BILL ANALYSIS                                                                                                                                                                                                    



                                                          AB 1421
                                                          Page  1

Date of Hearing:  April 19, 1999

          ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE 
                     Roderick Wright, Chair
          AB 1421 (Wright) - As Amended:  April 15, 1999
  
SUBJECT  :   Gas and electric service.

  SUMMARY  : This bill declares that core customers of a gas  
corporation should continue to receive safe basic gas service  
from the gas corporation unless the customer makes a positive  
declaration to receive service from another entity.  This bill  
also declares that all customers of an electrical corporation  
should continue to receive basic electric service from the  
electric corporation unless the customer chooses or contracts to  
receive power through a direct transaction with another service  
provider.  Specifically,  this bill  :  

1)Defines basic gas service to include transmission, storage,  
  and distribution of natural gas, purchasing natural gas on  
  behalf of a customer, revenue cycle services and after meter  
  services.  Revenue cycle services includes metering services,  
  customer billing and collection and related customer services;

2)Defines basic electric service to include transmission and  
  distribution of electric power, purchasing of electric power  
  on behalf of a customer and revenue cycle services such as  
  metering, customer usage, customer billing and related  
  customer services;  

3)Allows a customer to choose or contract to receive basic gas  
  service from another provider;

4)Allows a customer to make a positive declaration to receive  
  basic electric service from another provider;

5)Specifies that a public utility gas corporation shall continue  
  to be the exclusive provider of revenue cycle services, as  
  defined, in its service territory, except as specified, and  
  requires the distribution rate to continue to include  
  after-meter services, as defined;

6)Requires California Public Utilities Commission (CPUC) to  
  authorize a gas corporation to purchase natural gas commodity  
  from any source and to set the natural gas commodity portion  








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  of the bundled rate equal to the weighted average cost of gas;

7)Specifies that the 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 CPUC;

8)Specifies that all costs of procurement, other than the  
  purchase of natural gas commodity, shall be included as part  
  of the basic distribution rate paid by all distribution  
  customers;

9)Requires CPUC to authorize gas corporations to offer optional  
  competitive rate schedules and tariffs;

10)Requires CPUC 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; 

11)Requires metering, billing, and collection service to be  
  provided by the existing public utility electrical  
  corporation, unless the customer makes a positive declaration  
  to receive electric power through a direct transaction with  
  another electric service provider;

12)Requires CPUC to set the electric energy commodity portion of  
  the bundled rate, as specified;

13)Authorizes the electrical corporation to purchase energy and  
  associated ancillary services from the Power Exchange (PX) and  
  from other sources;

14)Specifies that the difference between the cost of purchases  
  from other sources and the cost of purchases from the PX shall  
  be shared by the electrical corporation and bundled service  
  customers in a manner determined by CPUC;

15)Specifies that all costs of providing basic electric service,  
  other than the purchases of energy and ancillary services and  
  transmission shall be included as part of the basic  
  distribution rate paid by all distribution customers;








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16)Authorizes each electrical corporation to offer all customers  
  rate alternatives to purchasing energy as part of basic  
  electric service, such as time-of-use based rates and other  
  optional competitive rates.  

  EXISTING LAW  :  Permits CPUC to investigate the restructuring of  
natural gas services, as specified, but prohibits the enactment  
and enforcement of any natural gas restructuring decisions for  
core customers prior to January 1, 2000.

Permits CPUC to exercise its authority to investigate a process  
for certification and regulation of the rates, charges, terms,  
and conditions of default service.  

Provides that if CPUC determines that a process for  
certification and regulation of default service is in the public  
interest, CPUC shall submit its finding and recommendations to  
the Legislature.

  FISCAL EFFECT  :   Unknown.

  COMMENTS  :   

1)This bill codifies that the investor owned utilities (IOU) are  
  the default providers of gas and electric service, provides a  
  definition of basic service, and prohibits the unbundling of  
  gas and electric metering and billing.  None of the provisions  
  of the bill affect direct access.  A customer is still free to  
  choose an energy service provider other than the IOU.

2)This bill defines basic gas service-provided by the IOUs-to  
  include transmission, storage, and distribution of natural  
  gas, purchasing natural gas on behalf of a customer, revenue  
  cycle services, and after meter services.  Revenue cycle  
  services include metering services, customer billing and  
  collection, and related customer services.  (Metering  
  services, as defined under current law, include, but are not  
  limited to: gas meter installation, maintenance, testing,  
  collecting, and processing consumption data and all related  
  services associated with the meter.  After meter services  
  include, but are not limited to: leak investigation,  
  inspecting customer piping and appliances, carbon monoxide  
  investigation, pilot re-lighting, and high bill  
  investigation).








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3)This bill prohibits further unbundling of gas (and electric)  
  metering and billing, which would prevent utilities from  
  charging separately to investigate gas leaks, relight pilot  
  lights, check gas appliances, or check for carbon monoxide  
  leaks.  According to the sponsors of this bill, this would  
  ensure that low- and middle-income customers are not forced to  
  choose between safety and saving money on a service call.  In  
  September 1998 CPUC's Safety Branch determined that further  
  unbundling of natural gas metering and billing would create  
  safety risks for customers, the public, and utility employees.

4)This bill provides that customers who fail to choose a direct  
  access provider are guaranteed service by IOUs.  For IOUs, the  
  natural gas commodity portion of the bundled rate shall be no  
  higher than the weighted average cost of gas, determined by  
  unspecified "appropriate market indices."  If the cost to gas  
  customers falls below the average price, the difference  
  between the two accrues to gas customers and the gas  
  corporation, in a manner determined by CPUC.  For IOU electric  
  customers, the PX price will serve as the benchmark.  When the  
  IOU purchases energy and ancillary services from sources other  
  than the PX, as permitted by this bill, and beats the PX  
  benchmark price, the difference is shared between the electric  
  corporation and its customers.

5)On the electric side, residential and small commercial  
  customers are guaranteed the PX-wholesale price.  However,  
  because the IOUs would be allowed to purchase energy outside  
  the PX, the possibility remains that the IOUs, (with 99%  
  retail market share) might manipulate the outcome of the PX  
  auction to the detriment of customers, and the PX-benchmark  
  price.  A guarantee of the PX-wholesale price does not ensure  
  that the benchmark will always stay relatively low.  

6)Advocates for the energy service providers, and some consumer  
  organizations, including The Utility Reform Network (TURN),  
  are concerned that the provisions of this bill may result in  
  the IOUs gaming the PX to their competitive advantage.  
  According to New Energy Ventures, this bill "codifies the  
  current competitive advantage of the utility default provider  
  and solidifies the market power held by utilities."    
  According to the Clean Power Campaign, this bill eliminate  
  CPUC authority to set the terms and conditions of default  
  service, freezing in place the current system which requires  








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  energy service providers (ESPs) beat a wholesale price with a  
  retail price.  Thus, this bill may prevent green power  
  providers from emerging into a larger market."

7)The Coalition of California Utility Employees and the Southern  
  California Gas Workers Council indicate that this bill  
  guarantees residential and small commercial customers safe,  
  basic gas and electric service, and the benefits of gas and  
  electric restructuring. They also assert that bill ensures  
  that (default provider) customers "continue to get the  
  benefits of competitive energy prices from the PX by doing  
  nothing." 

8)By statutorily defining the role of the default provider, this  
  bill limits the role of CPUC in setting policy and guidelines.  
   This bill would repeal the provisions of the Public Utilities  
  Code permitting CPUC to exercise its authority to investigate  
  a process for certification and regulation of the rates,  
  charges, terms, and conditions of default service.  SB 477  
  (Peace, Chapter 275, Statutes of 1997) additionally provided  
  that if CPUC determines that a process for certification and  
  regulation of default service is in the public interest, the  
  Commission shall submit its findings and recommendations to  
  the Legislature for approval.

9)The bill also prohibits "state-mandated slamming," by  
  prohibiting CPUC from adopting proposals to force utility  
  customers to shop for gas and electricity, or to determine the  
  definition of default provider.   

10)According to the sponsors, this bill "will ensure that all  
  residential and small business customers can be assured of  
  continued safe and reliable basic electrical and gas service,  
  including bundled revenue cycle services if they choose to  
  continue to receive electric and gas from their existing  
  investor-owned utility."

  REGISTERED SUPPORT / OPPOSITION  :   

  Support  

Coalition of California Utility Employees (Co-sponsor)
Local Union 465, IBEW
IBEW, Local Union 659
IBEW, Local Union 1245








                                                          AB 1421
                                                          Page  6

Southern California Gas Workers Council (Co-sponsor)
Sempra Energy
Southern California Edison (SCE)
Utility Workers of America, Local No. 246

  Opposition  

Association of California Water Agencies
California Cleaners Association
Clean Power Campaign
Enron Corp.
IBEW, Local No. 47
New Energy Ventures (NEV)
Office of Ratepayer Advocates
The Utility Reform Network (TURN)
  
Analysis Prepared by  :    Joseph Lyons / U. & C. / (916) 319-2083