not be affiliated with any actual or potential
participant in any market administered by the Independent System
Operator.
(c) (1) All appointments shall be for three-year terms.
(2) There is no limit on the number of terms that may be served by
any member.
(d) The Independent System Operator shall revise its articles of
incorporation and bylaws in accordance with this section, and shall
make filings with the Federal Energy Regulatory Commission as it
determines to be necessary.
(e) For the purposes of the initial appointments to the
Independent System Operator governing board, as provided in
subdivision (a), the Governor shall appoint one member to a one-year
term, two members to a two-year term, and two members to a three-year
term.
SEC. 5.
SEC. 2. Section 338 of the Public Utilities Code is repealed.
338. The Oversight Board shall have the exclusive right to
approve procedures and the qualifications for Power Exchange
governing board members specified in subdivision (d) of Section 335,
all of whom shall be required to be electricity customers in the area
served by the Power Exchange. The Power Exchange governing board
shall include, but not be limited to, representatives of
investor-owned electric distribution companies, publicly owned
electric distribution companies, nonutility generators, public buyers
and sellers, private buyers and sellers, industrial end-users,
commercial end-users, residential end-users, agricultural end-users,
public interest groups, and nonmarket participant representatives.
The structural composition of the Power Exchange governing board
existing on July 1, 1999, shall remain in effect until an agreement
with a participating state is legally in effect. However, prior to
such an agreement, California shall retain the right to change the
Power Exchange governing board into a nonstakeholder board. In the
event of such a legislative change, revised bylaws shall be filed
with the Federal Energy Regulatory Commission under Section 205 of
the Federal Power Act (16 U.S.C.A. Sec. 824d).
SEC. 3. Section 340 of the Public Utilities Code is repealed.
340. The Oversight Board shall take the steps that are necessary
to ensure the earliest possible incorporation of the Independent
System Operator and the Power Exchange as separately incorporated
public benefit, nonprofit corporations under the Corporations Code.
SEC. 4. Section 341.1 of the Public Utilities Code is repealed.
341.1. Regulations adopted within 120 days of the effective date
of this section may be adopted as emergency regulations in accordance
with Chapter 3.5 (commencing with Section 11340) of the Government
Code, and for the purposes of that chapter, including Section 11349.6
of the Government Code, the adoption of the regulations shall be
considered by the Office of Administrative Law to be necessary for
the immediate preservation of the public peace, health, safety, and
general welfare.
SEC. 5. Section 341.5 of the Public Utilities Code is repealed.
341.5. (a) The Independent System Operator and Power Exchange
bylaws shall contain provisions that identify those matters specified
in subdivision (b) of Section 339 as matters within state
jurisdiction. The bylaws shall also contain provisions which state
that California's bylaws approval function with respect to the
matters specified in subdivision (b) of Section 339 shall not
preclude the Federal Energy Regulatory Commission from taking any
action necessary to address undue discrimination or other violations
of the Federal Power Act (16 U.S.C.A. Sec. 791a et seq.) or to
exercise any other commission responsibility under the Federal Power
Act. In taking any such action, the Federal Energy Regulatory
Commission shall give due respect to California's jurisdictional
interests in the functions of the Independent System Operator and
Power Exchange and to attempt to accommodate state interests to the
extent those interests are not inconsistent with the Federal Energy
Regulatory Commission's statutory responsibilities. The bylaws shall
state that any future agreement regarding the apportionment of the
Independent System Operator and Power Exchange board appointment
function among participating states associated with the expansion of
the Independent System Operator and Power Exchange into multistate
entities shall be filed with the Federal Energy Regulatory Commission
pursuant to Section 205 of the Federal Power Act (16 U.S.C.A. Sec.
824d).
(b) Any necessary bylaw changes to implement the provisions of
Section 335, 337, 338, 339, or subdivision (a) of this section, or
changes required pursuant to an agreement as contemplated by
subdivision (a) of this section with a participating state for a
regional organization, shall be effective upon approval of the
respective governing boards and the Oversight Board and acceptance
for filing by the Federal Energy Regulatory Commission.
SEC. 6. Section 341.5 is added to the Public Utilities Code,
to read:
341.5. The Independent System Operator bylaws shall contain
provisions that identify matters within state jurisdiction. The
bylaws shall also contain provisions that state that the approval
function of California's bylaws with respect to the matters within
state jurisdiction do not preclude the Federal Energy Regulatory
Commission from taking any action necessary to address undue
discrimination or other violations of the Federal Power Act (16
U.S.C. Sec. 791a et seq.) or to exercise any other commission
responsibility under the Federal Power Act. In taking any action,
the Federal Energy Regulatory Commission shall give due respect to
California's jurisdictional interests in the functions of the
Independent System Operator, and shall attempt to accommodate state
interests to the extent those interests are not inconsistent with the
Federal Energy Regulatory Commission's statutory responsibilities.
The bylaws shall state that any future agreement regarding the
apportionment of the Independent System Operator board appointment
function among participating states associated with the expansion of
the Independent System Operator into a multistate entity shall be
filed with the Federal Energy Regulatory Commission pursuant to
Section 205 of the Federal Power Act (16 U.S.C. Sec. 824d).
SEC. 6.
SEC. 7. Section 346 of the Public Utilities Code is
repealed.
SEC. 7.
SEC. 8. Section 348 of the Public Utilities Code is amended
to read:
348. The Independent System Operator shall adopt inspection,
maintenance, repair, and replacement standards for the transmission
facilities under its control no later than September 30, 1997. The
standards, which shall be performance or prescriptive standards, or
both, as appropriate, for each substantial type of transmission
equipment or facility, shall provide for high quality, safe, and
reliable service. In adopting its standards, the Independent System
Operator shall consider: cost, local geography and weather,
applicable codes, national electric industry practices, sound
engineering judgment, and experience. The Independent System
Operator shall also adopt standards for reliability, and safety
during periods of emergency and disaster. The Independent System
Operator shall require each transmission facility owner or operator
to report annually on its compliance with the standards. That report
shall be made available to the public.
SEC. 8.
SEC. 9. Section 350 of the Public Utilities Code is
repealed.
SEC. 9.
SEC. 10. Section 350 is added to the Public Utilities Code,
to read:
350. (a) It is the intent of the Legislature to provide for the
development of regional electricity transmission markets in the
western states and to improve the access of consumers served by the
Independent System Operator to those markets.
(b) The preferred means by which the voluntary evolution described
in subdivision (a) should occur is through the adoption of a
regional compact or other comparable agreement among cooperating
party states, the retail customers of which states would reside
within the geographic territories served by the Independent System
Operator.
(c) The agreement described in subdivision (b) should provide for
all of the following:
(1) An equitable process for the appointment or confirmation by
party states of members of the governing boards of the Independent
System Operator.
(2) A respecification of the size, structure, representation,
eligible membership, nominating procedures, and member terms of
service of the governing boards of the Independent System Operator.
(3) Mechanisms by which each party state, jointly or separately,
can oversee effectively the actions of the Independent System
Operator as those actions relate to ensuring electricity system
reliability within the party state and to matters that affect
electricity sales to the retail customers of the party state or
otherwise affect the general welfare of the electricity consumers and
the general public of the party state.
(4) The adherence by publicly owned and investor-owned utilities
located in party states to enforceable standards and protocols to
protect the reliability of the interconnected regional transmission
and distribution systems.
SEC. 10.
SEC. 10.5. Section 352 of the Public Utilities Code is
amended to read:
352. The Independent System Operator may not enter into a
multistate entity or a regional organization as authorized in Section
350 unless that entry is approved by the Legislature
Oversight Board .
SEC. 11. Article 5 (commencing with Section 359), of Chapter 2.3
of Part 1 of the Public Utilities Code is repealed.
SEC. 12. Section 367 of the Public Utilities Code is amended to
read:
367. The commission shall identify and determine those costs and
categories of costs for generation-related assets and obligations,
consisting of generation facilities, generation-related regulatory
assets, nuclear settlements, and power purchase contracts, including,
but not limited to, restructurings, renegotiations or terminations
thereof approved by the commission, that were being collected in
commission-approved rates on December 20, 1995, and that may become
uneconomic as a result of a competitive generation market, in that
these costs may not be recoverable in market prices in a competitive
market, and appropriate costs 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 these additions are necessary to maintain
the facilities through December 31, 2001. These uneconomic costs
shall include transition costs as defined in subdivision (f) of
Section 840, and shall be recovered from all customers or in the case
of fixed transition amounts, from the customers specified in
subdivision (a) of Section 841, on a nonbypassable basis .
and shall be amortized over a reasonable time period,
including collection on an accelerated basis, consistent with not
increasing rates for any rate schedule, contract, or tariff option
above the levels in effect on June 10, 1996; provided that, the
recovery shall not extend beyond December 31, 2001, except as
follows:
(a) Costs associated with employee-related transition costs as set
forth in subdivision (b) of Section 375 shall continue until fully
collected; provided, however, that the cost collection shall not
extend beyond December 31, 2006.
(b) Power purchase contract obligations shall continue for the
duration of the contract. Costs associated with any buy-out,
buy-down, or renegotiation of the contracts shall continue to be
collected for the duration of any agreement governing the buy-out,
buy-down, or renegotiated contract; provided, however, no power
purchase contract shall be extended as a result of the buy-out,
buy-down, or renegotiation.
(c) Nuclear incremental cost incentive plans for the San Onofre
nuclear generating station shall continue for the full term as
authorized by the commission in Decision 96-01-011 and Decision
96-04-059; provided that the recovery shall not extend beyond
December 31, 2003. This subdivision shall become inoperative on
January 1, 2004.
(d) Fixed transition amounts, as defined in subdivision (d) of
Section 840, may be recovered from the customers specified in
subdivision (a) of Section 841 until all rate reduction bonds
associated with the fixed transition amounts have been paid in full
by the financing entity.
SEC. 13. Section 367.5 is added to the Public Utilities Code, to
read:
367.5. (a) The commission shall establish a Ratepayer Refund
Account for each electrical corporation. All refunds recovered by an
electrical corporation, either directly or indirectly by way of
offset against amounts otherwise owed by the electrical corporation,
resulting from any litigation or agreement relative to the charging
of excessive costs for wholesale power by electric power generators
and suppliers that have been recovered, or are recoverable, from
ratepayers in commission-approved rates, shall be credited to the
electrical corporation's account.
(b) All funds held by an electrical corporation that are required
by this section to be credited to the Ratepayer Refund Account of the
corporation are property of the ratepayers and shall be held in
trust on their behalf.
SEC. 14. Section 367.7 of the Public Utilities Code is repealed.
SEC. 15. Section 368 of the Public Utilities Code is repealed.
SEC. 16. Section 369 of the Public Utilities Code is repealed.
SEC. 17. Section 370 of the Public Utilities Code is repealed.
SEC. 18. Section 371 of the Public Utilities Code is repealed.
SEC. 19. Section 372 of the Public Utilities Code is amended to
read:
372. (a) It is the policy of the state to encourage and support
the development of cogeneration as an efficient, environmentally
beneficial, competitive energy resource that will enhance the
reliability of local generation supply, and promote local business
growth. Subject to the specific conditions provided in this section,
the commission shall determine the applicability to customers of
uneconomic costs as specified in Sections 367 and 375. Consistent
with this state policy, the commission shall provide that these costs
shall not apply to any of the following:
(1) To load served onsite or under an over-the-fence arrangement
by a nonmobile self-cogeneration or cogeneration facility that was
operational on or before December 20, 1995, or by increases in the
capacity of the facility to the extent that the increased capacity
was constructed by an entity holding an ownership interest in or
operating the facility and does not exceed 120 percent of the
installed capacity as of December 20, 1995, provided that prior to
June 30, 2000, the costs shall apply to over-the-fence arrangements
entered into after December 20, 1995, between unaffiliated parties.
For the purposes of this subdivision, "affiliated" means any person
or entity that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common
control with another specified entity. "Control" means either of the
following:
(A) The possession, directly or indirectly, of the power to direct
or to cause the direction of the management or policies of a person
or entity, whether through an ownership, beneficial, contractual, or
equitable interest.
(B) Direct or indirect ownership of at least 25 percent of an
entity, whether through an ownership, beneficial or equitable
interest.
(2) To load served by onsite or under an over-the-fence
arrangement by a nonmobile self-cogeneration or cogeneration facility
for which the customer was committed to construction as of December
20, 1995, provided that the facility was substantially operational on
or before January 1, 1998, or by increases in the capacity of the
facility to the extent that the increased capacity was constructed by
an entity holding an ownership interest in or operating the facility
and does not exceed 120 percent of the installed capacity as of
January 1, 1998, provided that prior to June 30, 2000, the costs
shall apply to over-the-fence arrangements entered into after
December 20, 1995, between unaffiliated parties.
(3) To load served by existing, new, or portable emergency
generation equipment used to serve the customer's load requirements
during periods when utility service is unavailable, provided the
emergency generation is not operated in parallel with the integrated
electric grid, except on a momentary parallel basis.
(4) After June 30, 2000, to any load served onsite or under an
over-the-fence arrangement by any nonmobile self-cogeneration or
cogeneration facility.
(b) Further, consistent with state policy, with respect to
self-cogeneration or cogeneration deferral agreements, the commission
shall do the following:
(1) Provide that a utility shall execute a final self-cogeneration
or cogeneration deferral agreement with any customer that, on or
before December 20, 1995, had executed a letter of intent (or similar
documentation) to enter into the agreement with the utility,
provided that the final agreement shall be consistent with the terms
and conditions set forth in the letter of intent and the commission
shall review and approve the final agreement.
(2) Provide that a customer that holds a self-cogeneration or
cogeneration deferral agreement that was in place on or before
December 20, 1995, or that was executed pursuant to paragraph (1) in
the event the agreement expires, or is terminated, may do any of the
following:
(A) Continue through December 31, 2001, to receive utility service
at the rate and under terms and conditions applicable to the
customer under the deferral agreement that, as executed, includes an
allocation of uneconomic costs.
(B) Engage in a direct transaction for the purchase of electricity
and pay uneconomic costs consistent with Sections 367 and 375.
(C) Construct a self-cogeneration or cogeneration facility of
approximately the same capacity as the facility previously deferred
unless otherwise authorized by the commission pursuant to subdivision
(c).
(3) Provide that the ratemaking treatment for self-cogeneration
or cogeneration deferral agreements executed prior to December 20,
1995, or executed pursuant to paragraph (1) shall be consistent with
the ratemaking treatment for the contracts approved before January 1,
1995.
(c) The commission shall authorize, within 60 days of the receipt
of a joint application from the serving utility and one or more
interested parties, applicability conditions as follows:
(1) The costs identified in Sections 367 and 375 shall not, prior
to June 30, 2000, apply to load served onsite by a nonmobile
self-cogeneration or cogeneration facility that became operational on
or after December 20, 1995.
(2) The costs identified in Sections 367 and 375 shall not, prior
to June 30, 2000, apply to any load served under over-the-fence
arrangements entered into after December 20, 1995, between
unaffiliated entities.
(d) For the purposes of this subdivision, all onsite or
over-the-fence arrangements shall be consistent with Section 218 as
it existed on December 20, 1995.
(e) To facilitate the development of new microcogeneration
applications, electrical corporations may apply to the commission for
a financing order to finance the transition costs to be recovered
from customers employing the applications.
(f) To encourage the continued development, installation, and
interconnection of clean and efficient self-generation and
cogeneration resources, to improve system reliability for consumers
by retaining existing generation and encouraging new generation to
connect to the electric grid, and to increase self-sufficiency of
consumers of electricity through the deployment of self-generation
and cogeneration, both of the following shall occur:
(1) The commission shall determine if any policy or action
undertaken by the Independent System Operator, directly or
indirectly, unreasonably discourages the connection of existing
self-generation or cogeneration or new self-generation or
cogeneration to the grid.
(2) If the commission finds that any policy or action of the
Independent System Operator unreasonably discourages, the connection
of existing self-generation or cogeneration or new self-generation or
cogeneration to the grid, the commission shall undertake all
necessary efforts to revise, mitigate, or eliminate that policy or
action of the Independent System Operator.
SEC. 20. Section 373 of the Public Utilities Code is repealed.
SEC. 21. Section 376 of the Public Utilities Code is repealed.
SEC. 22. Section 377 of the Public Utilities Code is amended to
read:
377. (a) The commission shall continue to regulate the 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 facilities has applied to the commission to
dispose of those 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 utility retained generation
remain dedicated for the benefit of the public utility's bundled
service customers. Nothing in this section may be construed to
compel any electrical corporation to renew or renegotiate an expiring
contract. For purposes of this section, "utility retained
generation" means utility-owned generation, qualifying facility
contracts, and other bilateral contracts entered into prior to
January 17, 2001. This section does not apply to the transfer or
sale of generation plants that are located outside the state and are
owned exclusively by companies not based in the state.
(b) The commission shall establish rates designed to provide the
public utility electrical corporation with a reasonable opportunity
to recover the reasonable costs of producing power and ancillary
services from utility retained generation assets dedicated to the
service of bundled service customers. The rates shall provide a
reasonable opportunity for the public utility electrical corporation
to recover reasonable operating costs and capital costs, including a
reasonable return of and on the public utility electrical corporation'
s depreciated book cost of investments in utility retained generation
assets.
(c) "Operating costs" include all customary categories of
operating costs, consistent with historical regulatory practices,
including any costs charged by the Independent System Operator to the
electrical corporation as the generator or scheduling coordinator of
the power.
(d) "The electrical corporation's depreciated book cost of
investment in utility retained generation assets" shall initially be
set at the amounts recorded on its books of account as of December
31, 2001, as verified and approved by the commission. The cost of
major capital additions
and improvements to a public utility's retained generation assets
shall be reviewed and approved by the commission, in the manner set
forth in Sections 1005 and 1005.5, in advance of the public utility
being allowed to invest in major capital additions or improvements.
(e) The commission shall continue to determine the appropriate
means for recovery of decommissioning costs.
SEC. 23. Section 378 of the Public Utilities Code is repealed.
SEC. 24. Section 397 of the Public Utilities Code is repealed.
SEC. 25. Section 454.1 of the Public Utilities Code, as added by
Section 6 of Chapter 1040 of the Statutes of 2000, is amended and
renumbered to read:
454.5. (a) Reasonable expenditures by transmission owners that
are electrical corporations to plan, design, and engineer
reconfiguration, replacement, or expansion of transmission facilities
are in the public interest and are deemed prudent if made for the
purpose of facilitating competition in electric generation markets,
ensuring open access and comparable service, or maintaining or
enhancing reliability, whether or not these expenditures are for
transmission facilities that become operational.
(b) The commission shall facilitate the efforts of the state's
transmission owning electrical corporations to obtain authorization
from the Federal Energy Regulatory Commission to recover reasonable
expenditures made for the purposes stated in subdivision (a).
(c) Nothing in this section alters or affects the recovery of the
reasonable costs of other electric facilities in rates pursuant to
the commission's existing ratemaking authority under this code or
pursuant to the Federal Power Act (41 Stat. 1063; 16 U.S.C. Secs.
791a, et seq.). The commission may periodically review and adjust
depreciation schedules and rates authorized for an electric plant
that is under the jurisdiction of the commission and owned by
electrical corporations and periodically review and adjust
depreciation schedules and rates authorized for a gas plant that is
under the jurisdiction of the commission and owned by gas
corporations, consistent with this code.
SEC. 26. Section 761.7 is added to the Public Utilities Code, to
read:
761.7. Any electrical corporation or holding company, as defined
in Section 79b(a)(7)(A) of Title 15 of the United States Code, that
owns, controls, operates, or manages a public utility shall be
subject to the jurisdiction, control, and regulation of the
commission for the limited purpose of monitoring and enforcing any
promises, commitments, conditions, or written representations made to
the commission or to the ratepayers of the public utility.
SEC. 27. Section 858 is added to the Public Utilities Code, to
read:
858. Any gain or loss on sale associated with the sale, transfer,
or disposition of assets that have been included in the rate base of
an electrical corporation shall be allocated exclusively to the
ratepayers served by the electrical corporation. Gain or loss on
sale shall be calculated as the difference between the transfer or
sale price and the net depreciated book value of the assets at the
time of the transfer.
SEC. 28. The provisions of this act are severable. If any
provision of this act or its application is held invalid, that
invalidity shall not affect other provisions or applications that can
be given effect without the invalid provision or application.
SEC. 29. No reimbursement is required by this act pursuant to
Section 6 of Article XIII B 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 XIII B of the California
Constitution.