BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 1082
                                                                  Page  1

          Date of Hearing:  July 6, 2000

                    ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE 
                               Roderick Wright, Chair
                   AB 1082 (Calderon) - As Amended:  June 20, 2000
           
          SUBJECT  :  Public utilities: stocks and security transactions.

           SUMMARY  :  Permits telephone corporations that are regulated  
          under a "price cap" regulatory structure to issue stock or debt  
          unless the California Public Utilities Commission (CPUC)  
          determines that such an issuance is not in the public interest.   
          Specifically,  this bill  :  

          1)Authorizes CPUC to exempt a telephone corporation that is  
            regulated under a price-cap regulatory structure from  
            specified stock and security transaction provisions, unless  
            the corporation:

             a)   Secures the financing by pledging a plant or assets; and

             b)   CPUC determines that such an issuance is not in the  
               public interest.

          1)Provides that these provisions shall continue to apply to any  
            telephone corporation that is also an electric or gas  
            corporation, as defined.

          1)States legislative intent that these provisions shall not  
            hinder CPUC's existing authority to disallow imprudent  
            expenses or capital expenditures of the utilities under its  
            jurisdiction, or CPUC's authority to impute a capital  
            structure or cost of capital for utilities under its  
            jurisdiction.

           EXISTING LAW  

          1)Authorizes CPUC to regulate decisions governing stock and  
            security transactions of any public utility if CPUC finds it  
            is required by the public interest.  

          1)Authorizes CPUC to exempt any public utility or class of  
            public utility from its regulations relating to stock and  
            security transactions if it finds that their application does  
            not impact the public interest.








                                                                  AB 1082
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           FISCAL EFFECT  :  Unknown.

           COMMENTS  : 

          In 1951, CPUC was granted the legal oversight of regulated  
          utilities' ability to obtain short and long-term capital  
          financing.  In the monopoly environment, utility rates were set  
          basing them on the cost of providing service, plus a reasonable  
          return on the utility's investment - a process known as  
          "cost-of-service" ratemaking.  Under that scheme, cost recovery  
          was virtually guaranteed for the monopoly telephone companies.   
          The telecommunications industry has undergone significant  
          changes since the initial grant of CPUC oversight authority.   
          Today, the ratesetting process for Pacific Bell and GTE  
          California (GTE) uses an incentive-based price-cap in which  
          shareholders bear the entire risk of the operations and  
          financial decisions of the company, and customers are shielded  
          from poor financing decisions of the utilities management.  This  
          bill delegates the responsibility for making sound decisions to  
          management.

          GTE, the sponsor of this bill, indicates that they have had to  
          forego opportunities to obtain more favorable financing terms  
          because the current CPUC oversight process takes a minimum of  
          three months to complete.  The California Telephone Association  
          asserts that by giving CPUC the ability to exempt the state's  
          largest local exchange carriers from onerous review and approval  
          of utility financing delegates greater responsibility on the  
          management of those carriers.

           REGISTERED SUPPORT / OPPOSITION  :

           Support  

          California Telephone Association
          Office Ratepayer Advocates
          Pacific Bell

           Opposition  

          None on file.
           

          Analysis Prepared by  :    Carolyn Veal-Hunter / U. & C. / (916)  








                                                                  AB 1082
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          319-2083