BILL ANALYSIS                                                                                                                                                                                                    



                                                                  SB 659
                                                                  Page  1

          Date of Hearing:  June 14, 2004

                    ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
                                 Sarah Reyes, Chair
                      SB 659 (Soto) - As Amended:  June 1, 2004

           SENATE VOTE  :  Senate vote not relevant.
           
          SUBJECT  :  Public Utilities Commission:  Rehearings and judicial  
          review.

           SUMMARY  :  Repeals provisions in existing law that require an  
          expedited rehearing and expedited judicial review of California  
          Public Utilities Commission (CPUC) decisions arising out of the  
          implementation of ABX1 1 (Keeley), Chapter 4, Statutes of 2001.   
          Specifically,  this bill  :

          1)Repeals a provision that prohibits a cause of action arising  
            out of any decision of CPUC implementing the provisions of  
            ABX1 1 unless an application for a rehearing has been filed  
            with CPUC within 10 days after the date the decision has been  
            issued. 

          2)Repeals a provision creating a direct and expedited judicial  
            review by the California Supreme Court of any CPUC decision of  
            ABX1 1.

           EXISTING LAW  :

          1)Provides that after any order or decision has been made by  
            CPUC, any party to the action or proceeding may apply for a  
            rehearing in respect to any matters determined in the action  
            or proceeding and specified in the application for rehearing. 

          2)Specifically prohibits a cause of action arising out of any  
            decision of CPUC implementing the provisions of ABX1 1 unless  
            an application for a rehearing has been filed with CPUC within  
            10 days after the date the decision has been issued.

          3)Provides that any aggrieved party may petition for a writ of  
            review to a court of appeal or the California Supreme Court  
            for the purpose of having the lawfulness of a CPUC decision or  
            order determined. 

          4)Allows for a direct and expedited judicial review by the  








                                                                  SB 659
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            California Supreme Court of any CPUC decision implementing  
            ABX1 1.

           FISCAL EFFECT  :  Unknown.

           COMMENTS  :  During the energy crisis, the Legislature approved  
          and Governor Davis signed ABX1 1, which allowed the Department  
          of Water Resources (DWR) to purchase electricity on behalf of  
          the state's Investor Owned Utilities (IOUs) and to recover its  
          procurement costs through the sale of revenue bonds which would  
          ultimately be repaid by IOU's ratepayers. Additionally, the  
          bill: 

          1)Required CPUC to set electricity rates to cover DWR's power  
            purchasing costs. 

          2)Prohibited any future rate increased for residential customers  
            for usage under 130 percent of baseline quantities.

          3)Prohibited DWR from entering into any power procurement  
            contracts after January 1, 2003. 

          After ABX1 1 was signed into law, concerns were raised that  
          revenue bonds could not be issued until proceedings at CPUC were  
          final and no longer subject to rehearing or judicial review.   
          The normal rehearing and judicial review procedures could have  
          resulted in delays in issuing the bonds.  To address these  
          concerns, SBX1 31, (Burton) Chapter 9, Statutes of 2001, was  
          enacted with provisions that called for an expedited rehearing  
          and judicial review process for all issues relating to ABX1 1,  
          include provisions not directly related to the issuance of  
          bonds. 

          Since the passage of ABX1 1, the bonds have been issued, DWR is  
          no longer entering into new contracts to purchase power, the  
          contracts DWR did enter into have been allocated to IOUs and  
          CPUC has made several decisions relating to the allocation of  
          DWR's power purchase costs. 

          The sponsors of this bill believe that since the purpose of the  
          expedited review procedures was to allow the revenue bonds to be  
          sold quickly and the bond sales are now complete, there is no  
          need for a continued expedited review.  They believe that any  
          review of decisions relating to other provision in ABX1 1  
          including the allocation of DWR's power procurement costs, the  








                                                                  SB 659
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          prohibition on rate increase for residential customers using  
          less than 130 percent of base line, and the suspension of direct  
          access should be handled under the regular rehearing and  
          judicial review process. 

          Under the expedited review process, several decisions have been  
          appealed to the California Supreme Court.  In each case, the  
          court denied a writ of review, leaving CPUC decision in place.   
          Many observers believe that because of the complexity of most  
          CPUC decisions and the limited number of cases the Supreme Court  
          can take in a year, the court is hesitant to take direct appeals  
          of CPUC decisions.  Generally, the courts of appeal have been  
          more likely to hear appeals of CPUC decisions.  Consequently,  
          leaving the direct appeal process in place may limit the number  
          of decisions that the courts will review. 

           Are all issues relating to the bonds resolved?
           
          While the bonds have been sold, there are still costs associated  
          with the bonds that DWR must pay that could be increased if the  
          bond's credit ratings are down graded.  By changing the judicial  
          review process, this bill may create uncertainty with investors  
          that would negatively impact the recovery bonds and increase  
          DWR's total procurement costs.  To assure that this legislation  
          does not negatively impact the revenue bonds, the committee may  
          wish to consider amending the bill to leave the expedited review  
          process in place for issues relating to the issuance of the  
          bonds or costs recovery of DWR's procurement costs, but allows  
          for a return to the normal review process for all other issues  
          addressed in ABX1 1.  


           Will this bill impact current proceedings?

           
          Currently, there are a number of open and final decisions at  
          CPUC that relate to the implementation in ABX1 1.  As drafted  
          this bill does not address what potential impact it will have on  
          open proceedings or recently issued decisions.   In order to  
          avoid retroactively changing CPUC procedures the committee may  
          wish to consider amendments to state that this bill will only  
          apply to decisions that are issued after January 1, 2005.  
          
           REGISTERED SUPPORT / OPPOSITION  :









                                                                  SB 659
                                                                  Page  4

           Support 
           
          TURN (Sponsor) 
           
            Opposition 
           
          None on file.


           Analysis Prepared by  :    Edward Randolph / U. & C. / (916)  
          319-2083