BILL NUMBER: AB 1421 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 8, 1999
INTRODUCED BY Assembly Member Wright
FEBRUARY 26, 1999
An act to amend Sections 330 and Section
331 of, to add Sections 328.1 and 328.2 to, and to repeal and
add Sections 328 and 365.5 of, the Public Utilities Code, relating to
public utilities.
LEGISLATIVE COUNSEL'S DIGEST
AB 1421, as amended, R. Wright. Gas and electric service.
(1) Existing law permits the Public Utility Commission to
investigate the restructuring of natural gas services, as specified,
but prohibits the commission, prior to January 1, 2000, from enacting
any gas industry restructuring decisions and from enforcing any
natural gas restructuring decisions for core customers as considered
in Rulemaking 98-01-011 enacted after July 1, 1998, but prior to
August 25, 1998.
This bill would repeal that provision, and, instead, would require
the commission to require each gas corporation to provide bundled
basic gas service, as defined, to all core customers in its service
territory unless the customer makes a positive declaration
chooses or contracts to have natural gas
purchased and supplied by another entity. The bill would
require the commission to allow only specify that
a public utility gas corporation shall continue
to provide be the exclusive provider
of revenue cycle services, as defined, in its service
territory, except as specified, and would require the
commission to require the distribution rate to continue to include
after-meter services, as defined. The bill would require the
commission to authorize a gas corporation to purchase natural
gas commodity from any source and to set the natural gas
commodity portion of the bundled rate equal to the weighted average
cost of gas. The bill would require the commission to authorize gas
corporations to offer optional competitive rate schedules and
tariffs. The bill would make related legislative findings and
declarations.
(2) Existing law relating to electrical restructuring states that
nothing in those provisions prevents the commission from exercising
its authority to investigate a process for the certification and
regulation of the rates, charges, terms, and conditions of default
service, and if the commission determines that a process for the
certification and regulation of default service is in the public
interest, existing law requires the commission to submit its findings
and recommendations to the Legislature for approval.
This bill would repeal that provision, and, instead, require the
commission to require each electrical corporation to provide bundled
basic electric service, as defined, to all customers in its service
territory unless the customer makes a positive declaration in
accordance with specified existing law to receive electric power
through a direct transaction with another electric service provider.
The bill would authorize an electric power supplier, if a customer
makes a positive declaration to receive electric power through a
direct transaction with an electric power supplier, to also provide
metering, billing, and collection service for that customer, but if a
positive declaration is not made, would require metering, billing,
and collection service to be provided by the existing public
utility electrical corporation. The bill would require the
commission to set the electric energy commodity portion of the
bundled rate, as specified , and to authorize an electrical
corporation to purchase energy and associated services from specified
sources . The bill would require the commission to authorize
each electrical corporation to offer all customers unbundled electric
energy at time-of-use based rates, and to also authorize an
electrical corporation to offer other optional competitive rates and
services.
(3) Because a violation by a public utility of a requirement of
the commission is a crime, this bill would impose a state-mandated
local program by creating new crimes.
(4) 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.
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 328 of the Public Utilities Code is repealed.
SEC. 2. Section 328 is added to the Public Utilities Code, to
read:
328. The Legislature finds and declares both of the following:
(a) In order to ensure that all core customers of a gas
corporation continue to receive safe basic gas service in a
competitive market, each existing gas corporation should continue to
provide this essential service.
(b) No customer should have to pay separate fees for
utilizing services that protect public or customer safety.
SEC. 3. Section 328.1 is added to the Public Utilities Code, to
read:
328.1. As used in this section, the following terms have the
following meanings:
(a) "Basic gas service" includes transmission, storage for
reliability of service , and distribution of natural gas,
purchasing natural gas on behalf of a customer, revenue cycle
services, and after-meter services.
(b) "Revenue cycle services" means metering services, billing the
customer, collection, and related customer services.
(c) "After-meter services" includes, but is not limited to, leak
investigation, inspecting customer piping and appliances, carbon
monoxide investigation, pilot relighting, and high bill
investigation.
(d) "Metering services" includes, but is not limited to, gas meter
installation, maintenance testing, collecting and processing
consumption data, and all related services associated with the meter.
SEC. 4. Section 328.2 is added to the Public Utilities Code, to
read:
328.2. (a) The commission shall require each gas corporation to
provide bundled basic gas service to all core customers in its
service territory unless the customer makes a positive
declaration chooses or contracts to have natural
gas purchased and supplied by another entity. The
commission shall allow only a gas corporation to provide
A public utility gas corporation shall continue to be the
exclusive provider of revenue cycle services to
all customers in its service territory , except that an
entity purchasing and supplying natural gas under the commission's
core aggregation program may perform billing and collection services
for its customers . The commission shall require the
distribution rate to continue to include after-meter services.
(b) For bundled basic gas service, the commission shall set the
natural gas commodity portion of the bundled rate at an amount equal
to the weighted average cost of gas. So that customers will
have the lowest rate for natural gas, the commission shall authorize
the gas corporation to purchase natural gas commodity from any
source. Any difference between the cost of purchases by the gas
corporation and the cost of gas as measured by appropriate market
indices shall be shared by the gas corporation and bundled service
customers in a manner determined by the commission. All costs of
procurement, other than the purchases of natural gas commodity, shall
be included as part of the basic distribution rate paid by all
distribution customers.
(c) The commission shall authorize gas corporations to offer
optional competitive rate schedules and tariffs.
SEC. 5. Section 330 of the Public Utilities Code is amended to
read:
330. In order to provide guidance in carrying out this chapter,
the Legislature finds and declares all of the following:
(a) It is the intent of the Legislature that a cumulative rate
reduction of at least 20 percent be achieved not later than April 1,
2002, for residential and small commercial customers, from the rates
in effect on June 10, 1996. In determining that the April 1, 2002,
rate reduction has been met, the commission shall exclude the costs
of the competitively procured electricity and the costs associated
with the rate reduction bonds, as defined in Section 840.
(b) The people, businesses, and institutions of California spend
nearly twenty-three billion dollars ($23,000,000,000) annually on
electricity, so that reductions in the price of electricity would
significantly benefit the economy of the state and its residents.
(c) The Public Utilities Commission has opened rulemaking and
investigation proceedings with regard to restructuring California's
electric power industry and reforming utility regulation.
(d) The commission has found, after an extensive public review
process, that the interests of ratepayers and the state as a whole
will be best served by moving from the regulatory framework existing
on January 1, 1997, in which retail electricity service is provided
principally by electrical corporations subject to an obligation to
provide ultimate consumers in exclusive service territories with
reliable electric service at regulated rates, to a framework under
which competition would be allowed in the supply of electric power
and customers would be allowed to have the right to choose their
supplier of electric power.
(e) Competition in the electric generation market will encourage
innovation, efficiency, and better service from all market
participants, and will permit the reduction of costly regulatory
oversight.
(f) The delivery of electricity over transmission and distribution
systems is currently regulated, and will continue to be regulated to
ensure system safety, reliability, environmental protection, and
fair access for all market participants.
(g) Reliable electric service is of utmost importance to the
safety, health, and welfare of the state's citizenry and economy. It
is the intent of the Legislature that electric industry
restructuring should enhance the reliability of the interconnected
regional transmission systems, and provide strong coordination and
enforceable protocols for all users of the power grid.
(h) It is important that sufficient supplies of electric
generation will be available to maintain the reliable service to the
citizens and businesses of the state.
(i) Reliable electric service depends on conscientious inspection
and maintenance of transmission and distribution systems. To
continue and enhance the reliability of the delivery of electricity,
the Independent System Operator and the commission, respectively,
should set inspection, maintenance, repair, and replacement
standards.
(j) It is the intent of the Legislature that California enter into
a compact with western region states. That compact should require
the publicly and investor-owned utilities located in those states,
that sell energy to California retail customers, to adhere to
enforceable standards and protocols to protect the reliability of the
interconnected regional transmission and distribution systems.
(k) In order to achieve meaningful wholesale and retail
competition in the electric generation market, it is essential to do
all of the following:
(1) Separate monopoly utility transmission functions from
competitive generation functions, through development of independent,
third-party control of transmission access and pricing.
(2) Permit all customers to choose from among competing suppliers
of electric power.
(3) Provide customers and suppliers with open, nondiscriminatory,
and comparable access to transmission and distribution services.
(l) The commission has properly concluded that:
(1) This competition will best be introduced by the creation of an
Independent System Operator and an independent Power Exchange.
(2) Generation of electricity should be open to competition and
utility generation should be transitioned from regulated status to
unregulated status through means of commission-approved market
valuation mechanisms.
(3) There is a need to ensure that no participant in these new
market institutions has the ability to exercise significant market
power so that operation of the new market institutions would be
distorted.
(4) These new market institutions should commence simultaneously
with the phase-in of customer choice, and the public will be best
served if these institutions and the nonbypassable transition cost
recovery mechanism referred to in subdivisions (s) to (w), inclusive,
are in place simultaneously and no later than January 1, 1998.
(m) It is the intention of the Legislature that California's
publicly owned electric utilities and investor-owned electric
utilities should commit control of their transmission facilities to
the Independent System Operator. These utilities should jointly
advocate to the Federal Energy Regulatory Commission a pricing
methodology for the Independent System Operator that results in an
equitable return on capital investment in transmission facilities for
all Independent System Operator participants.
(n) Opportunities to acquire electric power in the competitive
market must be available to California consumers as soon as
practicable, but no later than January 1, 1998, so that all customers
can share in the benefits of competition.
(o) Under the existing regulatory framework, California's
electrical corporations were granted franchise rights to provide
electricity to consumers in their service territories.
(p) Consistent with federal and state policies, California
electrical corporations invested in power plants and entered into
contractual obligations in order to provide reliable electrical
service on a nondiscriminatory basis to all consumers within their
service territories who requested service.
(q) The cost of these investments and contractual obligations are
currently being recovered in electricity rates charged by electrical
corporations to their consumers.
(r) Transmission and distribution of electric power remain
essential services imbued with the public interest that are provided
over facilities owned and maintained by the state's electrical
corporations.
(s) It is proper to allow electrical corporations an opportunity
to continue to recover, over a reasonable transition period, those
costs and categories of costs for generation-related assets and
obligations, including costs associated with any subsequent
renegotiation or buyout of existing generation-related contracts,
that the commission, prior to December 20, 1995, had authorized for
collection in rates and that may not be recoverable in market prices
in a competitive generation market, and appropriate additions
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 the
costs are necessary to maintain those facilities through December 31,
2001. In determining the costs to be recovered, it is appropriate
to net the negative value of above market assets against the positive
value of below market assets.
(t) The transition to a competitive generation market should be
orderly, protect electric system reliability, provide the investors
in these electrical corporations with a fair opportunity to fully
recover the costs associated with commission approved
generation-related assets and obligations, and be completed as
expeditiously as possible.
(u) The transition to expanded customer choice, competitive
markets, and performance based ratemaking as described in Decision
95-12-063, as modified by Decision 96-01-009, of the Public Utilities
Commission, can produce hardships for employees who have dedicated
their working lives to utility employment. It is preferable that any
necessary reductions in the utility work force directly caused by
electrical restructuring, be accomplished through offers of voluntary
severance, retraining, early retirement, outplacement, and related
benefits. Whether work force reductions are voluntary or
involuntary, reasonable costs associated with these sorts of benefits
should be included in the competition transition charge.
(v) Charges associated with the transition should be collected
over a specific period of time on a nonbypassable basis and in a
manner that does not result in an increase in rates to customers of
electrical corporations. In order to insulate the policy of
nonbypassability against incursions, if exemptions from the
competition transition charge are granted, a fire wall shall be
created that segregates recovery of the cost of exemptions as
follows:
(1) The cost of the competition transition charge exemptions
granted to members of the combined class of residential and small
commercial customers shall be recovered only from those customers.
(2) The cost of the 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 those customers. The commission shall retain existing cost
allocation authority provided that the fire wall and rate freeze
principles are not violated.
(w) It is the intent of the Legislature to require and enable
electrical corporations to monetize a portion of the competition
transition charge for residential and small commercial consumers so
that these customers will receive rate reductions of no less than 10
percent for 1998 continuing through 2002. Electrical corporations
shall, by June 1, 1997, or earlier, secure the means to finance the
competition transition charge by applying concurrently for financing
orders from the Public Utilities Commission and for rate reduction
bonds from the California Infrastructure and Economic Development
Bank.
(x) California's public utility electrical corporations provide
substantial benefits to all Californians, including employment and
support of the state's economy. Restructuring the electric services
industry pursuant to the act that added this chapter will continue
these benefits, and will also offer meaningful and immediate rate
reductions for residential and small commercial customers, and
facilitate competition in the supply of electric power.
(y) In order to ensure that all customers of an electrical
corporation continue to receive basic electric service in a
competitive market, each electrical corporation should continue to
provide this essential service.
SEC. 6.
SEC. 5. Section 331 of the Public Utilities Code is amended
to read:
331. The definitions set forth in this section shall govern the
construction of this chapter.
(a) "Aggregator" means any marketer, broker, public agency, city,
county, or special district, that combines the loads of multiple
end-use customers in facilitating the sale and purchase of electric
energy, transmission, and other services on behalf of these
customers.
(b) "Basic electric service" includes transmission and
distribution of electric power, purchasing electric power on behalf
of a customer, and revenue cycle services such as metering customer
usage, billing the customer, and related customer services.
(c) "Broker" means an entity that arranges the sale and purchase
of electric energy, transmission, and other services between buyers
and sellers, but does not take title to any of the power sold.
(d) "Direct transaction" means a contract between any one or more
electric generators, marketers, or brokers of electric power and one
or more retail customers providing for the purchase and sale of
electric power or any ancillary services.
(e) "Fire wall" means the line of demarcation separating
residential and small commercial customers from all other customers
as described in subdivision (e) of Section 367.
(f) "Marketer" means any entity that buys electric energy,
transmission, and other services from traditional utilities and other
suppliers, and then resells those services at wholesale or to an
end-use customer.
(g) "Microcogeneration facility" means a cogeneration facility of
less than one megawatt.
(h) "Restructuring trusts" means the two tax-exempt public benefit
trusts established by Decision D. 96-08-038 of the Public Utilities
Commission to provide for design and development of the hardware and
software systems for the Power Exchange and the Independent System
Operator, respectively, and that may undertake other activities, as
needed, as ordered by the commission.
(i) "Small commercial customer" means a customer that has a
maximum peak demand of less than 20 kilowatts.
SEC. 7.
SEC. 6. Section 365.5 of the Public Utilities Code is
repealed.
SEC. 8.
SEC. 7. Section 365.5 is added to the Public Utilities Code,
to read:
365.5. (a) The Legislature finds and declares that in order
to ensure that all customers of an electrical corporation continue to
receive basic electric service in a competitive market, and to
protect good California jobs, each electrical corporation should
continue to provide this essential service utilizing employees of the
corporation.
(b) The commission shall require each electrical corporation
to provide bundled basic electric service to all customers in its
service territory unless the customer makes a positive declaration in
accordance with Section 366 to receive electric power through a
direct transaction with another electric service provider. If a
customer makes a positive declaration to receive electric power
through a direct transaction with an electric power supplier, the
electric power supplier may also provide metering, billing, and
collection service for that customer. If a positive declaration is
not made, metering, billing, and collection service shall be provided
by the existing public utility electrical corporation.
(b)
(c) Commencing on the date on which the
commission-authorized costs for utility generation related assets and
obligations have been fully recovered or March 31, 2002, whichever
is earlier, the commission shall set the electric energy commodity
portion of the bundled rate at an amount equal to the price of
electric energy purchased or settled through the Power Exchange.
So that customers will have the lowest possible rate for electric
power, the commission shall authorize the electrical corporation to
purchase energy and associated ancillary services from the Power
Exchange and from other sources. Any difference between the cost of
purchases from other sources and the cost of purchases from the Power
Exchange shall be shared by the electrical corporation and bundled
service customers in a manner determined by the commission. All
costs of procurement, other than the purchases of energy and
ancillary services, shall be included as part of the basic
distribution rate paid by all distribution customers.
(c)
(d) The commission shall authorize each electrical
corporation to offer all customers unbundled electric energy at
time-of-use based rates, and shall also authorize an electrical
corporation to offer other optional competitive rates and services.
SEC. 9.
SEC. 8. No reimbursement is required by this act pursuant to
Section 6 of Article XIIIB 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 XIIIB of the California Constitution.