BILL NUMBER: SB 888 AMENDED
BILL TEXT
AMENDED IN SENATE JUNE 4, 2003
AMENDED IN SENATE MAY 20, 2003
AMENDED IN SENATE APRIL 28, 2003
AMENDED IN SENATE APRIL 10, 2003
AMENDED IN SENATE APRIL 8, 2003
INTRODUCED BY Senators Dunn, Bowen, and Burton
(Coauthors: Senators Cedillo, Escutia, Karnette,
Kuehl, Murray, Ortiz, Perata, and Romero)
(Coauthors: Assembly Members Leno, Matthews, Oropeza, and
Steinberg)
FEBRUARY 21, 2003
An act to amend Sections 335, 348, 352, 364, 367, 377, 379, 392,
and 9604 of, to amend and renumber Section 454.1 of, to add Sections
330.1, 330.2, 330.4, 330.6, 367.5, 393.1, 393.2, 454.55, 454.10,
701.2, 739.12, and 761.7 to, to repeal Sections 334, 338,
341.1, 341.5, 346, 350, 355, 356, 359, 360, 361, 365.5, 366.5, 367.7,
370, 373, 376, 378, 389, 391, 397, 9600, 9601, 9602, 9603, and 9605
of, and to repeal and add Sections 330, 365, and 366 of, the Public
Utilities Code, relating to public utilities.
LEGISLATIVE COUNSEL'S DIGEST
SB 888, as amended, Dunn. Public utilities: electrical
restructuring.
(1) The California Constitution establishes the Public Utilities
Commission, with jurisdiction over all public utilities. Private
corporations and persons that own, operate, control, or manage a
line, plant, or system for the production, generation, transmission,
or furnishing of heat, light, or power, directly or indirectly, to or
for the public, are public utilities subject to control by the
Legislature. The Constitution grants the commission certain general
powers over all public utilities, including the power to fix rates
and establish rules, and authorizes the Legislature, unlimited by the
other provisions of the Constitution, to confer additional authority
and jurisdiction upon the commission, that is cognate and germane to
the regulation of public utilities. The Public Utilities Act
authorizes the commission to supervise and regulate every public
utility in the state, including electrical, gas, and heat
corporations, subject to provisions restructuring the electrical
industry.
The existing restructuring of the electrical services industry
provides for the authorization of direct transactions between an
electric service provider, as defined, and retail enduse
end-use customers of an electrical corporation
and allows enduse end-use customers to
aggregate their loads to facilitate direct transactions. The
existing restructuring of the electrical industry within the Public
Utilities Act provides for the establishment of an Independent System
Operator (ISO) and a Power Exchange as separately incorporated
public benefit nonprofit corporations. An Electricity Oversight
Board (Oversight Board) is also established to oversee the ISO and
the Power Exchange in order to ensure the success of electric
industry restructuring and to ensure a reliable supply of electricity
in the transition to a new market structure. The ISO is required by
existing law to participate in all relevant proceedings of the
Federal Energy Regulatory Commission (FERC). Pursuant to an order of
the FERC, the Power Exchange has ceased to function. The Oversight
Board is granted various powers including, but not limited to,
requiring the revision of the bylaws of the ISO and the approval of
the entry of the ISO into a multistate entity or a regional
organization. Existing law requires the ISO to adopt certain
inspection, maintenance, repair, and replacement standards for the
transmission facilities under its control and to make a related
report to the Oversight Board. Existing law authorizes the ISO and
the Power Exchange to enter into a regional compact or other
comparable agreement to become western states regional organizations.
This bill would enact the Repeal of Electricity Deregulation Act
of 2003. The bill would provide that electrical and gas corporations
have an obligation to serve retail customers with reliable service
at just and reasonable rates. The bill would provide that this
obligation includes a duty of care, a duty of loyalty, a
duty of disclosure, and a duty to use best efforts by the corporation'
s management, to promote the safety, health, environmental
protection, comfort, and convenience of its customers, employees, and
the public, consistent with the statutes of the state and the rules,
regulations, decisions, and orders of the commission. The bill
would provide that this obligation to serve also includes the
obligation to plan for and provide sufficient, affordable,
reliable, cost-effective resources, including utility owned and
procured generation resources, transmission resources, and
distribution resources. The bill would require the commission to
ensure that the electrical corporation is afforded the means to carry
out these obligations, specifically including reasonable
compensation for employees and a reasonable opportunity to recover
from all customers reasonable investments in electric plants
a reasonable opportunity to recover from all
customers, reasonable costs to operate and maintain those resources,
reasonable compensation for employees, a return of and a reasonable
return on prudent investments in utility owned generation,
transmission, and distribution resources necessary to meet the above
obligations, and reasonable costs for procured generation resources
. The bill would require the commission to ensure that
generation assets remain dedicated for the benefit of the electrical
corporation's bundled customers, and establishes standards for the
recovery of costs and return on investment. The bill requires the
commission to establish and oversee a long-term, comprehensive
integrated resource planning process that results in a balanced,
reliable, environmentally responsible portfolio of supply and
demand-reduction resources, and to ensure that the electrical
corporation's procurement plan is consistent with the long-term
resource plan, to the extent feasible. The bill would authorize the
commission to require electrical corporations to make investments in
electric generation plants that are dedicated to serve customers
connected to the electrical corporation's distribution system or
grid, or to contract for such investment with any entity, including
the California Consumer Power and Conservation Financing Authority.
This bill would delete the authorization of direct transactions,
including aggregation of loads and other provisions to facilitate
direct transactions, between an electric service provider and retail
enduse end-use customers of an
electrical corporation, on a prospective basis. The bill would
require all metering of customer usage of electricity and customer
billing to be performed by the electrical corporation and would
prohibit residential and small commercial customers being required to
take service under a time-differentiated rate without prior consent.
This bill would delete those provisions establishing the Power
Exchange and would make conforming changes repealing those
provisions granting powers to the Oversight Board relative to the
Power Exchange . The bill would delete provisions relative
to the ISO participation in FERC activities. The bill would require
the Legislature to approve the entry of the ISO into a multistate or
regional transmission organization, and would repeal that provision
regarding the adoption of standards for transmission facilities by
the ISO. The bill would require the commission to adopt and
periodically review and update inspection, maintenance, repair, and
replacement standards for the distribution and transmission
systems of investor-owned electric utilities. The bill
would require the commission, on or before June 1, 2004, to develop,
and submit to the Legislature for enactment as a statute, a detailed
proposal for implementation of a "core/noncore" model for retail
electric service that achieves certain objectives. The bill would
repeal the regional compact provision. The bill would make other
conforming changes. Because any violation of the Public Utilities Act
is a crime, the bill would impose a state-mandated local program by
changing the definition of a crime.
This bill would establish a Ratepayer Refund Account for each
electrical corporation, into which would be paid any funds recovered
by electrical corporations resulting from litigation or agreement
relative to the charging of excessive costs for wholesale electricity
by electrical generators. All funds would be held in trust for the
benefit of ratepayers as authorized by the commission.
(2) The existing Public Utilities Act, prohibits any person or
corporation from acquiring or controlling, directly or indirectly,
any public utility organized and doing business in this state,
including electrical corporations and gas corporations, without first
securing authorization to do so from the commission.
Existing law requires the commission, before authorizing the
acquisition or control of an electric, gas, or telephone utility
having revenues in excess of a specified amount, to consider, among
other things, that the proposal provides short-term and long-term
economic benefits to ratepayers, and equitably allocates the
short-term and long-term forecasted economic benefits of the proposed
merger, acquisition, or control, as determined by the commission,
between shareholders and ratepayers, where the commission has
ratemaking authority.
Pursuant to the act, the commission has authorized the formation
of holding companies holding a controlling interest in certain
electrical corporations and gas corporations. The commission has
conditioned authorization upon the capital requirements of the
electrical corporation or gas corporation being given first priority
by the board of directors of the parent holding company, as
determined by the commission as being necessary to meet the
obligation to serve the electrical corporation or gas corporation.
This bill would provide that a holding company, as defined, or
other entity that owns, controls, operates, or manages a public
utility, is subject to the continuing jurisdiction and power of the
commission for the limited purpose of monitoring and enforcing
conditions in certain decisions of the commission authorizing the
formation of holding companies. Because a violation of the Public
Utilities Act or an order of the commission is a crime under existing
law, the bill would impose a state-mandated local program by
creating a new crime.
(3) This bill would delete provisions relative to the
restructuring of electrical service provided by publicly owned
electrical utilities.
(4) This bill would require the commission to establish by
July 1, 2004, special bundled service rates for public school
facilities , as defined, that reflect the typical seasonal
load shape of public schools and the special importance of public
education.
(5) 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.
(6) This bill would provide that it shall not become operative,
and that it is for display purposes only.
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. Section 330 is added to the Public Utilities Code, to
read:
330. The act adding this section shall be known and may be cited
as the Repeal of Electricity Deregulation Act of 2003.
SEC. 3. Section 330.1 is added to the Public Utilities Code, to
read:
330.1. The Legislature finds and declares all of the following:
(a) Electricity is a unique good in modern society, not a simple
commodity. Access to safe, reliable , environmentally clean,
efficient, and affordable electrical service is indispensable
to the health, comfort, and well-being of every person and business,
and should be regarded as a right.
(b) Unlike other commodities, electricity must be manufactured at
the same instant it is consumed, it cannot be effectively stored, and
adequate generating conservation, efficiency, generation,
and transmission capacity must be available at all times to meet
any level of demand at any location. Shortages, even for only a few
minutes, cause blackouts. This combination of circumstances creates
unparalleled opportunities for discrimination and market
manipulation.
(c) Reliable , environmentally clean, and efficient,
electrical service is of utmost importance to the safety, health, and
welfare of the state's citizenry , environment, and
economy. It is the intent of the Legislature that regulation of the
electrical industry should ensure the reliability of electrical
service to end users, including the reliability of the interconnected
regional transmission systems, and provide strong coordination and
enforceable protocols for all users of the electricity grid.
(d) Accordingly, the electrical industry must be comprehensively
regulated, by state and federal agencies for investor-owned
utilities, or by customer-controlled structures for public and
cooperative utilities. The people of California expect effective
government and utility action to ensure reliable service at
reasonable rates.
(e) Electrical service in California was restructured, or
deregulated, by orders of the California Public Utilities Commission
(CPUC) and the Federal Energy Regulatory Commission (FERC), and
actions of the California Independent System Operator pursuant to
FERC authorization, which ordered separation of the transmission and
generation elements of electrical service resulting in: (1)
divestiture of powerplants that had been built and dedicated to serve
California consumers at just and reasonable regulated rates; (2) the
separation of wholesale and retail transmission service by the
utility owners of the transmission facilities; (3) uses of the
transmission grid designed to enable sellers to undermine grid
reliability in the pursuit of high prices through the exercise of
market power.
(f) The California Legislature confirmed the CPUC orders in some
respects through the enactment of Assembly Bill 1890 (Chapter 854 of
the Statutes of 1996), and in so doing, codified the basic tenants of
deregulation of electrical service in California.
(g) As the direct result of deregulation of the electrical
industry, electricity markets in California have been grossly
dysfunctional for the past several years, characterized by
manipulation and abuse of seller market power in wholesale
electricity markets, withholding of vital energy supplies and other
illegal conduct that resulted in unjust and unreasonable wholesale
prices for electricity, causing elevated retail rates and repeated
actual and threatened interruptions of electrical service.
(h) As the direct result of the deregulation of the wholesale
electrical market and the dysfunctional service arrangements,
residential and business consumers have endured the single largest
retail rate increase in the state's history, the state's largest
electrical corporation filed for bankruptcy, a second electrical
corporation was on the verge of insolvency, and reliable electrical
service was repeatedly jeopardized. It will take many years for the
economic effects of these calamities to be overcome.
(i) During the period from May 2000 through June 2001, California
was beset by actual and threatened blackouts due to supply
withholding by wholesale generators and electricity traders, using
both direct and indirect means to make electricity unavailable to the
people of California.
(j) As the direct result of deregulation of the electrical supply
market, California was forced to rely entirely on unregulated private
investment decisions to provide sufficient electrical generation to
satisfy the demand for electricity. As a direct result of
deregulation of the electrical supply market, California has
experienced the boom and bust cycle in the construction of new
electrical powerplants that characterizes any unregulated market.
The wholesale electricity generation sector, subject only to
ineffective or nonexistent regulation by FERC, is now failing to
invest in new generation needed by California.
(k) As the direct result of deregulation of the electrical
industry, California's traditional commitments to renewable energy
sources and investments in improved energy efficiency were weakened.
In order to fulfill the mandates of Senate Bill 1078 (Chapter 516 of
the Statutes of 2002), which is necessary to protect California's
environment, public utilities must be able to implement the
California Renewables Portfolio Standard Program.
(l) California electricity consumers will inevitably provide the
ultimate credit support for any new investment in facilities for the
provision of electrical service in the future either through
rate-based utility investments or through long-term contracts with
other suppliers. Protecting
(k) The state should move to a new model for electricity resource
development and management, under which public utilities manage and
improve their generation, transmission, and distribution systems as
well as a resource portfolio including cost-effective energy
efficiency and conservation and environmentally clean and efficient
electrical generation resources.
(l) It appears inevitable that California electricity consumers
will be called upon to provide the ultimate credit support for any
new investments in facilities for the provision of electrical service
in the future, either via rate-based utility investments or through
preapproved long-term contracts with other suppliers. Therefore,
protecting the interests of consumers by ensuring that
investment is these investments are prudent and
cost-effective should be the highest priority of California
regulatory policy and action.
(m) It is in the state's interest to have functional creditworthy
public utilities providing essential electrical service to California
consumers at just and reasonable rates and to limit the exposure of
California consumers to dysfunctional deregulated wholesale
electricity markets.
(n) Fully empowering public utilities and state entities and
agencies, including the CPUC, the California Consumer Power and
Conservation Financing Authority, the Independent System Operator,
and the Department of Water Resources to mitigate the exercise of
market power by sellers of electricity, reduce prices for
electricity, and restore electrical grid reliability, is in the
public interest. To the extent that unbundling the elements of
electrical service, including transmission of electricity provided to
retail consumers, weakens the ability of California to protect its
people, such unbundling should be reconsidered and reversed.
(o) Direct transactions, popularly termed direct access, as a
means for obtaining retail electrical service, have resulted in
massive subsidies of some retail customers by others. Direct access
has resulted in increased costs for bundled service customers of
electrical corporations, while failing to provide justifiable reduced
costs for direct access customers. Direct access undermines the
ability of public utilities to plan and invest to meet their
obligation to serve, by making uncertain the amount of customer
demand that must be met. To the extent that retail competition is
permitted by the Legislature, the existing direct access program
should be replaced by a retail competition program that is more
stable and transparent, and that that
promotes renewable and other clean sources of electricity, and that
fairly assigns risks and costs between different customer
classes, electrical corporations, and retail competitors.
(p) The expectations and assumption that deregulation of the
electrical industry would provide consumer benefits, enhanced
reliability, lower rates and technological innovation, have proven
illusory. Instead, consumers have been and will be forced to pay for
massive costs incurred as a result of deregulation, and have
suffered from unprecedented degradation in the reliability of
electricity supply. Public utilities have been forced to near
financial ruin or to seek bankruptcy protection. Certain merchant
generators and marketers are in severe financial distress.
(q) It is in the public interest to repudiate the failed policies
of electrical industry deregulation, and to assure the people of
California that electrical service will be reliable and
affordable , affordable, efficient, and clean in
the future through effective regulation.
SEC. 4. Section 330.2 is added to the Public Utilities Code, to
read:
330.2. It is the intent of the Legislature to achieve effective
state regulation of California's public utilities in
order to protect ratepayers, ensure adequate and efficient electrical
service, to protect public health and the environment, and to
pursue the following policy goals:
(a) Restore and affirm the public utility's obligation to serve
all of its customers with electric generation supply,
transmission, and distribution. .
(b) Protect public health and the environment.
(c) Eliminate opportunities for market manipulation by stopping
electric plant divestiture and authorizing cost-of-service
construction of new electric plant, pursuant to
subdivision (b) of Section 454.10 and subject to the maximum cost
limitation of Section 1005.5, while providing a reasonable
opportunity for reasonable return of and on prudent investments, and
appropriate rules for public utility wholesale electricity
procurement.
(d) Ensure reasonable and prudent investments in energy
conservation and environmentally clean and efficient generation of
electricity that is subject to state regulation and oversight.
(e) Ensure electricity supply reliability and deter market
manipulation by establishing and enforcing effective standards for
maintenance and operation of electric plants that serve California.
(e)
(f) Ensure that all cost-effective transmission and distribution
alternatives that meet the identified need, including demand-side
alternatives, are considered in transmission and distribution
planning.
(g) Provide for cost-effective construction, operation and
maintenance of the electrical transmission grid and distribution
system , or cost-effective alternatives, in the public
interest, while providing a fair opportunity for reasonable returns
on prudent investment.
(f)
(h) Protect consumers from slamming, cramming and fraud by
requiring metering, billing, collection, and customer service to be
provided in the most efficient and least costly manner to
customers by public utilities, under regulation by the CPUC.
(g)
(i) Preserve and renew the skilled public utility workforce
by ending employee layoffs, providing reasonable
wages and working conditions, and ensuring that the public utilities
have an adequately sized and trained workforce , with a
preference for utility employees, to meet their obligation to
serve.
(h)
(j) Establish a comprehensive integrated resource planning
process under regulation that results in a balanced, reliable,
environmentally responsible portfolio , consisting of a
cost-effective mix of customer-owned, utility-owned, and nonutility
supply and demand reduction resources, and is consistent with
Sections 701.1 and 454.5 454.5 and 701.1
, Article 16 (commencing with Section 399.11), and Chapter 4
(commencing with Section 25300) of Division 15 of the Public
Resources Code.
(i)
(k) Offer first consideration, when providing for resource
adequacy, to available energy efficiency resources and renewable
resources, consistent with Article 16 (commencing with Section
399.11), that are cost-effective compared to other available resource
options.
(j)
(l) Simplify corporate ownership of electrical corporations
by requiring transparent forms of corporate ownership of public
utilities, by improving accountability for holding company
requirements in state law and by seeking enforcement of the Public
Utilities Holding Company Act of 1935 (Ch. 2C (commencing with Sec.
79), Title 15, U.S.C.).
(k)
(m) Provide for fair cost allocation among customers in just
and reasonable rates fixed established
through open public processes.
(l)
(n) Restore consumer and investor confidence in electrical
corporation financial soundness and pricing fairness by making costs
transparent and establishing and enforcing accounting standards.
(m)
(o) Assure universal service by assuring affordable rates
and, among other measures, providing low-income discounts with
effective enrollment programs.
(n)
(p) Provide an open regulatory forum where all persons
affected by public utility service and rates can observe and
participate in the decisionmaking process.
(q) Ensure that public utilities, their facilities and plant, and
any real property they own, are operated and managed in an
environmentally sound manner.
(r) Ensure that in its proceedings, the commission actively
promotes protection of ratepayers and the environment.
SEC. 5. Section 330.4 is added to the Public Utilities Code, to
read:
330.4. The actions of the commission pursuant to this part, as
they affect electrical service, shall be consistent with the findings
and declarations contained in this article.
SEC. 6. Section 330.6 is added to the Public Utilities Code, to
read:
330.6. (a) Because of their status as public utilities pursuant
to Article XII of the California Constitution, and consistent with
Sections 399.2 and 451, electrical corporations and gas corporations
that serve retail customers have an obligation to serve those
customers with reliable service at just and reasonable rates.
(b) This obligation to serve includes a duty of care, a
duty of loyalty, a duty of disclosure, and a duty to use best efforts
by the corporation's management, to promote the safety,
health, environmental protection, comfort, and convenience of its
customers, employees, and the public, consistent with the statutes of
the state and the rules, regulations, decisions, and orders of the
commission. This obligation to serve includes the obligation to plan
for, and provide sufficient, affordable, reliable,
cost-effective resources, including utility owned and procured
generation resources, transmission resources, and distribution
resources.
(c) The commission, on behalf of enduse
end-use customers, shall ensure that the electrical corporation
is afforded the means to carry out this obligation to serve,
specifically including reasonable compensation for employees
and a reasonable opportunity to recover from all customers, in a
manner determined by the commission pursuant to this code, reasonable
investments in electric plant, including a reasonable return on
those investments, reasonable costs to operate and maintain the
electric plant, and procurement costs a reasonable
opportunity to recover from all customers, in a manner determined by
the commission pursuant to this code, reasonable costs to operate and
maintain those resources, reasonable compensation for employees, a
return of and a reasonable return on prudent investments in utility
owned generation, transmission, and distribution resources necessary
to meet the obligations pursuant to subdivision (b), and reasonable
costs for procured generation resources in accordance with
Section 454.5.
SEC. 7. Section 334 of the Public Utilities Code is repealed.
SEC. 8. Section 335 of the Public Utilities Code is
amended to read:
335. In order to ensure that the interests of the people of
California are served, a five-member Electricity Oversight Board is
hereby created as provided in Section 336. For purposes of this
chapter, any reference to the Oversight Board shall mean the
Electricity Oversight Board. Its functions shall be all of the
following:
(a) To oversee the Independent System Operator.
(b) To serve as an appeal board for majority decisions of the
Independent System Operator governing board, as they relate to
matters subject to exclusive state jurisdiction, as specified in
Section 339.
(c) To investigate any matter related to the wholesale market for
electricity to ensure that the interests of California's citizens and
consumers are served, protected, and represented in relation to the
availability of electrical transmission and generation and related
costs, during periods of peak demand.
SEC. 9. Section 338 of the Public Utilities Code is
repealed.
SEC. 10.
SEC. 9. Section 341.1 of the Public Utilities Code is
repealed.
SEC. 11.
SEC. 10. Section 341.5 of the Public Utilities Code is
repealed.
SEC. 12.
SEC. 11. Section 346 of the Public Utilities Code is
repealed.
SEC. 13.
SEC. 12. Section 348 of the Public Utilities Code is amended
to read:
348. (a) The Independent System Operator, in consultation with
the commission and consistent with Section 364 ,
shall adopt and periodically review and update inspection,
maintenance, repair, and replacement standards for the transmission
facilities under its control. The standards for each substantial
type of transmission equipment or facility, shall provide for high
quality, safe, and reliable service.
(b) In adopting its standards, the Independent System Operator
shall consider all of the following:
(1) Cost.
(2) Local geography and weather.
(3) Applicable codes.
(4) National electric industry practices.
(5) Sound engineering judgment.
(6) Experience.
(c) The Independent System Operator shall also adopt standards for
reliability, and safety during periods of emergency and disaster.
(d) 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. 14.
SEC. 13. Section 350 of the Public Utilities Code is
repealed.
SEC. 15.
SEC. 14. Section 352 of the Public Utilities Code is amended
to read:
352. The Independent System Operator may not enter into a
multistate regional transmission organization unless that entry is
approved by the Oversight Board and the Legislature by concurrent
resolution.
SEC. 16.
SEC. 15. Section 355 of the Public Utilities Code is
repealed.
SEC. 17.
SEC. 16. Section 356 of the Public Utilities Code is
repealed.
SEC. 18.
SEC. 17. Section 359 of the Public Utilities Code is
repealed.
SEC. 19.
SEC. 18. Section 360 of the Public Utilities Code is
repealed.
SEC. 20.
SEC. 19. Section 361 of the Public Utilities Code is
repealed.
SEC. 21.
SEC. 20. Section 364 of the Public Utilities Code is amended
to read:
364. (a) The commission shall adopt and periodically review and
update inspection, maintenance, repair, and replacement standards for
the distribution and transmission systems of
investor-owned electric utilities. The standards for each
substantial type of distribution and transmission
equipment or facility shall provide for high quality, safe and
reliable service.
(b) In setting its standards, the commission shall consider:
cost, local geography and weather, applicable codes, national
electric industry practices, sound engineering judgment, and
experience. The commission shall also adopt standards for operation,
reliability, and safety during periods of emergency and disaster.
(d)
(c) The commission shall require each utility to report
annually on its compliance with the standards. That report shall be
made available to the public.
(e)
(d) The commission shall conduct a review to determine
whether the standards prescribed in this section and Section 348
have been met. If the commission finds that the standards
have not been met, the commission may order appropriate sanctions,
including penalties in the form of rate reductions or monetary fines.
The review shall be performed after every major outage. Any money
collected pursuant to this subdivision shall be used to offset
funding for the California Alternative Rates for Energy Program.
SEC. 22.
SEC. 21. Section 365 of the Public Utilities Code is
repealed.
SEC. 23.
SEC. 22. Section 365 is added to the Public Utilities Code,
to read:
365. On or before June 1, 2004, the commission shall develop, and
submit to the Legislature for enactment as a statute, a detailed
proposal for implementation of a "core/noncore" model for retail
electric service that achieves each of the following objectives:
(a) Permits specified electrical corporation customers to purchase
electricity directly from alternative retail
electric service providers.
(b) Provides that noncore customers forgo both the benefits and
future-incurred costs of bundled electricity service from the
electrical corporation.
(c) Provides that remaining core customers are served by the
electrical corporation's generation
electricity resource portfolio.
(d) Requires each electrical corporation to maintain the value of
its generation electricity resource
portfolio for core customers.
(e) Ensures electrical corporations and core customers full and
timely recovery of costs , including investments in long-term
resource additions to the system, originally incurred to serve
departing customers.
(f) Provides for full recovery of existing direct access customers'
energy cost obligations on a schedule comparable to the recovery of
comparable costs from core customers.
(g) Provides an election process for determining which customers
wish to remain core customers, and which customers opt for noncore
service, administered in a manner that ensures a stable customer base
for electrical corporations to support long-term integrated
resource planning and investment.
(h) Requires noncore electric
service providers to comply with conditions, including, but
not limited to, resource adequacy standards, that the
commission determines to be necessary and appropriate to ensure there
is no adverse effect on the reliability or cost of electricity for
core customers.
(i) Requires noncore electric
service providers to comply with renewable procurement
requirements comparable to electrical corporations. the
requirements established pursuant to Article 16 (commencing with
Section 399.11).
(j) Permits core customers to purchase renewable power at cost via
electrical corporation renewable service options, in addition to an
electrical corporation's obligations under Article 16 (commencing
with Section 399.11).
(k) Restricts the eligibility of noncore customers to return to
bundled service. Electrical corporation service to returning noncore
customers shall be provided at cost a fully
compensatory rate , and subject to contractual return
conditions that prevent any cost shifting.
(l) Shows that a core/noncore program will support, and not be
detrimental to, system reliability and future investments in
electricity infrastructure and the objective of acquiring all
cost-effective demand reduction resources on the system .
(m) Compares the public benefits of core/noncore to other electric
service options , including community choice aggregation, as
provided in Section 366.2 .
(n) Protects existing contractual rights.
SEC. 24.
SEC. 23. Section 365.5 of the Public Utilities Code is
repealed.
SEC. 25.
SEC. 24. Section 366 of the Public Utilities Code is
repealed.
SEC. 26.
SEC. 25. Section 366 is added to the Public Utilities Code,
to read:
366. (a) It is the intention of the Legislature that new direct
transactions not be authorized until the commission proposes rules
pursuant to Section 365 and those rules are enacted as statutes.
(b) Each customer within the geographical distribution area of an
electrical corporation shall receive any retail electricity service
from the electrical corporation or its successor in interest, except
as provided in subdivision (c) and Sections 366.1 and 366.2. For
purposes of this section, retail electricity service does not include
self-provision of electricity from customer-owned generation
resources or provision of electricity consistent with subdivision
(b) of Section 218. This subdivision does not prevent the
commission from approving an application by an irrigation district to
serve customers pursuant to Section 9607 or 9608.
(c) If a customer account was served by an electric service
provider on April 1, 2003, the customer account may continue to be
served by that electric service provider until the later of January
1, 2005, or the date of expiration of the customer's direct
transaction contract in effect on April 1, 2003. Thereafter, the
customer shall receive any retail electricity service from the
electrical corporation that provides
distribution service.
(d) A customer that elects to continue purchasing electricity from
an electric service provider pursuant to subdivision (c) shall
supply the commission with a confidential copy of its current direct
transaction contract and shall enter into a contract with
the electrical corporation, as a condition of distribution service,
that sets forth terms of return to bundled service that prevent
cost-shifting.
(e) Any customer that the commission has determined in Decision
02-11-022, is responsible to pay a cost recovery surcharge as a
condition of purchasing electricity pursuant to a direct transaction,
shall continue to pay the cost recovery surcharge until full
collection is achieved.
(f) The commission shall report to the Legislature by June 1,
2004, all of the following:
(1) Each customer electing to continue purchasing electricity from
an electric service provider pursuant to subdivision (c), identified
numerically.
(2) The electrical load serviced under each direct transaction
contract.
(3) The expiration date of each direct transaction contract.
SEC. 27.
SEC. 26. Section 366.5 of the Public Utilities Code is
repealed.
SEC. 28.
SEC. 27. 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:
(a) 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:
(1) 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.
(2) Power purchase contract obligations shall continue for the
duration of the contract. Costs associated with any buyout, buydown,
or renegotiation of the contracts shall continue to be collected for
the duration of any agreement governing the buyout, buydown, or
renegotiated contract; provided, however, no power purchase contract
shall be extended as a result of the buyout, buydown, or
renegotiation.
(3) 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.
(4) 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.
(b) (1) There shall be a firewall segregating the recovery of the
costs of competition transition charge exemptions such that the costs
of competition transition charge exemptions granted to members of
the combined class of residential and small commercial customers
shall be recovered only from these customers, and the costs of
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 these customers.
(2) The commission shall retain existing cost allocation
authority, provided the firewall and rate freeze principles are not
violated.
SEC. 29.
SEC. 28. 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, net of
litigation costs as authorized by the commission, 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 electricity by electrical
generators, traders, and suppliers that have been recovered, or are
recoverable, from ratepayers in commission-approved rates, shall be
credited to the electrical corporation's Ratepayer Refund 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 shall be held in trust for the benefit of ratepayers in
an amount and manner authorized by the commission.
SEC. 30.
SEC. 29. Section 367.7 of the Public Utilities Code is
repealed.
SEC. 31.
SEC. 30. Section 370 of the Public Utilities Code is
repealed.
SEC. 32.
SEC. 31. Section 373 of the Public Utilities Code is
repealed.
SEC. 33.
SEC. 32. Section 376 of the Public Utilities Code is
repealed.
SEC. 34.
SEC. 33. Section 377 of the Public Utilities Code is amended
to read:
377. The commission shall regulate the facilities for the
generation of electricity owned by any public utility on a
cost of service basis pursuant to subdivision (b) of
Section 454.10 . Notwithstanding any other provision of law,
no facility or site for the generation of electricity owned by a
public utility may be disposed of prior to January 1, 2010. The
commission shall ensure that public utility generation assets remain
dedicated for the benefit of the electrical corporation's bundled
customers.
SEC. 35.
SEC. 34. Section 378 of the Public Utilities Code is
repealed.
SEC. 36.
SEC. 35. Section 379 of the Public Utilities Code is amended
to read:
379. Nuclear decommissioning costs shall be recovered as a
nonbypassable charge until the costs are fully recovered. Recovery
of decommissioning costs may be accelerated to the extent possible.
SEC. 37.
SEC. 36. Section 389 of the Public Utilities Code is
repealed.
SEC. 38.
SEC. 37. Section 391 of the Public Utilities Code is
repealed.
SEC. 39.
SEC. 38. Section 392 of the Public Utilities Code is amended
to read:
392. Electrical corporations shall disclose each component of the
electrical bill as directed by the commission.
SEC. 40.
SEC. 39. Section 393.1 is added to the Public Utilities
Code, to read:
393.1. The Legislature finds and declares all of the following:
(a) Metering customer usage of electricity is an integral part of
the electricity distribution system, and is the responsibility of the
electrical corporation.
(b) Accurately applying utility tariffs approved by the commission
and calculating a customer's bill is the responsibility of the
electrical corporation.
(c) If electricity metering is performed by entities other than
the electrical corporation, it can create customer confusion, and can
create serious safety hazards for customers and utility employees.
(d) Customers are entitled to have the electrical corporation
resolve all questions regarding the accuracy of bills, including the
accuracy of metering and correct application of approved utility
tariffs, subject to commission oversight.
(e) To protect customers from fraud and abuse, and to enable
customers to easily resolve disputes concerning metering or billing,
those functions should be performed in the most efficient and
least costly manner, only by an electrical corporation subject
to regulation by the commission.
SEC. 41.
SEC. 40. Section 393.2 is added to the Public Utilities
Code, to read:
393.2. (a) All metering of customer usage of electricity and
customer with average usage of less than 1,000 kilowatthours
per month billing shall be performed by the electrical
corporation.
(b) No residential or small commercial customer with average
usage of less than 1,000 kilowatthours per month may be
required to take service under a time-differentiated rate.
(c) Nothing in this article limits the commission's power or
authority with respect to the contents or nature of
customer billing. The commission may require an electrical
corporation to aggregate a customer's multiple accounts into a single
bill, so long as the cost for that activity is recoverable in rates.
SEC. 42.
SEC. 41. Section 397 of the Public Utilities Code is
repealed.
SEC. 43.
SEC. 42. Section 454.55 is added to the Public Utilities
Code, to appear immediately following Section 454.5, to read:
454.55. (a) The commission shall establish and oversee a
long-term, comprehensive integrated resource planning process that
results in a balanced, reliable, environmentally responsible
portfolio of supply and demand-reduction resources, and is consistent
with Sections 701.1 and 454.5 454.5 and
701.1 , Article 16 (commencing with Section 399.11), and
Chapter 4 (commencing with Section 25300) of Division 15 of the
Public Resources Code.
(b) The commission shall ensure that the implementation of an
electrical corporation's procurement plan is consistent with the
long-term resource plan, to the extent feasible.
(c) The commission shall require an electrical corporation, when
implementing its procurement plan, to first acquire available energy
efficiency resources that are cost-effective compared to other
available resource options.
SEC. 44.
SEC. 43. Section 454.1 of the Public Utilities Code, as
added by Chapter 1040 of the Statutes of 2000, is amended and
renumbered to read:
454.6. (a) Reasonable expenditures by transmission owners that
are electrical corporations to plan, design, and engineer
reconfiguration, replacement, or expansion of transmission facilities
or other cost-effective transmission alternatives, including
demand side alternatives, that meet identified need, are in the
public interest and are deemed prudent if made for the purpose of
providing lower cost delivery of delivery of
lower cost electricity to ratepayers, or maintaining or
enhancing reliability, whether or not these expenditures are for
transmission facilities that become operational.
(b) The commission and the Electricity Oversight Board shall
jointly 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 ( Ch. 12 (commencing with Section
791a), Title 16, U.S.C.). 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. 45.
SEC. 44. Section 454.10 is added to the Public Utilities
Code, to read:
454.10. (a) Consistent with Section 762
Article 16 (commencing with Section 399.11), Sections 454.5, 701.1,
and 762, and Chapter 4 (commencing with Section 25300) of Division 15
of the Public Resources Code , and in order to ensure that
service provided by electrical corporations is environmentally
clean, efficient, cost-effective to ratepayers, and adequate,
the commission may require an electrical corporation that provides
distribution service to make direct investments in, or contract with
any entity, public or private, for, electric generation plants that
are dedicated to serve the customers connected to the electrical
corporation's distribution system or grid, consistent with the plan
approved by the commission pursuant to Section 454.5.
(b) After a hearing, the commission shall approve rates
sufficient to afford that provide the electrical
corporation a reasonable opportunity to recover its reasonable costs
of operating, its reasonable investment in, and a reasonable return
on its investment in the electric generation plants, in accordance
with Sections 330.6, 377, 451, and 1005.5.
(c) An electrical corporation may meet the obligations of this
section by contracting with or entering into projects for
construction of electric generation plants jointly with any entity,
including, without limitation, the California Consumer Power and
Conservation Financing Authority, California municipalities,
cooperatives, and joint powers authorities.
(d) Direct investment in electric generation plants is not the
exclusive method for electrical corporation's to fulfill their
obligation to serve retail customers at just and reasonable rates.
The commission shall implement this section consistent with
other applicable provisions of law, including Sections 701.1 and
454.5 and Article 16 (commencing with Section 399.11), to achieve a
through a transparent process that achieves a
balanced, reliable, environmentally responsible and cost-effective
resource portfolio.
(e) This section does not limit or affect the requirements for
utilization of cost-effective energy conservation and renewable
resources established pursuant to this division.
SEC. 45. Section 701.2 is added to the Public Utilities Code, to
read:
701.2. On or before July 1, 2004, the commission shall adopt
standards applicable to the operation, maintenance, and stewardship
of lands owned or operated by electrical corporations in order to
ensure that the lands, and any natural resources on those lands, are
managed in a manner consistent with applicable laws protecting public
health, the environment, species, habitat and other resource values.
SEC. 46. Section 739.12 is added to the Public Utilities Code, to
read:
739.12. (a) The Legislature finds and declares all of the
following:
(1) Unlike most businesses or industries, and unlike the
California electrical system as a whole, public school facilities
tend to have peak electrical usage during winter rather than summer
months.
(2) Public school facilities as a group impose lower average costs
on the electrical system than other facilities of similar size.
(3) Current rates do not adequately reflect the seasonal load
shape of public school facilities.
(4) Because of the critical importance of public education and the
unique characteristics typically exhibited by public school
facilities, these facilities should be served at the lowest
reasonable rate.
(5) Rates for public school facilities should be reduced to
reflect a discount from the electrical corporations otherwise
applicable rate schedules.
(b) The commission shall establish by July 1, 2004,
special bundled service rates for public school facilities that
reflect the typical seasonal load shape of public schools and the
special importance of public education.
(c) For purposes of subdivision (b), "public school facilities"
means all real property and portable classrooms owned or leased by a
school district, county office of education, charter school,
community college district, the California State University and the
system of institutions of higher education which comprises the
California State University as authorized in Section 89001 of the
Education Code, and the Trustees of the California State University.
SEC. 47. Section 761.7 is added to the Public Utilities Code, to
read:
761.7. An electrical corporation, holding company as defined in
Section 79b(a)(7)(A) of Title 15 of the United States Code, or other
entity 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
conditions in commission decisions D.88-01-063, D.96-11-017,
D.99-04-068, D.95-05-021, D.95-12-018, and D.98-03-07.
SEC. 48. Section 9600 of the Public Utilities Code is repealed.
SEC. 49. Section 9601 of the Public Utilities Code is repealed.
SEC. 50. Section 9602 of the Public Utilities Code is repealed.
SEC. 51. Section 9603 of the Public Utilities Code is repealed.
SEC. 52. Section 9604 of the Public Utilities Code is amended to
read:
9604. For purposes of this division, "local publicly owned
electric utility" as used in this division means a municipality or
municipal corporation operating as a "public utility" furnishing
electric service as provided in Section 10001, a municipal utility
district furnishing electric service formed pursuant to Division 6
(commencing with Section 11501), a public utility district furnishing
electric services formed pursuant to the Public Utility District Act
set forth in Division 7 (commencing with Section 15501), an
irrigation district furnishing electric services formed pursuant to
the Irrigation District Law set forth in Division 11 (commencing with
Section 20500) of the Water Code, or a joint powers authority that
includes one or more of these agencies and that owns generation or
transmission facilities, or furnishes electric services over its own
or its member's electric distribution system.
SEC. 53. Section 9605 of the Public Utilities Code is repealed.
SEC. 54. 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. 55. Notwithstanding any other provision of this act,
this act shall not become operative, and is for display purposes
only.
SEC. 56. 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.