BILL ANALYSIS
SB 418
Page 1
Without Reference to File
SENATE THIRD READING
SB 418 (Polanco)
As Amended September 7, 1999
Majority vote
SENATE VOTE :26-8
UTILITIES AND COMMERCE 12-0
APPROPRIATIONS 19-0
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|Ayes:|Wright, Pescetti, |Ayes:|Migden, Brewer, Ackerman, |
| |Calderon, Campbell, | |Ashburn, Campbell, |
| |Cardenas, Frusetta, | |Cedillo, Davis, |
| |Maddox, Mazzoni, Thomson, | |Hertzberg, Maldonado, |
| |Reyes, Vincent, Wesson | |Papan, Romero, Runner, |
| | | |Shelley, Steinberg, |
| | | |Thomson, Wesson, Wiggins, |
| | | |Wright, Zettel |
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SUMMARY : Authorizes the California Public Utilities Commission
(CPUC) to credit ratepayers for excess rate reduction bonds
(RRB). Specifically, this bill:
1)Authorizes CPUC to order a fair and reasonable credit to
ratepayers of any excess RRBs for an electrical corporation
that ended its rate freeze prior to July 15, 1999.
2)Defines "excess rate reduction bonds proceeds" to mean the
proceeds from the sale of RRBs authorized by CPUC financing
orders determined to be in excess of the amounts necessary to
provide ratepayers the 10% rate reduction required by Section
368(a) of the Public Utilities Code.
EXISTING LAW:
1)Requires each electrical corporation to provide a 10% rate
reduction to all small commercial and residential customers
until March 31, 2002, or until CPUC authorized costs for
utility generation-related assets and obligations were fully
recovered, whichever came first.
SB 418
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2)Authorized each electrical corporation to finance the rate
reduction through RRBs to be repaid by utility customers with
Fixed Transition Amount (FTA) payments over a ten-year period.
FISCAL EFFECT : Minor, absorbable costs.
COMMENTS : As part of the Legislature's electric restructuring
efforts in AB 1890 (Brulte), Chapter 854, Statutes of 1996,
electric corporations were required to provide all residential
and small commercial customers a 10% rate reduction until March
31, 2002, or until CPUC authorized costs for utility generation
related assets and obligations were fully recovered, whichever
came first. Chapter 854 also authorized the electrical
corporations to finance the rate reduction through RRBs that
would be repaid by utility ratepayers with FTA payments over a
ten-year period.
San Diego Gas & Electric (SDG&E) obtained CPUC approval to issue
$658 million in RRBs to support its rate reduction to its
customers. On June 30, 1999, SDG&E completed its transition
from a monopoly provider of service in a regulated market to a
fully competitive market. Because SDG&E completed the
transition period early, a significant amount of the RRB
proceeds originally thought necessary to finance the rate
reduction are not needed.
Under the terms of SDG&E's financing order, CPUC ordered that
they are obligated to return any RRB proceeds not needed to
provide the 10% rate reduction for the four and one-fourth year
period at their authorized rate of return of 12.54%. SDG&E
asserts that because they are not earning an amount equivalent
to their rate of return for the RRB proceeds, they should not be
penalized and required to use shareholder profits to make up the
difference. Opponents argue, however, that SDG&E should be
required to comply with the existing financing order because it
provides the greatest benefit to ratepayers.
Rather than decide the appropriate approach or methodology for
return of the RRBs, CPUC would be authorized to consider the
issues raised by SDG&E and determine whether an alternate
disposition of the excess RRBs is appropriate.
Analysis Prepared by : Carolyn Veal-Hunter / U. & C. / (916)
SB 418
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319-2083
FN: 0003466