BILL ANALYSIS
AB 1082
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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