BILL ANALYSIS                                                                                                                                                                                                    



                                                          SB 1095
                                                          Page  1

Date of Hearing:   August 23, 1999

          ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE 
                     Roderick Wright, Chair
           SB 1095 (Bowen) - As Amended:  July 8, 1999

  SENATE VOTE  :   39-0
  
SUBJECT  :   Electrical restructuring.

  SUMMARY  :   Establishes that utility-owned generation assets  
shall be subject to California Public Utilities Commission  
(CPUC) regulation until their disposition has been reviewed and  
approved by CPUC.  Specifically,  this bill  :  

1)Requires that generation assets owned by any public utility  
  prior to January 1, 1997, and subject to rate regulation by  
  CPUC, shall continue to be subject to regulation by CPUC until  
  those assets have undergone market valuation in accordance  
  with procedures established by CPUC, and CPUC has authorized  
  the disposition of those assets pursuant to Section 851 of the  
  Public Utilities Code.

  EXISTING LAW  :

1)Requires the generation assets owned by any public utility  
  prior to January 1, 1997, and subject to rate regulation by  
  CPUC, continue to be subject to regulation by CPUC until those  
  assets have undergone market valuation, as specified.

2)Requires that the valuation of assets, for the purposes of  
  calculating public utilities' uneconomic costs, be completed  
  no later than December 31, 2001, using appraisal, sale, or  
  other divestiture.

3)Provides that, subsequent to market valuation, if the public  
  utility wishes to retain ownership of non-nuclear generation  
  assets in the same corporation as the distribution utility,  
  the public utility shall demonstrate to the satisfaction of  
  CPUC, through a public hearing, that it would be consistent  
  with the public interest and would not confer undue  
  competitive advantage on the public utility to retain that  
  ownership in the same corporation as the distribution utility.

  FISCAL EFFECT  :   Unknown.








                                                          SB 1095
                                                          Page  2


  COMMENTS  :   

1)Assembly Bill 1890 (Brulte), [Chapter 854, Statutes of 1996]  
  restructured California's electric industry in order to  
  establish a competitive generation market.  The investor-owned  
  utilities (IOUs) have divested most of their generating  
  assets, including a large number of natural gas power plants.   
  The utilities with hydroelectric assets, Pacific Gas &  
  Electric (PG&E) and Southern California Edison (SCE) have not  
  yet valued or divested any hydroelectric facilities.

2)Pursuant to AB 1890, PG&E and SCE filed applications at CPUC  
  earlier this year seeking to value their hydroelectric assets.  
   SCE has proposed retaining its hydroelectric facilities as  
  part of the regulated utility, while PG&E, which withdrew its  
  application in March, is seeking to transfer its hydroelectric  
  facilities to an unregulated affiliate.  The CPUC proceeding,  
  which was limited in scope to the issue of market value for  
  assets retained by the utilities, has been delayed pending the  
  Legislature's consideration of this issue.

3)PG&E, in its application to CPUC earlier this year, argued  
  that CPUC jurisdiction over its assets ends when they are  
  assigned a value, irrespective of whether CPUC reviewed and  
  approved their disposition pursuant to Section 851 of the  
  Public Utilities Code.  In its CPUC filing, PG&E cited Public  
  Utilities Code Sections 216 and 317, both of which state that  
  the assets are subject to CPUC regulation until those assets  
  have undergone market valuation.  This bill amends both code  
  sections to provide for continued CPUC regulation until the  
  CPUC has authorized the disposition of those assets pursuant  
  to Section 851.

4)The purpose of this bill, according to the author, is to  
  ensure that the hydroelectric assets are not deregulated  
  without public review.  This bill provides that once the  
  hydroelectric facilities are valued, they would continue to be  
  regulated by CPUC, until such time as a Section 851 review has  
  been completed by CPUC.  Section 851 requires that when a  
  public utility seeks to divest, sell, or purchase facilities,  
  they go before CPUC for approval.  As it relates to  
  hydroelectric facilities, Section 851 would guide CPUC's  
  review process for utility divestiture.









                                                          SB 1095
                                                          Page  3

  REGISTERED SUPPORT / OPPOSITION  :

  Support  

Office of Ratepayer Advocates
  
Opposition  

None on file.


  Analysis Prepared by  :    Joseph Lyons / U. & C. / (916) 319-2083