BILL NUMBER: AB 2638 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY MAY 8, 2000
AMENDED IN ASSEMBLY MAY 1, 2000
INTRODUCED BY Assembly Member Calderon
FEBRUARY 25, 2000
An act to amend Sections 330 and 374 of, and to add Sections
454.1 and 9067 454.5 and 9607 to, the
Public Utilities Code, relating to public utilities.
LEGISLATIVE COUNSEL'S DIGEST
AB 2638, as amended, Calderon. Public utilities: electrical
power.
(1) Existing law relating to electrical restructuring exempts
specified entities from the obligation to pay certain uneconomic
costs of that restructuring.
This bill would provide that the exemption does not apply to any
irrigation district providing firm electrical service to customers
representing load participating in an electrical corporation's
nonfirm electrical service program as of May 1, 2000.
(2) Existing law prohibits a public utility from changing any rate
or altering any classification, contract, practice, or rule so as to
result in any new rate, except upon a showing before the commission
and a finding by the Public Utilities Commission that the new rate is
justified.
This bill would authorize an electrical corporation , if
a customer participating in an electrical corporation's nonfirm
electrical service program as of January 1, 2000, receives a bona
fide offer from an alternative electric distribution or transmission
service provider for firm electrical service at rates less than the
electrical corporation's tariffed rates, to discount its rate to its
marginal cost of serving that customer and to recover any difference
between its tariffed and discounted service from its remaining
customers, allocated as determined by the commission
or a local publicly owned utility to continue to recover the cost
incurred to provide electric distribution service to each retail
customer from existing and future retail customers, within the
service territory of the utility as of a specified date when the
customers take electric distribution service from an irrigation
district at the same location after a specified date .
(3) The Irrigation District Law authorizes an irrigation district
that is governed under that law to sell, dispose of, and distribute
electric power for use outside its boundaries.
This bill would require the commission to approve the sale of
electricity by an irrigation district in the service territory of
specified entities. Prior to granting approval, the commission would
be required to make findings, as prescribed. Because this bill would
increase the duties of local entities by requiring them to obtain
commission approval in order to sell electricity, it would impose a
state-mandated local program. The bill would make a related
statement of state policy and legislative intent.
(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, including the creation of a State Mandates Claims Fund
to pay the costs of mandates that do not exceed $1,000,000 statewide
and other procedures for claims whose statewide costs exceed
$1,000,000.
This bill would provide that, if the Commission on State Mandates
determines that the bill contains costs mandated by the state,
reimbursement for those costs shall be made pursuant to these
statutory provisions.
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 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 all of the following:
(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 intent 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 and local publicly owned electric utilities. It is the
policy of this state, and the intent of the Legislature to reaffirm,
that each electrical corporation and local publicly owned electric
utility shall continue to operate electric distribution facilities
only in its respective service territory as it existed on
January May 1, 2000, in a safe, reliable,
environmentally beneficial, efficient, and cost-effective manner. In
order to ensure the continued safe, reliable, environmentally
beneficial, efficient, and cost-effective operation of electric
distribution facilities, each electrical corporation and local
publicly owned electric utility should continue to operate electric
distribution facilities only in its respective service territory as
it existed on January May 1, 2000.
(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 workforce directly caused by
electrical restructuring, be accomplished through offers of voluntary
severance, retraining, early retirement, outplacement, and related
benefits. Whether workforce 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 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.
SEC. 2. Section 374 of the Public Utilities Code is amended to
read:
374. (a) In recognition of statutory authority and past
investments existing as of December 20, 1995, and subject to the fire
wall specified subdivision (e) of Section 367, the obligation to pay
the uneconomic costs identified in Sections 367, 368, 375, and 376
do not apply to any of the following:
(1) One hundred ten megawatts of load served by irrigation
districts, as hereafter allocated by this paragraph:
(A) The 110 megawatts of load shall be allocated among the service
territories of the three largest electrical corporations in the
ratio of the number of irrigation districts in the service territory
of each utility to the total number of irrigation districts in the
service territories of all three utilities.
(B) The total amount of load allocated to each utility service
area shall be phased in over five years beginning January 1, 1997, so
that one-fifth of the allocation is allocated in each of the five
years. Any allocation which remains unused at the end of any year
shall be carried over to the succeeding year and added to the
allocation for that year.
(C) The load allocated to each utility service territory pursuant
to subparagraph (A) shall be further allocated among the respective
irrigation districts within that service territory by the California
Energy Resources Conservation and Development Commission. An
individual irrigation district requesting such an allocation shall
submit to the commission by January 31, 1997, detailed plans that
show the load that it serves or will serve and for which it intends
to utilize the allocation within the timeframe requested. These
plans shall include specific information on the irrigation districts'
organization for electric distribution, contracts, financing and
engineering plans for capital facilities, as well as detailed
information about the loads to be served, and shall not be less than
eight megawatts or more than 40 megawatts. Provided, however, any
portion of the 110 megawatts that remains unallocated may be
reallocated to projects without regard to the 40 megawatts
limitation. In making such an allocation among irrigation districts,
the Energy Resources Conservation and Development Commission shall
assess the viability of each submission and whether it can be
accomplished in the timeframe proposed. The Energy Resources
Conservation and Development Commission shall have the discretion to
allocate the load covered by this section in a manner that best
ensures its usage within the allocation period.
(D) At least 50 percent of each year's allocation to a district
shall be applied to that portion of load that is used to power pumps
for agricultural purposes.
(E) Any load pursuant to this subdivision shall be served by
distribution facilities owned by, or leased to, the district in
question.
(F) Any load allocated pursuant to paragraph (1) shall be located
within the boundaries of the affected irrigation district, or within
the boundaries specified in an applicable service territory boundary
agreement between an electrical corporation and the affected
irrigation district; additionally, the provisions of subparagraph (C)
of paragraph (1) shall be applicable to any load within the Counties
of Stanislaus or San Joaquin, or both, served by any irrigation
district that is currently serving or will be serving retail
customers.
(2) Seventy-five megawatts of load served by the Merced Irrigation
District hereafter prescribed in this paragraph:
(A) The total allocation provided by this paragraph shall be
phased in over five years beginning January 1, 1997, so that
one-fifth of the allocation is received in each of the five years.
Any allocation which remains unused at the end of any year shall be
carried over to the succeeding year and added to the allocation for
that year.
(B) Any load to which the provision of this paragraph is
applicable shall be served by distribution facilities owned by, or
leased to, Merced Irrigation District.
(C) A load to which the provisions of this paragraph are
applicable shall be located within the boundaries of Merced
Irrigation District as those boundaries existed on December 20, 1995,
together with the territory of Castle Air Force Base which was
located outside of the district on that date.
(D) The total allocation provided by this paragraph shall be
phased in over five years beginning January 1, 1997, with the
exception of load already being served by the district as of June 1,
1996, which shall be deducted from the total allocation and shall not
be subject to the costs provided in Sections 367, 368, 375, and 376.
(3) To loads served by irrigation districts, water districts,
water storage districts, municipal utility districts, and other water
agencies which, on December 20, 1995, were members of the Southern
San Joaquin Valley Power Authority, or the Eastside Power Authority;
provided, however, that this paragraph shall be applicable only to
that portion of each district or agency's load that is used to power
pumps which are owned by that district or agency as of December 20,
1995, or replacements thereof, and is being used to pump water for
district purposes. The rates applicable to these districts and
agencies shall be adjusted as of January 1, 1997.
(4) The provisions of this subdivision shall no longer be
operative after March 31, 2002.
(5) The provisions of paragraph (1) shall not be applicable to any
irrigation district, water district or water agency described in
paragraph (2) or (3).
(6) Transmission services provided to any irrigation district
described in paragraph (1) or (2) shall be provided pursuant to
otherwise applicable tariffs.
(7) Nothing in this chapter shall be deemed to grant the
commission any jurisdiction over irrigation districts not already
granted to the commission by existing law.
(8) Notwithstanding any other provision of law, this subdivision
does not apply to any irrigation district providing firm electrical
service to customers representing load participating in an electrical
corporation's nonfirm electrical service program as of May 1, 2000.
(b) To give the full effect to the legislative intent in enacting
Section 701.8, the costs provided in Sections 367, 368, 375, and 376
shall not apply to the load served by preference power purchased from
a federal power marketing agency, or its successor, pursuant to
Section 701.8 as it existed on January 1, 1996, provided the power is
used solely for the customer's own systems load and not for sale.
The costs of this provision shall be borne by all ratepayers in the
affected service territory, notwithstanding the fire wall established
in subdivision (e) of Section 367.
(c) To give effect to an existing relationship, the obligation to
pay the uneconomic costs specified in Sections 367, 368, 375, and 376
shall not apply to that portion of the load of the University of
California campus situated in Yolo County that was being served as of
May 31, 1996, by preference power purchased from a federal marketing
agency, or its successor, provided the power is used solely for the
facility load of that campus and not, directly or indirectly, for
sale.
SEC. 3. Section 454.1 is added to the Public Utilities Code, to
read:
454.1. If a customer participating in an electrical corporation's
nonfirm electrical service program as of January 1, 2000, receives a
bona fide offer from an alternative electric distribution or
transmission service provider for firm electrical service at rates
less than the electrical corporation's tariffed rates, the electrical
corporation may discount its rate to its marginal cost of serving
that customer. The electrical corporation may recover any difference
between its tariffed and discounted service from its remaining
customers, allocated as determined by the commission.
SEC. 3. Section 454.5 is added to the Public Utilities Code, to
read:
454.5. (a) In order to avoid cost shifting and to ensure that
each retail customer of an electrical corporation or local publicly
owned utility pays their proportionate share of costs incurred by the
electrical corporation or local publicly owned utility to provide
electric distribution service to each retail customer, these costs
shall continue to be recoverable from existing and future retail
customers within the service territory of the electrical corporation
or local publicly owned utility as of May 1, 2000, who take electric
distribution service from an irrigation district at the same location
after May 1, 2000.
(b) Recovery of the costs by an electrical corporation shall be in
a nonbypassable charge or any other manner determined by the
commission. Recovery of the costs by a local publicly owned utility
shall be in a nonbypassable charge or any other manner approved by
its governing body consistent with this section, existing contracts,
and relevant state law.
SEC. 4. Section 9607 is added to the Public Utilities Code, to
read:
9607. (a) Notwithstanding Section 9604, for purposes of this
section, "district" means an irrigation district furnishing electric
services formed pursuant to the Irrigation District Law as set forth
in Division 11 (commencing with Section 20500) of the Water Code.
(b) Notwithstanding any other provision of law, a district may
not, without the approval of the commission, construct, lease,
acquire, or operate facilities for the distribution of
electricity or transmission of electricity to retail
customers located in the service territory of an electrical
corporation providing electric distribution services as that
territory existed on January May 1,
2000, or in the service territory of a local publicly owned electric
utility providing electric distribution services as of
January May 1, 2000.
(c) The commission may not approve the request of a district to
provide distribution of electricity or
transmission of electricity to retail customers located in the
service territory of an entity as set forth in subdivision (a) unless
the commission determines all of the following:
(1) Construction of duplicative facilities by the district within
the service territory will not have an unnecessary adverse impact on
the environment or property values.
(2) Service by the district within the service territory is in the
public interest.
(3) Service by the district within the service territory is
consistent with the policies of the state to prevent or eliminate
economic waste as set forth in Section 8101.
(4) Service by the district within the service territory does not
adversely impact the ability of the electrical corporation or local
publicly owned electric utility to provide adequate service at
reasonable rates within the remainder of its service territory.
(5) Service by the district within the service territory does not
reduce in value or render useless any facilities previously
constructed by the electrical corporation or local publicly owned
electric utility.
SEC. 5. Notwithstanding Section 17610 of the Government Code, if
the Commission on State Mandates determines that this act contains
costs mandated by the state, reimbursement to local agencies and
school districts for those costs shall be made pursuant to Part 7
(commencing with Section 17500) of Division 4 of Title 2 of the
Government Code. If the statewide cost of the claim for
reimbursement does not exceed one million dollars ($1,000,000),
reimbursement shall be made from the State Mandates Claims Fund.