BILL ANALYSIS                                                                                                                                                                                                    1
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   SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
                  DEBRA BOWEN, CHAIRWOMAN


AB 1421 -  Wright                                       
Hearing Date:  August 25, 1999       A
As Amended:              August 18, 1999          FISCAL     
   B
                                                             
  
                                                             
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                         DESCRIPTION
  
  Existing law  authorizes the California Public Utilities  
Commission (CPUC) to investigate restructuring of natural  
gas services, but requires it to submit its recommendations  
to the Legislature, and prohibits it from enacting any gas  
restructuring decisions prior to January 1, 2000 (SB 1602  
(Peace), Chapter 401, Statutes of 1998).

  This bill  prevents further restructuring of gas services by  
designating the incumbent utilities as the mandatory  
provider of "default" bundled gas service and prohibiting  
the CPUC from unbundling distribution-related gas services,  
such as metering and billing, for most customers.

Specifically,  the bill  :

Requires that gas utilities provide "bundled basic gas  
service" (including transmission, storage, distribution,  
purchasing, revenue cycle services and after meter  
services) to all "core" (residential and small commercial)  
customers, unless the customer chooses to purchase gas from  
a non-utility provider.

Requires that gas utilities be the  exclusive  provider of  











"revenue cycle services" (meter installation and reading,  
billing, collection and related customer services) for  all   
customers, except that non-core customers and core  
customers served by an aggregator may receive  billing and  
collection  services from a non-utility provider.

Requires that, where billing and collection services by  
non-utility providers are permitted, the existing "avoided  
cost" methodology for calculating credits provided by the  
utility in lieu of providing these services must be  
maintained.

Requires "after meter services" (leak detection and other  
safety-related services) to be included in the distribution  
rate and not billed separately.

  The bill  additionally requires electric utilities to  
conduct research to determine the typical simultaneous peak  
load of agricultural customers with multiple meters and  
report to those customers and the CPUC by July 1, 2001.  It  
also requires the CPUC to consider the research results in  
setting future distribution rates for those customers.

                        KEY QUESTIONS
  
1.Should the current moratorium on, and investigation of,  
  natural gas restructuring be replaced by a statutory  
  prohibition of further restructuring? 

2.Should specific ratemaking issues, such as the  
  methodology for calculating the credit for services not  
  provided by the utility, be fixed in statute? 

3.Should the Legislature require electric utilities to  
  conduct what is essentially a private research project  
  intended to benefit their agricultural customers?
  
                         BACKGROUND
  
The natural gas commodity market has been opened to  
competition for several years in California and customers  
have the choice to buy the commodity itself from the  
incumbent utility provider or alternative providers.   
However, the appropriate level of competition for the range  










of services related to providing the gas has been the  
subject of ongoing debate and discussion, both in the  
Legislature and at the CPUC.  This bill proposes a final  
answer to any lingering questions about further  
restructuring of gas services.  

Pursuant to SB 1602, the CPUC is authorized to investigate  
restructuring of gas services, but is required to submit  
its recommendations to the Legislature, and prohibited from  
enacting any gas restructuring decisions prior to January  
1, 2000. 

This bill prohibits competition for gas-related revenue  
cycle services, including meter installation and reading,  
billing, collection and related customer services, by  
requiring that utilities be the exclusive provider of these  
services for all customers.  Only non-core customers and  
core customers served by an aggregator may receive billing  
and collection services from a non-utility provider.  For  
these customers, the existing avoided cost methodology  
(which favors the incumbent providers) for calculating  
credits provided by the utility in lieu of providing these  
services must be maintained.

With one exception, this bill's provisions are generally  
consistent with the CPUC's July 8, 1999 natural gas  
strategy decision (D.99-07-015) which outlines future  
options for the gas restructuring.  In the decision, the  
CPUC recommends that the utility be the provider of default  
service, meter installation and reading, and after-meter  
services.  

The exception to this bill's consistency with the CPUC  
decision is on the issue of billing.  The CPUC identifies  
open competition in billing services for core customers as  
a promising option, while this bill prohibits competition  
for billing services for most customers.  

The CPUC intends to submit its final recommendations on  
these matters to the Legislature for review later this  
year.  Because this bill repeals SB 1602 and definitively  
concludes that gas services should not be further  
unbundled, it renders the moratorium, the CPUC  
investigation and future review of the findings by the  










Legislature moot.

                           COMMENTS
  
  1.More-atorium?   The CPUC will not formally issue its gas  
  restructuring recommendations to the Legislature until  
  after the end of this year's session and, since the  
  current moratorium expires on January 1, 2000, the  
  Legislature will not have an opportunity to review the  
  recommendations before the moratorium expires.  

  If the Committee is interested in providing for  
  legislative review of the CPUC recommendations, while  
  still preventing CPUC action until the Legislature has  
  reviewed and acted on the recommendations, it could  
  extend the moratorium for an additional year. This would  
  allow the CPUC to finish its work, and the Legislature to  
  review it prior to either the CPUC or the Legislature  
  enacting any final policies.

  2.Double-billing?   By locking in the avoided cost  
  methodology, this bill arguably will result in  
  "double-billing" for certain services, because the  
  avoided cost methodology results in customers being  
  billed by the utility for residual services that are no  
  longer actually provided by the utility.  When a electric  
  customer switches to a non-utility provider of energy,  
  the provider is offered a credit by the utility for costs  
  associated with providing energy to that customer.  This  
  bill says that if a similar credit is offered for gas  
  customers, the utility would be required to offer the  
  credit equal to the cost actually avoided by not serving  
  that customer.  As a practical matter, for a utility with  
  five million customers to serve, the cost avoided by not  
  serving one customer is essentially zero.  This serves as  
  a disincentive to competition, or at least raises the  
  threshold, because it takes a lot of individual customer  
  switches before the utility's avoided cost amounts to  
  much.  

  Competitors naturally prefer a methodology known as  
  "long-run marginal costs."  In simplified terms, the cost  
  of providing services to all customers is divided by the  
  total number of customers to calculate the credit offered  










  for each customer.  Competitors argue this method ensures  
  that customers to pay only for services actually used.

  3.Where did that study come from  ?  The study of  
  simultaneous peak loads of agricultural customers this  
  bill requires addresses an issue separate from the rest  
  of the bill that's been raised by the Agricultural Energy  
  Consumers Association.  These customers feel utilities  
  are not fairly metering their consumption, which  
  contributes to high distribution rates.  The intent of  
  this study is to establish a more accurate load profile  
  for agricultural customers.  The CPUC is required to  
  consider the results in setting future distribution rates  
  for those customers.

  The Committee approved a related bill, SB 282 (Kelley),  
  on April 13.  SB 282 requires the California Energy  
  Commission to report on various activities related to  
  reducing energy costs and improving competitive  
  opportunities for California agriculture and other rural  
  energy customers.  SB 282 is on the Senate Floor,  
  awaiting concurrence in Assembly amendments.
                               































                       ASSEMBLY VOTES
  
Assembly U & C                     (11-0)
Assembly Appropriations            (13-1)
Assembly Floor                     (50-17)
  
                         POSITIONS
  
  Support:  

Advocates for Consumer Equity, Inc.
Agricultural Energy Consumers Association
California Farm Bureau Federation
California Firefighters
California Labor Federation, AFL-CIO
California Teamsters Public Affairs Council
Coalition of California Utility Employees
Consumer Federation of California
Engineers & Scientists of California, Local 20, IFPTE (San  
Francisco)
Eric Lawson, Torrance
International Brotherhood of Electrical Workers, Local  100  
(Fresno)
International Brotherhood of Electrical Workers, Local  11  
(Pasadena)
International Brotherhood of Electrical Workers, Local   
1245 (Walnut Creek)
International Brotherhood of Electrical Workers, Local   
1710 (El Monte)
International Brotherhood of Electrical Workers, Local  18  
(Los Angeles)
International Brotherhood of Electrical Workers, Local  180  
(Vallejo)
International Brotherhood of Electrical Workers, Local   
2295 (El Monte)
International Brotherhood of Electrical Workers, Local  234  
(Castroville)
International Brotherhood of Electrical Workers, Local  302  
(Pleasant Hill)
International Brotherhood of Electrical Workers, Local  332  
(San Jose)
International Brotherhood of Electrical Workers, Local  340  
(Sacramento, Yolo)
International Brotherhood of Electrical Workers, Local  40  










(North Hollywood)
International Brotherhood of Electrical Workers, Local  413  
(Santa Barbara)
International Brotherhood of Electrical Workers, Local  428  
(Bakersfield)
International Brotherhood of Electrical Workers, Local  440  
(Riverside)
International Brotherhood of Electrical Workers, Local  441  
(Orange County)
International Brotherhood of Electrical Workers, Local  45  
(Hollywood)
International Brotherhood of Electrical Workers, Local  465  
(San Diego)
International Brotherhood of Electrical Workers, Local  477  
(San Bernardino)
International Brotherhood of Electrical Workers, Local  551  
(Santa Rosa)
International Brotherhood of Electrical Workers, Local  569  
(San Diego)
International Brotherhood of Electrical Workers, Local  595  
(Dublin)
International Brotherhood of Electrical Workers, Local  6  
(San Francisco)
International Brotherhood of Electrical Workers, Local  617  
(San Mateo)
International Brotherhood of Electrical Workers, Local  639  
(San Luis Obispo)
International Brotherhood of Electrical Workers, Local  684  
(Modesto)
International Brotherhood of Electrical Workers, Local  952  
(Ventura)
International Chemical Workers Union Conference/United Food  
and Commercial
  Workers Union, Local 350 (Temple City)
International Chemical Workers Union Conference/United Food  
and Commercial
  Workers Union, Local 47 (West Covina)
International Chemical Workers Union Conference/United Food  
and Commercial
  Workers Union, Local 58 (La Verne)
International Chemical Workers Union Conference/United Food  
and Commercial
  Workers Union, Local 78 (Alta Loma)
Los Angeles County Federation of Labor, AFL-CIO










Pacific Gas and Electric Company
Resources for Independent Living, Inc.
San Diego-Imperial Counties Labor Council, AFL-CIO
San Mateo County Central Labor Council
SEMPRA Energy
Southern California Edison
Southern California Gas Workers Council
State Building and Construction Trades Council of  
California
Utility Workers Union of America (National Union)
Utility Workers Union of America, Local 132 (Los Angeles)
Utility Workers Union of America, Local 170 (Bakersfield)
Utility Workers Union of America, Local 246 (Los Alamitos)
Utility Workers Union of America, Local 465 (San Diego)
Utility Workers Union of America, Local 483 (Santa Barbara)
Utility Workers Union of America, Local 522 (Moreno Valley)
Utility Workers Union of America, Local 659 (Central Point,  
Oregon)


  Oppose:
  
Association of Bay Area Governments
Association of California Water Agencies (ACWA)
Automated Power Exchange
California Public Utilities Commission (CPUC)
Clean Power Campaign
College of Marin
Consumers Union
Dixie School District, San Rafael
Enron Corporation
Environmental Defense Fund
Eureka City Schools
Folsom Cordova Unified School District
Fresno Unified School District
Greenmountain Energy Resources
Independent Energy Producers Association
International Brotherhood of Electrical Workers, Local 47
Marin County Office of Education
New Energy Ventures
New Haven Unified School District
Office of Ratepayer Advocates (ORA)
Pacific Utility Installation, Inc.
Peralta Community College District










Polaris Group
Pollock Pines Elementary School District
Reliant Energy
San Francisco Unified School District
Santa Rosa Junior College
School Project for Utility Rate Reduction
Sierra Club
Tamalpais Union High School District
The Utility Reform Network (TURN)
Tulare Joint Union High School District
Utility Consumers' Action Network (UCAN)
Utility.com
Western Power Trading Forum


Lawrence Lingbloom 
AB 1421 Analysis
Hearing Date:  August 25, 1999