BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 2303
                                                                  Page  1

          Date of Hearing:   May 5, 2004

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                   Judy Chu, Chair

                    AB 2303 (Leno) - As Amended:  April 21, 2004 

          Policy Committee:                              UtilitiesVote:7-4
                        Revenue and Taxation                  6-0

          Urgency:     No                   State Mandated Local Program:  
          Yes    Reimbursable:              No

           SUMMARY  

          This bill:  

          1)Requires the cost of any bonus paid to an executive of an  
            insolvent utility regulated by the Public Utilities Commission  
            (PUC) to be borne by that utility's shareholders rather than  
            by ratepayers.  (Affected employees include the utility's  
            president, secretary, treasurer, and any vice president in  
            charge of a principal business unit, division, or function.)

          2)Exempts from the above a bonus that is part of an employee's  
            compensation contract.

           FISCAL EFFECT  

          Potential minor absorbable cost to the PUC for enforcement,  
          which could be offset to some extent by any penalty revenues.

           COMMENTS  

           Purpose  .  According to the author, this bill arises from a  
          December 31, 2003, announcement by PG&E that it would pay over  
          $85 million in stock in "retention bonuses" to 17 current and  
          former senior executives while the company was still officially  
          under Chapter 11 bankruptcy protection. The retention bonuses  
          were part of a program established shortly before the utility  
          filed for bankruptcy protection in April 2001. The bonuses were  
          issued as incentives to encourage PG&E's executives to stay with  
          the company during the bankruptcy. PG&E indicates that the  
          bonuses will be funded by reducing shareholder dividends. The  
          PUC is currently conducting an investigation to determine the  








                                                                  AB 2303
                                                                  Page  2

          extent to which these bonuses were disclosed in PG&E's General  
          Rate Case and to what, if any extent, the bonus will be paid  
          through rates.

          This bill will limit the ability of an insolvent utility to  
          recover bonuses through rates. (The bill defines insolvent to  
          mean the utility has ceased to pay its debts in the ordinary  
          course of business and/or utilities exceed assets.) Under all  
          other financial circumstances, the utility may still recover all  
          reasonable expenses, including bonuses, through rates. 

           Analysis Prepared by  :    Chuck Nicol / APPR. / (916) 319-2081