HomeMy WebLinkAboutMINUTES - 09101996 - D7 TO: BOARD OF SUPERVISORS Contra
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FROM: PHIL BATCHELOR, COUNTY ADMINISTRATORCosta
Count
DATE: September 5, 1996 a K�
STATUS REPORT ON ELECTRIC ENERGY DEREGULATION AND THE
SUBJECT: REQUEST OF THE MODESTO IRRIGATION DISTRICT TO DELIVER
ELECTRIC ENERGY IN CONTRA COSTA COUNTY
SPECIFIC REQUEST(S)OR RECOMMENDATION(S)&BACKGROUND AND JUSTIFICATION
RECOMMENDATIONS:
1. ACCEPT this report from the County Administrator on the status of
discussions with various electric energy suppliers regarding the impending
deregulation of the electric utility industry nationally as well as within
California.
2. ACKNOWLEDGE the complexity of the electric energy industry deregulation
and the need to raise and obtain answers to many questions and evaluate
many possible options before it will be feasible to provide sound alternatives
for the Board of Supervisors' consideration.
3. RECOGNIZE that the County has several potential roles in the deregulation
of the electric industry, including that as a customer, as a potential aggregator
of customers, and as an actual operator of an electric utility, and that the
advantages and disadvantages of each role need to be identified, quantified
and carefully evaluated before the Board of Supervisors will be in a position
to determine the best course of action for the County.
4. DIRECT the County Administrator, and appropriate staff from other County
Departments, to continue.to study and evaluate the deregulation of the electric
energy industry and provide additional status reports to the Board of
Supervisors as events dictate the need for such reports.
CONTINUED ON ATTACHMENT: YES SIGNATURE:
RECOMMENDATION OF COUNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE
XAPPROVE OTHER
SIGNATURE(S):
ACTION OF BOARD ON septeinAPPROVED AS RECOMMENDED X OTHER X
IT IS BY THE BOARD ORDERED that the above recommendations are approved; and
appropriate staff is REQUESTED to consider the issues raised today including
the LAFCO process , low income and energy efficiency subsidies , revenue
enhancements and policies that would represent the people of Contra Costa
County ; and all parties are URGED to read the report and sample agreement
and bring their concerns to the attention of appropriate staff .
VOTE OF SUPERVISORS
X 1 HEREBY CERTIFY THAT THIS IS A TRUE
UNANIMOUS(ABSENT ) AND CORRECT COPY OF AN ACTION TAKEN
AYES: NOES: AND ENTERED ON THE MINUTES OF THE BOARD
ABSENT: ABSTAIN: OF SUPERVISORS ON THE DATE SHOWN.
ATTESTED Sei)tember 10 , 1996
Contact: PHIL BATCHELOR,CLERK OF THE BOARD OF
cc: SUPERVISORS AND CO NTY ADMINISTRATOR
See Page 4
a
BY ,DEPUTY
?
5. CONCLUDE that it appears feasible and appropriate to separate the request
of the Dupont Chemical Plant to receive electric energy service from the
Modesto Irrigation District (MID) from the remainder of decisions the Board of
Supervisors may need to make in the future regarding other aspects of the
electric energy industry deregulation.
6. RECOGNIZE that because of the hearing and noticing requirements for the
environmental review of the proposed Permission Agreement which must first
be completed by MID, it will probably not be possible for either the Board of
Director of MID or the Board of Supervisors to approve and sign an agreement
before the end of September.
7. DIRECT the County Administrator and other appropriate County staff to
negotiate a Permission Agreement between the County and the Modesto
Irrigation District which will permit MID to provide electric power to the Dupont
Chemical Plant near Antioch but which does not authorize MID, at this time,
to extend its service to other customers in the unincorporated area of Contra
Costa County.
BACKGROUND:
On August 13, 1996, the Board of Supervisors considered a request from Supervisor
Torlakson which asked staff to recommend whether the Board should enter into an
agreement with the Modesto Irrigation District, which wishes to provide electrical
power to the Dupont Chemical Plant in the Antioch area and which would eventually
like to expand its service base to other commercial, industrial and residential
customers in the County.
Because of the pending deregulation of the electric energy supply industry
throughout the United States and in view of the simultaneous consideration by the
California Legislature of significant legislation affecting the deregulation of the
electric energy industry in California, the County Administrator agreed to provide a
status report to the Board of Supervisors on September 10, 1996.
At the Federal level, the Federal Energy Regulatory Commission (FERC), has been
moving toward an "open access" policy for electric transmission systems in the
United States. FERC has recently issued orders that provide for a more competitive
marketplace.
At the State level, on December 20, 1995, the California Public Utilities Commission
(CPUC) issued an order making California's electric utility subject to competitive
forces. Starting on January 1, 1998, customers will have the ability to choose their
own supplier or to have the utility buy competitively-priced power for them. On
August 31, 1996, the California Legislature enacted legislation to implement portions
of the CPUC's order. This legislation, AB 1890, is among the most far-reaching
legislation to be passed by the Legislature in recent years in terms of the potential
impact it can have on nearly every resident of California and on every commercial
and industrial business in the State. The Association of Bay Area Governments
(ABAG) has, for example, made an extraordinary effort to schedule a conference on
September 12, 1996 to help explain the role local governments can have in the new
era of deregulation and the role ABAG hopes to play as an aggregator of customers.
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Currently, the majority of California electric customers buy their electric service from
PG&E, Southern California Edison or San Diego Gas and Electric. Generally, this
service is provided on a "bundled" basis, meaning that utilities provide electric
service including the generation, transmission and distribution of power.
The proposed restructuring separates generation, transmission, and distribution. In
a restructured industry, a customer will have a choice of electrical supply (the
generation portion). Transmission is the transportation of bulk quantities of
electricity from generators to the distribution system. This service will be provided
by the Independent System Operator (ISO), a new entity which is created by AB
1890. At least initially, the companies currently delivering power to end-users will
provide distribution services, which is the transportation of electricity to the end-user.
Overlaid on this restructuring, and to some extent separate from it, is the proposal
from the Modesto Irrigation District (MID). MID is a public agency which is governed
by a five-member elected Board of Director. MID is an irrigation district that also
provides electric service to approximately 90,000 customers in California. As an
irrigation district, MID is not governed by the CPUC in terms of its electric power
generation and delivery and is not considered a public utility under California law.
On January 16, 1996, the City of Pittsburg authorized MID to use the city's rights of
way to extend electrical service to Pittsburg business and residential customers.
MID maintains that it is specifically permitted to sell power to customers outside of
its territory by Water Code Sections 22115 and 22120. MID's first customer in
Pittsburg is the Praxair facility on Loveridge Road.
MID is now interested in providing electric power to the Dupont Chemical Plant
facility near Antioch and Dupont is apparently interested in obtaining its electric
power from MID.
MID has indicated that it can enter into an agreement with Dupont to provide electric
power to Dupont's plant without the need for any prior consent from or agreement
with the County but recognizes that the County may have authority to impose some
regulations. MID has approached the County and is interested in reaching
agreement with the County to allow it to provide electric power to Dupont as a
courtesy from one public agency to another. MID recognizes that if and when it
begins to provide electric power to Dupont that the County will lose certain franchise
revenue it has been collecting from PG&E. MID appears prepared to provide the
County with a revenue agreement which will insure that the County will not be a net
loser when MID begins to provide electric power to Dupont.
County staff met with representatives from PG&E and from MID in separate
meetings on September 3, 1996 and is committed to continuing these discussions
and negotiations.
As for MID's request for permission to serve Dupont, there are a number of issues
that need to be explored in more detail, especially those relating to the impacts on
county revenues.
It is necessary for MID to go through an environmental review of their decision to
enter into an agreement to provide electric power to Dupont. It is anticipated that
this review may result in the issuance of a negative declaration. It is necessary to
provide a 21-day posted notice before a hearing at which the decision on the
environmental review is adopted. It is not possible for either the County or MID to
enter into an agreement prior to the completion of this hearing after the required
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notice period. Therefore, it is unlikely that either party could legally enter into an
agreement before the early part of October.
At this time, there appears to be no reason to stand in the way of Dupont's business
decision to seek an alternative provider of electric power which Dupont believes will
be a sound economic decision for it to make. We are, therefore, recommending that
staff be directed to prepare an agreement with MID and return it to the Board,
probably at the Board's October 8, 1996 meeting.
The larger question of how the Board of Supervisors should respond to the whole
subject of deregulation of the electric power industry is one which requires
considerably more study. It is essential that we have an opportunity to carefully
review the language of AB 1890 and consult with affected parties regarding their
understanding of what the impact of deregulation will mean. A copy of AB 1890 is
attached.
Staff has raised several dozen questions which we believe need to be answered and
considered by the Board of Supervisors in deciding what role the County should play
in deregulation in the future. We are recommending that the Board direct us to
continue to study this entire subject matter and return to the Board with status reports
as circumstances dictate over the next several months. We have attached some of
these questions. No doubt many more will be added over the next several weeks
as we get more deeply involved in this subject.
cc: County Administrator
County Counsel
Director, GMEDA
Director of General Services
Public Works Director
Modesto Irrigation District (Via CAO)
PG&E (Via CAO)
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QUESTIONS TO BE RESEARCHED REGARDING
ALTERNATIVE ELECTRICAL ENERGY PRODUCERS
1 . What is the Modesto Irrigation District (MID), who governs it and how is
it organized?
2. What authority does MID have to sell electrical power to retail industrial,
commercial and residential customers?
3. Does the California Public Utilities Commission (CPUC) regulate the sale
of electrical power as is proposed by MID?
4. Does the CPUC have exclusive jurisdiction in the area of the sale of
electrical power by MID or does the County have the authority to agree
to regulate such sales?
5. Destec Power Services is apparently a subsidiary of Destec Energy, Inc.
and maintains that it has the authority to produce electrical power and
transmit it on PG & E's transmission lines as long as it is selling only to
wholesale customers, like MID. Do we agree that it has those powers
and rights?
6. What regulation is there on the ability of Destec and MID to sell electrical
power and what limits are there on the price for which they can sell
electrical power, either at wholesale or retail?
7. Assuming the County has the ability to regulate at least the retail sale of
electrical power in the County by firms which are not regulated by the
CPUC, like MID, what exactly would the County's role be if it were to
agree to serve as the regulatory body?
8. Does an electrical power provider like MID need access to easements in
our road system or other rights-of-way over which the County has
control?
9. Could MID obtain the necessary easements by eminent domain if it
wished to do so, despite the objections of the County?
10. Are there other actual or possible electrical power providers who might
be interested in competing with MID and PG & E to provide electrical
power to customers in the unincorporated area of the County?
11 . What ability does PG & E have to successfully interfere with the County's
efforts to enter into an agreement with another electrical power provider?
12. Regardless of whether the County enters into an agreement with MID or
another provider to provide electrical power to the unincorporated area
of the County, does it make sense to explore such an agreement for the
County's own electrical bill, which is approximately $ 5 million annually?
13. Mention has been made about a project along these lines being
undertaken by the Association of Bay Area Governments (ABAG). What
is this project about and what is ABAG's involvement?
14. Some cities have been approached by MID about serving in much this
same capacity within their respective cities. Which cities have been
approached and what is each doing?
15. Does the County need an outside expert to address all of the relevant
questions and gather the data necessary for the Board of Supervisors to
make an informed decision?
16. If so, what type of expertise do we need, where do we find it and what will
it cost?
17. If the Board of Supervisors were to enter into the type of agreement that
has been request by MID, what types,of costs would there be, what
numbers and types of new staff would be required and what would the
costs be to provide this regulatory system?
18. What ability does the Board of Supervisors have to impose a franchise
fee on an electrical power provider like MID and what costs can be
included in the franchise fee?
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19. Is it possible for the County to recover all of its direct and overhead costs
of regulating the electrical power distribution system in the
unincorporated area of the County through a franchise fee?
20. What limits are there on the franchise fee the County could charge an
electrical power provider like MID?
21 . In view of recent newspaper articles about Destec's possible financial
problems, is it reasonable to rely on Destec to continue providing the link
between PG&E and MID for power transmission purposes?
22. Considering that the CPUC has stated that all the utilities' transition
costs, or stranded costs due to energy programs, subsidized low-cost
residential programs, and major facility capital improvements, must be
addressed in the restructuring of the electrical investor-owned utilities
and MID doesn't currently pay them, how will MID address these
transition costs in future pricing?
23. If MID doesn't pay a share of transition costs, will County residents have
to pay them?
24. Who will provide for low-cost service to low-income residents under an
agreement with MID?
25. Will MID encourage the use of alternative power and energy reduction
programs, such as lighting retrofits, and if "yes", how will MID pay for
such programs?
26. How can the County benefit from lower cost electricity to County
buildings that are in various parts of the County, when MID and Destec
representatives stated that they plan to only service Dupont and facilities
located within 3 miles of Dupont in the near future?
27. How will MID respond to preventive maintenance and repair services for
customers, and will there be a local office to call for prompt response?
28. Will MID offer free services, such as checking pilot lights?
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29. Is it correct that the Destec agreement with PG&E states that service
can't be offered to former PG&E customers and does this mean that only
new businesses moving into the area could join in the low cost electricity
service while businesses currently served by PG&E would not be able to
have the same low rates?
30. What kind of billing information will MID provide to users?
31 . If a franchise fee or a similar fee is charged to MID by the County, does
this fee have to be the same for all providers of power, such as PG&E?
32. How will MID/Destec plan to expand low cost electricity service to local
residents and small businesses and not just offer the low rates to large
users, such as Dupont?
33. What criteria will be used to rank customers to receive electricity in the
event that there is transmission congestion or power reduction? Will
Contra Costa receive preference over irrigation or other customers of
MID?
34. The Federal Energy Regulatory Commission (FERC) found on July 1 ,
1996 that a proposal made by the City of Palm Springs to install
duplicate electric meters to buy electricity in the wholesale market is a
"sham transaction". It cannot qualify as a municipal power system to buy
electricity in the wholesale market under the 1992 Energy Policy Act.
FERC also ruled that it was not in the public interest because it would
have disrupted the electric industry restructuring program already
underway in California. How do these rulings affect MID's proposal?
35. What obligations and responsibilities would the County have as a
regulator, and what related potential performance or financial exposures
would the County have in the event a producer fails to meet any of its
obligations?
36. Would these obligations, responsibilities and exposures change when
deregulation takes effect, and how?
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37. Will the benefits of being a regulator change when deregulation takes
effect, and how?
38. If the County has the authority to regulate in the unincorporated area, is
it exclusive or will there be competition among regulators? If the
authority is not exclusively the County's, who are the potential
competitors?
39. What would be the advantages and disadvantages of the County, the
cities, ABAG and/or others regulating "cooperatively"?
40. Given the passage of AB 1890 and the Governor's likely signature on it,
what impact does this legislation have on the whole deregulation picture
and MID's proposal?
5
State Assembly Bill AB 1890 A's Added; D's Deleted
Date Introduced: 02/24/95
Last Amended: 08/28/96
Assembly
PROPOSED CONFERENCE REPORT AUGUST 28, 1996
ASSEMBLY BILL No. 1890
INTRODUCED BY Assembly Member Brulte
(Principal coauthors: Assembly Members Conroy, Kuykendall, and Martinez)
(Principal coauthors: Senators Leonard, Peace, and Sher)
(Coauthors: Assembly Members Ackerman, Alby, Baca, Battin, Baugh, Boland,
Frusetta, Goldsmith, Harvey, Margett, McPherson, Miller, Morrissey, Morrow, Pringle,
Richter, Alpert, Baldwin, Brown, Bustamante, Cunneen, Davis, Ducheny, Escutia,
Gallegos, Hawkins, Hauser, House, Kaloogian, Katz, Knowles, Machado, Mazzoni,
Kevin Murray, Willard Murray,Napolitano, Olberg, Poochigian, Rainey, Rogan,
r
Takasugi, and Woods)
(Coauthors: Senators Alquist, Calderon, Haynes, Johannessen, Kelley, Maddy, Ayala,
Dills, Costa, Craven, Hughes, Johnston, Kopp, Killea, Knowles,Leslie, Marks, Petris,
Polanco, Rosenthal, Russell, Solis, and Monteith)
An act to amend Sections 955.1 and 3440.1 of the Civil Code, to amend Section
9104 of the Commercial Code, to amend Sections 63010, 63025.1, and 63071 of, and to
add Article 6 (commencing with Section 63048) to Chapter 2 of Division I of Title 6.7
of, the Government Code, to amend Section 216 of, to add Chapter 2.3 (commencing
with Section 330) to, to add Article 5.5 (commencing with Section 840)to Chapter 4 of,
Part 1 of Division 1 of, to add Division 4.9 (commencing with Section 9600) to, and to
repeal Article 12 (commencing with Section 394) of Chapter 2.3 of Part 1 of Division 1
of, the Public Utilities Code, relating to public utilities, making an appropriation therefor,
and declaring the urgency thereof,to take effect immediately.
LEGISLATIVE COUNSEL'S DIGEST
AB 1890, as amended, Brulte. Public utilities: electrical restructuring
Existing law provides for the furnishing of utility services, including residential
electrical, gas, heat, and water services, by privately owned public utilities subject to the
jurisdiction and control of the Public Utilities Commission and similar services by
publicly owned public utilities including municipal corporations subject to their
governing bodies and municipal utility districts and public utility districts subject to their
boards and directors.
The bill would amend the Public Utilities Act to require that the commission
undertake various actions, including the facilitation of the efforts of the state's electrical
corporations to develop and obtain authorization of the Federal Energy Regulatory
Commission for the creation and operation of an Independent System Operator and an
Independent Power Exchange, and the authorization of direct transactions between
electricity suppliers and end use customers, subject to implementation of a nonbypassable
charge.
This bill would prohibit any person, corporation, electrical corporation, or local
publicly owned electric utility or other governmental entity other than a retail customer's
existing electric service provider as of December 20, 1995, from providing electric
service to a retail customer of a publicly owned electric utility unless the customer pays
to the utility currently providing electric service, a nonbypassable generation-related
severance fee or transition charge, as defined, established by the regulatory body for that
utility.
The bill would prohibit a local publicly owned electric utility or other
governmental entity from providing electrical service to a retail customer of an electrical
corporation unless that customer pays a nonbypassable transition charge to the electrical
corporation.
The bill would require the local regulatory body of each local publicly owned
electric utility to determine whether it will authorize direct transactions between
electricity suppliers and end use customers, subject to implementation of the
nonbypassable.severance fee or transition charge, and provide for procedures to
implement the direct transactions.
This bill would provide for the issuance of rate reduction bonds for the recovery
of transition costs, as defined, by electrical corporations, pursuant to the restructuring of
the electrical services industry.
Under the Bergeson-Peace Infrastructure and Economic Development Bank Act,
the California Infrastructure and Economic Development Bank is authorized to, among
other things, issue and sell or purchase bonds, as defined, make loans, and provide for
other types of financing for qualifying projects for public improvements by specified
public agencies, known as sponsors, and to execute any instrument necessary, convenient,
or appropriate to carry out any power expressly given to the bank by the act. The act also
establishes and makes available to the bank the California Infrastructure Bank Fund, a
special fund continuously appropriated for these purposes.
By providing for the financing of transition costs under the act which is a new use
of continuously appropriated funds,this bill would make an appropriation.
The bill would also incorporate changes to Section 216 of the Public Utilities
Code proposed by AB 2501,to take effect if both bills are chaptered and this bill is
chaptered last.
Since a violation of the Public Utilities Act is a misdemeanor,the bill would
impose additional duties upon local law enforcement agencies, and the bill would also
impose additional duties on local agencies,thereby constituting a state-mandated local
program.
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.
This bill would provide that no reimbursement is required by this act for a
specified reason.
This bill would declare that it is to take effect immediately as an urgency statute.
Vote: 2/3. Appropriation: yes. Fiscal committee: yes. State-mandated local
program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. (a) The Legislature finds and declares that the restructuring of the
California electricity industry has been driven by changes in federal law intended to
increase competition in the provision of electricity. It is the intent of the Legislature to
ensure that California's transition to a more competitive electricity market structure
allows its citizens and businesses to achieve the economic benefits of industry
restructuring at the earliest possible date, creates a new market structure that provides
competitive, low cost and reliable electric service,provides assurances that electricity
customers in the new market will have sufficient information and protection, and
preserves California's commitment to developing diverse, environmentally sensitive
electricity resources.
(b) It is the intent of the Legislature to provide the legislative foundation for
transforming the regulatory framework of California's electric industry in ways that meet
the objectives stated in subdivision(a). It is the further intent of the Legislature that
during a limited transition period ending March 31, 2002, to provide for all of the
following:
(1) Accelerated, equitable,nonbypassable recovery of transition costs
associated with uneconomic utility investments and contractual obligations.
(2) An immediate rate reduction of no less than 10 percent for residential
and small commercial ratepayers.
(3) The financing of the rate reduction through the issuance of"rate
reduction bonds" that create no new financial obligations or liabilities for the State of
California.
(4) An anticipated result through implementation of this act of a
subsequent, cumulative rate reduction for residential and small commercial customers of
no less than 20 percent by April 1, 2002.
(5) A "fire wall" that protects residential and small business consumers
from paying for statewide transition cost policy exemptions required for reasons of equity
or business development and retention.
(6) Protection of the interests of utility employees who might otherwise be
economically displaced in a restructured industry.
(c) It is the intent of the Legislature to direct the creation of a proposed new
market structure featuring two state chartered, nonprofit market institutions: a Power
Exchange charged with providing an efficient, competitive auction to meet electricity
loads of exchange customers, open on a nondiscriminatory basis to all electricity
providers; and an Independent System Operator with centralized control of the state-wide
transmission grid, charged with ensuring the efficient use and reliable operation of the
transmission system. A five-member Oversight Board comprised of three gubernatorial
appointees, an appointee of the Senate Committee on Rules and an appointee of the
Speaker of the Assembly will oversee the two new institutions and appoint governing
boards that are broadly representative of California electricity users and providers.
It is the further intent of the Legislature to direct the Independent System Operator
to seek federal authorization to perform its functions and to be able to secure the
generation and transmission resources needed to achieve specified planning and
operational reserve criteria. It is the further intent of the Legislature to require
development of maintenance standards that will reduce the potential for outages and
secure participation in the operation of the Independent System Operator by the state's
independent local publicly-owned utilities.
(d) It is the intent of the Legislature to protect the consumer by requiring
registration of certain sellers, marketers, and aggregators of electricity service, requiring
information to be provided to consumers, and providing for the compilation and
investigation of complaints. It is the further intent of the Legislature to continue to fund �.
low-income ratepayer assistance programs, public purpose programs for public goods
research, development and demonstration, demand-side management and renewable
electric generation technologies in an unbundled manner.
(e) It is the intent of the Legislature that electrical corporations shall,by June 1,
1997,or on the earliest possible date, apply concurrently for financing orders from the
Public Utilities Commission and rate reduction bonds from the California Infrastructure
and Economic Development Bank in amounts sufficient to achieve a rate reduction in the
most expeditious manner for residential and small commercial customers of not less than
10 percent for 1998 and continuing through March 31, 2002.
SEC. 2. Section 955.1 of the Civil Code is amended to read:
955.1. (a) Except as provided in Sections 954.5 and 955 and subject to
subdivisions (b) and(c), a transfer other than one intended to create a security interest
(paragraph(1) of subdivision(a) of Section 9102 of the Commercial Code) of any general
intangible(Section 9106 of the Commercial Code) consisting of any right to payment and
any transfer of accounts or chattel paper excluded from the coverage of Division 9 of the
Commercial Code by subdivision(f) of Section 9104 of the Commercial Code shall be
deemed perfected as against third persons upon there being executed and delivered to the
transferee an assignment thereof in writing.
(b) As between bona fide assignees of the same right for value without notice,the
assignee first giving notice thereof to the obligor in writing has priority.
(c) The assignment is not, of itself, notice to the obligor so as to invalidate any
payments made by the obligor to the transferor.
(d) This section does not apply to transfers or assignments of
transition property, as defined in Section 840 of the Public Utilities
Code.
SEC. 3. Section 3440.1 of the Civil Code is amended to read:
3440.1. This chapter does not apply to any of the following:
(a) Things in action.
(b) Ships or cargoes if either are at sea or in a foreign port.
(c) The sale of accounts or chattel paper governed by the Uniform Commercial
Code, security interests, and contracts of bottomry or respondentia.
(d) Wines or brandies in the wineries, distilleries, or wine cellars of the makers or
owners of the wines or brandies, or other persons having possession, care, and control of
the wines or brandies, and the pipes, casks, and tanks in which the wines or brandies are
contained, if the transfers are made in writing and executed and acknowledged, and if the f
transfers are recorded in the book of official records in the office of the county recorder of
the county in which the wines,brandies, pipes, casks, and tanks are situated.
(e) A transfer or assignment made for the benefit of creditors generally or by any
assignee acting under an assignment for the benefit of creditors generally.
(f)Property exempt from enforcement of a money judgment.
(g) Standing timber.
(h) Subject to the limitations in Section 3440.3, a transfer of personal property if
all of the following conditions are satisfied:
(1) Prior to the date of the intended transfer,the transferor or the transferee
files a financing statement, with respect to the property transferred, signed by the
transferor. The financing statement shall be filed in the office of the Secretary of State in
accordance with Chapter 4 (commencing with Section 9401) of Division 9 of the
Commercial Code, but may use the terms "transferor" in lieu of"debtor" and "transferee"
in lieu of"secured party." The provisions of Chapter 4 (commencing with Section 9401)
of Division 9 of the Commercial Code shall apply as appropriate to the financing
statement.
(2) The transferor or the transferee publishes a notice of the intended l
transfer one time in a newspaper of general circulation published in the judicial district in
which the personal property is located, if there is one, and if there is none in the judicial
district,then in a newspaper of general circulation in the county embracing the judicial
district. The publication shall be completed not less than 10 days before the date the
transfer occurs. The notice shall contain the name and address of the transferor and
transferee and a general statement of the character of the personal property intended to be
transferred, and shall indicate the place where the personal property is located and a date
on or after which the transfer is to be made.
(i) Personal property not located within this state at the time of the transfer or
attachment of the lien if the provisions of this subdivision are not.used for the purpose of
evading this chapter.
0) A transfer of property which (1) is subject to a statute or treaty of the United
States or a statute of this state that provides for the registration of transfers of title or
issuance of certificates of title and (2) is so far perfected under that statute or treaty.that a
bona fide purchaser cannot acquire an interest in the property transferred that is superior
to the interest of the transferee.
(k) A transfer of personal property in connection with a transaction in which the
property is immediately thereafter leased by the transferor from the transferee provided
the transferee purchased the property for value and in good faith(subdivision(c)of
Section 10308 of the Commercial Code).
(1) Transition property, as defined in Section 840 of the Public Utilities Code.
SEC. 4. Section 9104 of the Commercial Code is amended to read:
9104. This division does not apply:
(a) To a security interest subject to any statute of the United States to the extent
that such statute governs the rights of parties to and third parties affected by transactions
in particular types of property;or
(c) To a lien given by statute or other rule of law for services or materials except
as provided in Section 9310 on priority of such liens; or
(d) To a transfer of a claim for wages, salary or other compensation of an
employee; or
(e) To a transfer, including creation of a security interest, by a government or
governmental subdivision or agency; or
(f) To a sale of accounts or chattel paper as part of a sale of the business out of
which they arose, or an assignment of accounts or chattel paper which is for the purpose
of collection only, or a transfer of a right to payment under a contract to an assignee who
is also to do the performance under the contract or a transfer of a single account to an
assignee in whole or partial satisfaction of a preexisting indebtedness; or
(g) To any loan made by an insurance company pursuant to the provisions of a
policy or contract issued by it and upon the sole security of the policy or contract; or
(h) To a right represented by a judgment(other than a judgment taken in a right to
payment which was collateral); or
(i) To any right of setoff; or
0)Except to the extent that provision is made for fixtures in Section 9313, to the
creation or transfer of an interest in or lien on real estate, including a lease or rents.
thereunder and to any interest of a lessor and lessee in any such lease or rents; or
(k) To a transfer in whole or in part of any claim arising out of tort.
(1) To any security interest created by the assignment of the benefits of any public
construction contract under the Improvement Act of 1911 (Division 7 (commencing with
Section 5000), Streets and Highways Code).
(m) To transition property,as defined in Section 840 of the Public Utilities Code,
except to the extent that the provisions of this division are referenced in Article 5.5
(commencing with Section 840) of Chapter 4 of Part 1 of Division 1 of the Public
Utilities Code.
SEC. 5. Section 63010 of the Government Code is amended to read:
63010. For purposes of this division, the following words and terms shall have
the following meanings unless the context clearly indicates or requires another or
different meaning or intent:
(a) "Act" means the Bergeson-Peace Infrastructure and Economic Development
Bank Act.
(b) "Bank" means the California Infrastructure and Economic Development Bank.
(c) 'Board" or "bank board" means the board of directors of the California
Infrastructure and Economic Development Bank.
(d) 'Bond purchase agreement" means a contractual agreement executed between
the bank and a sponsor, or a special purpose trust authorized by the bank or a sponsor, or
both, whereby the bank or special purpose trust authorized by the bank agrees to purchase
bonds of the sponsor for retention or sale.
(e) 'Bonds" means bonds, including structured, senior, and subordinated bonds or
other securities; loans; notes, including bond,revenue,tax or grant anticipation notes;
commercial paper; floating rate, and variable maturity securities; and any other evidences
of indebtedness or ownership, including certificates of participation or beneficial
interest, asset backed certificates , or lease-purchase or installment purchase agreements,
whether taxable or excludable from gross income for federal income taxation purposes.
(f) "Cost," as applied to a project or portion thereof financed under this division,
means all or any part of the cost of construction, renovation, and acquisition of all lands,
structures, real or personal property, rights, rights-of-way, franchises, licenses, easements,
and interests acquired or used for a project; the cost of demolishing or removing any
buildings or structures on land so acquired, including the cost of acquiring any lands to
which the buildings or structures may be moved; the cost of all machinery, equipment,
and financing charges; interest prior to, during, and for a period after, completion of
construction, renovation,or acquisition, as determined by the bank; provisions for
working capital; reserves for principal and interest and for extensions, enlargements,
additions, replacements, renovations, and improvements; the cost of architectural,
engineering,,financial and legal services, plans, specifications, estimates, administrative
expenses, and other expenses necessary or incidental to determining the feasibility of any
project or incidental to the construction, acquisition„ or financing of any project, and
transition costs in the case of an electrical corporation
(g) "Electrical corporation" has the meaning set forth in Section 218 of the Public
C Utilities Code.
(h) "Executive director" means the executive director of the California
Infrastructure and Economic Development Bank appointed pursuant to Section 63021.
(i) "Facilities" means real and personal property, structures, conveyances,
equipment,thoroughfares,buildings, and supporting components thereof that are directly
related to providing the following:
(1) "City streets" includes any street, avenue,boulevard, road,parkway,
drive, or other way that is any of the following:
(A) An existing municipal roadway.
(B) Is shown upon a plat approved pursuant to law and includes the
land between the street lines, whether improved or unimproved, and may comprise
pavement, bridges, shoulders, gutters, curbs, guardrails, sidewalks, parking areas,
benches, fountains,plantings, lighting systems, and other areas within the street lines, as
well as equipment and facilities used in the cleaning, grading,clearance, maintenance,
and upkeep thereof.
(2) "County highways" includes any county highway as defined in Section
25 of the Streets and Highways Code, that includes the land between the highway lines,
whether improved or unimproved, and may comprise pavement, bridges, shoulders,
gutters, curbs, guardrails, sidewalks,parking areas, benches, fountains,plantings, lighting
systems, and other areas within the street lines, as well as equipment and facilities used in
the cleaning, grading,clearance, maintenance, and upkeep thereof.
(3) "Drainage and flood control" includes ditches, canals, levees, pumps,
dams, conduits, pipes, storm sewers, and dikes necessary to keep or direct water away
from people, equipment, buildings, and other protected areas as may be established by
lawful authority, as well as the acquisition, improvement, maintenance, and management
of floodplain areas and all equipment used in the maintenance and operation of the
foregoing.
(4) "Educational facilities" includes libraries, child care facilities,
including, but not limited to, day care facilities, and employment training facilities.
(5) "Environmental mitigation measures" includes required construction or
modification of public infrastructure and purchase and installation of pollution control
and noise abatement equipment.
(6) "Parks and recreational facilities" includes local parks, recreational
property and equipment, parkways and property.
(7) "Port facilities" includes docks,harbors,ports of entry,piers, ships,
small boat harbors and marinas, and any other facilities,additions,or improvements in
connection therewith.
(8) "Communications" includes facilities for telephone and
telecommunications service.
(9) "Public transit" includes air and rail transport of goods, airports,
guideways, vehicles, rights-of-way,passenger stations, maintenance and storage yards,
and related structures, including public parking facilities,equipment used to provide or
enhance transportation by bus, rail, ferry, or other conveyance, either publicly.or privately
owned,that provides to the public general or special service on a regular and continuing
basis.
(10) "Sewage collection and treatment" includes pipes, pumps, and
conduits that collect wastewater from residential, manufacturing, and commercial
establishments, the equipment, structures, and facilities used in treating wastewater to
reduce or eliminate impurities or contaminants, and the facilities used in disposing of, or
transporting,remaining sludge, as well as all equipment used in the maintenance and
operation of the foregoing.
(11) "Solid-waste collection and disposal" includes vehicles, vehicle-
compatible waste receptacles,-transfer stations, recycling centers, sanitary landfills, and
waste conversion facilities necessary to remove solid waste, except that which is
hazardous as defined by law, from its point of origin.
(12) "Water treatment and distribution" includes facilities in which water
is purified and otherwise treated to meet residential, manufacturing, or commercial
purposes and the conduits, pipes, and pumps that transport it to places of use.
(13) "Defense conversion" includes, but is not limited to, facilities
necessary for successfully converting military bases consistent with an adopted base
reuse plan.
(14) "Public safety facilities" includes,but is not limited to,police.
stations, fire stations, court buildings,jails,juvenile halls, and juvenile detention
facilities.
(15) "State highways" includes any state highway as described in Chapter
2 (commencing with Section 230) of Division 1 of the Streets and Highways Code, and
the related components necessary for safe operation of the highway.
(j) "Financial assistance" in connection with a project, includes, but is not limited
to, any combination of grants, loans,the proceeds of bonds issued by the bank or special
purpose trust, insurance, guarantees or other credit enhancements or liquidity facilities,
and contributions of money,property, labor,or other things of value, as may be approved
by resolution of the board or the sponsor, or both;the purchase or retention of bank
bonds, the bonds of a sponsor for their retention or for sale by the bank,or the issuance of
bank bonds or the bonds of a special purpose trust used to fund the cost of a project for
which a sponsor is directly or indirectly liable,including,but not limited to,bonds,the
security for which is provided in whole or in part pursuant to the powers granted by
Section 63025; bonds for which the bank has provided a guarantee or enhancement,
including,but not limited to,the purchase of the subordinated bonds of the sponsor,the
subordinated bonds of a special purpose trust,or the retention of the subordinated bonds
of the bank pursuant to Chapter 4 (commencing with Section 63060); or any other type of
assistance deemed appropriate by the bank or the sponsor,except that no direct loans
shall be made to nonpublic entities other than in connection with the issuance of rate
reduction bonds pursuant to a financing-order.
For purposes of this subdivision, "grant" does not include grants made by the
bank except when acting as an agent or intermediary for the distribution or packaging of
financing available from federal,private, or other public sources.
(k) "Financing order" has the meaning set forth in Section 840 of the Public
Utilities Code.
(1) "Guarantee trust fund" means the California Infrastructure Guarantee Trust
( Fund.
(m) "Infrastructure bank fund" means the California Infrastructure and Economic
Development Bank Fund.
(n) "Loan agreement" means a contractual agreement executed between the bank
or a special purpose trust and a sponsor that provides that the bank or special purpose
trust will loan funds to the sponsor and that the sponsor will repay the principal and pay
the interest and redemption premium, if any, on the loan.
(o) "Participating party" means any person, company, corporation, partnership,
firm,or other entity or group of entities engaged in business within the state and that
applies for financing from the bank in conjunction with a sponsor for the purpose of
implementing a project. However, in the case of a project relating to the financing of
transition costs and the acquisition of transition property on the request of an electrical
corporation, the participating party shall be deemed to be the same entity as the sponsor
for the financing.
(p) "Project" means designing, acquiring,planning, permitting, entitling,
constructing, improving, extending, restoring, financing, and generally developing
facilities within the state or financing transition costs and the acquisition of transition
property upon approval of a financing order by the Public Utilities Commission, as
provided in Article 5.5 (commencing with Section 840) of Chapter 4 of Part 1 of Division
1 of the Public Utilities Code
(q) "Rate reduction bonds" has the meaning set forth in Section 840 of the Public
Utilities Code.
(r) "Revenues" means all receipts,purchase payments, loan repayments, lease
payments, and all other income or receipts derived by the bank or a sponsor from the sale,
lease, or other financing arrangement undertaken by the bank, a sponsor or a participating
party, including, but not limited to, all receipts from a bond purchase agreement, and any
income or revenue derived from the investment of any money in any fund or account of
the bank or a sponsor and any receipts derived from transition property. Revenues shall
not include moneys in the General Fund of the state.
(s) "Special purpose trust" means a trust,partnership, limited partnership,
association, corporation, nonprofit corporation, or other entity authorized under the laws
of the state to serve as an instrumentality of the state to accomplish public purposes and
authorized by the bank to acquire, by purchase or otherwise, for retention or sale, the
bonds of a sponsor or of the bank made or entered into pursuant to this division and to
issue special purpose trust bonds or other obligations secured by these bonds or other
sources of public or private revenues. In addition, special purpose trust also means any
entity authorized under the laws of the state to serve as an instrumentality of the state to
accomplish public purposes and authorized by the'bank to acquire transition property and
to issue rate reduction bonds.
(t) "Sponsor" means any subdivision of the state or local government including
departments, agencies, commissions, cities, counties, nonprofit corporations formed on
behalf of a sponsor, special districts, assessment districts, and joint powers authorities
within the state or any combination of these subdivisions that has, or proposes to acquire,
an interest in a project and that makes application to the bank for financial assistance in
connection with a project in a manner prescribed by the bank. In addition, an electrical
corporation shall be deemed to be the sponsor as well as the participating party for any
project relating to the financing of transition costs and the acquisition of transition
property on the request of the electrical corporation.
(u) "State" means the State of California.
(v) "Transition costs" has the meaning set forth in Section 840 of the Public
Utilities Code.
(w) "Transition property" has the meaning set forth in Section 840 of the Public
Utilities Code.
SEC. 6. Section 63025.1 of the Government Code is amended to read:
63025.1. The bank board may do or delegate the following to the executive
director:
(a) Sue and be sued in its own name.
(b) As provided in Chapter 5 (commencing with Section 63070),issue bonds and
authorize special purpose trusts to issue bonds, including, at the option of the board,
bonds bearing interest that is taxable for the purpose of federal income taxation, to pay all
or any part of the cost of any project.
(c) Engage the services of private consultants to render professional and technical
assistance and advice in carrying out the purposes of this division.
(d) Employ attorneys,financial consultants, and other advisers as may, in the
bank's judgment,be necessary in connection with the issuance and sale,or authorization
of special purpose trusts for the issuance and sale, of any bonds, notwithstanding Sections
11042 and 11043.
(e) Contract for engineering, architectural, accounting, or other services of
appropriate state agencies as may, in its judgment, be necessary for the successful
development of a project.
(f) Pay the reasonable costs of consulting engineers, architects, accountants, and
construction, land use, recreation, and environmental experts employed by any sponsor or
participating party if, in the bank's judgment, those services are necessary for the
successful development of a project.
(g) Acquire,take title to, and sell by installment sale or otherwise, lands,
structures, real or personal property, rights, rights-of-way, franchises, easements, and
other interests in lands that are located within the state ,or transition property as the bank
may deem necessary or convenient for the financing of the project, upon terms and
conditions that it considers to be reasonable.
(h) Receive and accept from any source including, but not limited to, the federal
government, the state, or any agency thereof, loans, contributions, or grants, in money,
property, labor, or other things of value, for, or in aid of, a project, or any portion thereof.
(i) Make secured loans to any sponsor or participating party in connection with
the financing of a project in accordance with an agreement between the bank and the
sponsor or a participating party. However, no loan shall exceed the total cost of the
project as determined by the sponsor or the participating party and approved by the bank.
(j) Make secured loans to any sponsor or participating party in accordance with an
agreement between the bank and the sponsor or participating party to refinance
indebtedness incurred by the sponsor or participating party in connection with projects
undertaken and completed prior to any agreement with the bank or expectation that the
bank would provide financing.
(k) Mortgage all or any portion of the bank's interest in a project and the property
on which any project is located, whether owned or thereafter acquired, including the
granting of a security interest in any property,tangible or intangible.
(1)Assign or pledge all or any portion of the bank's interests in transition property
and the revenues therefrom, or assets, things of value, mortgages, deeds of trust, bonds,
bond purchase agreements, loan agreements, indentures of mortgage or trusty or similar
instruments, notes, and security interests in property,tangible or intangible and the
revenues therefrom, of a sponsor or a participating party to which the bank has made
loans, and the revenues therefrom, including payment or income from any interest owned
or held by the bank, for the benefit of the holders of bonds.
(m) Receive or serve as a conduit for the making of grants, and provide for
contributions, guarantees, insurance, credit enhancements or liquidity facilities, or other
financial enhancements to a sponsor or a participating party as financial assistance for a
project.
(n) Lease the project being financed to a sponsor or a participating party, upon
terms and conditions that the bank deems proper but shall not be leased at a loss; charge
and collect rents therefor; terminate any lease upon the failure of the lessee to comply
with any of the obligations thereof, include in any lease, if desired,provisions that the
lessee shall have options to renew the lease for a period or periods, and at rents
determined by the bank; purchase any or all of the project; or,upon payment of all the
indebtedness incurred by the bank for the financing of the project,the bank may convey
any or all of the project to the lessee or lessees.
(o) Charge and equitably apportion among sponsors and participating parties the
bank's administrative costs and expenses incurred in the exercise of the powers and duties
conferred by this division.
(p) Issue, obtain, or aid in obtaining, from any department or agency of the United
States, from other agencies of the state, or from any private company, any insurance or
guarantee to, or for, the payment or repayment of interest or principal, or both, or any part
thereof, on any loan, lease, or obligation or any instrument evidencing or securing the
same, made or entered into pursuant to this division..
(q)Notwithstanding any other provision of this division, enter into any agreement,
contract, or any other instrument with respect to any insurance or guarantee; accept
payment in the manner and form as provided therein in the event of default by a sponsor
or a participating party; and issue or assign any insurance or guarantee as security for the
bank's bonds.
(r) Enter into any agreement or contract, execute any instrument, and perform any
act or thing necessary or convenient to, directly or indirectly, secure the bank's bonds,the
bonds issued by a special purpose trust, or a sponsor's obligations to the bank or to a
special purpose trust, including, but not limited to, bonds da sponsor purchased by the
bank or a special purpose trust for retention or sale,with funds or moneys that are legally
available and that are due or payable to the sponsor by reason of any grant, allocation,
apportionment or appropriation of the state or agencies thereof,to the extent that the
Controller shall be the custodian at any time of these funds or moneys, or with funds or
moneys that are or will be legally available to the sponsor,the bank, or the state or any
agencies thereof by reason of any grant, allocation, apportionment, or appropriation of the
federal government or agencies thereof; and in the event of written notice that the sponsor
has not paid or is in default on its obligations to the bank or a special purpose trust, direct
the Controller to withhold payment of those funds or moneys from the sponsor over
which it is or will be custodian and to pay the same to the bank or special purpose trust or
their assignee, or direct the state or any agencies thereof to which any grant, allocation,
apportionment or appropriation of the federal government or agencies thereof is or will be
legally available to pay the same upon receipt by the bank or special purpose trust or their
assignee, until the default has been cured and the amounts then due and unpaid have been
paid to the bank or special purpose trust or their assignee,or until arrangements
�. satisfactory to the bank or special purpose trust have been made to cure the default.
(s) Enter into any agreement or contract, execute any instrument, and perform any
act or thing necessary, convenient, or appropriate to carry out any power expressly given
to the bank by this division, including, but not limited to, agreements for the sale of all or
any part, including principal, interest, redemption rights or any other rights or obligations,
of bonds of the bank or of a special purpose trust, liquidity agreements, contracts
commonly known as interest rate swap agreements, forward payment conversion
agreements, futures or contracts providing for payments based on levels of, or changes in,
interest rates or currency exchange rates, or contracts to exchange cash-flows or a series
of payments, or contracts, including options, puts or calls to hedge payments, rate, spread,
currency exchange, or similar exposure, or any other financial instrument commonly
known as a structured financial product.
(t) Purchase, with the proceeds of the bank's bonds, transition property or bonds
issued by, or for the benefit of, any sponsor in connection with a project, pursuant to a
bond purchase agreement or otherwise. Bonds or transition property purchased pursuant
to this part may be held by the bank, pledged or assigned by the bank, or sold to public or
private purchasers at public or negotiated sale, in whole or in part, separately or together
with other bonds issued by the bank, and notwithstanding any other provision of law,
may be bought by the bank at private sale.
(u) Enter into purchase and sale agreements with all entities, public and private,
including state and local government pension funds, with respect to the sale or purchase
of bonds or transition property.
(v) Invest any moneys held in reserve or sinking funds, or any moneys not
required for immediate use or disbursement, in obligations that are authorized by law for
the investment of trust funds in the custody of the Treasurer.
(w)Authorize a special purpose trust or trusts to purchase or retain,with the
proceeds of the bonds of a special purpose trust,transition property or bonds issued by, or
for the benefit of,any sponsor in connection with a project or issued by the bank or a
special purpose trust,pursuant to a bond purchase agreement or otherwise. Bonds or
transition property purchased pursuant to this title may be held by a special purpose
entity,pledged or assigned by a special purpose entity, or sold to public or private
purchasers at public or negotiated sale, in whole or in part, with or without structuring,
subordination or credit enhancement, separately or together with other bonds issued by a
special purpose trust, and notwithstanding any other provision of law, may be bought by
the bank or by a special purpose trust at private sale.
(x)Approve the issuance of any bonds, notes, or other evidences of indebtedness
by the California Economic Development and Financing Authority, established pursuant
to Section 15712, and the Rural Economic Development Infrastructure Panel, established
pursuant to Section 15373.7.'' �.
(y) Approve the issuance of rate reduction bonds by an entity other than the bank
to acquire transition property upon approval of the transaction in a financing order by the
Public Utilities Commission, as provided in Article 5.5 (commencing with Section 840)
of Chapter 4 of Part 1 of Division 1 of the Public Utilities Code.
SEC. 7. Article 6 (commencing with Section 63048) is added to Chapter 2 of
Division 1 of Title 6.7 of the Government Code,to read:
Article 6. Financing of Transition Costs
63048. Notwithstanding any other provision of this division, a project for the
financing of transition costs and the acquisition of transition property upon the request of
an electrical corporation shall be deemed to be in the public interest and eligible for
financing by the bank, and Article 3 (commencing with Section 63040), Article 4
(commencing with Section 63042), and Article 5 (commencing with Section 63043),
shall not apply to the project or financing. The bank shall consider a project for financing
transition costs and the acquisition of transition property upon filing of an application by
an appropriate participating party, on the terms and conditions the bank shall determine.
The bank shall establish procedures for the expeditious review of applications from
electrical corporations for the issuance or approval of rate reduction bonds. The review
may be concurrent with the Public Utilities Commission's processing of an application for
the pertinent financing order, so as to allow for the issuance of rate reduction bonds as
quickly as feasible after the issuance of the pertinent financing order by the Public
Utilities Commission. Notwithstanding any other provision of this division, the bank
shall have no authority to alter or modify any term or condition related to the transition
costs or the transition property as set forth in the pertinent financing order, and shall have
no authority over any matter that is subject to the approval of the Public Utilities
Commission under Article 5.5 (commencing with Section 840) of Chapter 4 of Part 1 of
Division 1 of the Public Utilities Code.
SEC. 8. Section 63071 of the Government Code is amended to read:
63071. (a)Notwithstanding any other provision of law,but consistent with
Sections 1 and 18 of Article XVI of the California Constitution, a sponsor may issue
bonds for purchase by the bank pursuant to a bond purchase agreement. The bank may
issue bonds or authorize a special purpose trust to issue bonds. These bonds may be
issued pursuant to the charter of any city or any city and county that authorized the
issuance of these bonds as a sponsor and may also be issued by any sponsor pursuant to
the Revenue Bond Law of 1941 (Chapter 6 (commencing with Section 54300) of
Division 2 of Title 5) to pay the costs and expenses pursuant to this title, subject to the .
following conditions:
(1) With the prior approval of the bank,the sponsor may sell these bonds
in any manner as it may determine, either by private sale, or by means of competitive bid.
(2)Notwithstanding Section 54418,the bonds may be sold at a discount at
any rate as the bank and sponsor shall determine.
(3)Notwithstanding Section 54402, the bonds shall bear interest at any
rate and be payable at any time, as the sponsor shall determine with the consent of the
bank.
(b) The total amount of bonds that may be outstanding at any one time under this
chapter shall not exceed five billion dollars ($5,000,000,000), exclusive of rate reduction
bonds. The total amount of rate reduction bonds that may be outstanding at any one time
under this chapter shall not exceed ten billion dollars ($10,000,000,000)
(c) Bonds for which moneys or securities have been deposited in trust, in amounts
necessary to pay or redeem the principal, interest, and any redemption premium theron,
shall be deemed not to be outstanding for purposes of this section.
SEC. 9. Section 216 of the Public Utilities Code is amended to read:
216. (a) "Public utility" includes every common carrier,toll bridge corporation,
pipeline corporation, gas corporation, electrical corporation, telephone corporation,
telegraph corporation, water corporation, sewer system corporation, and heat corporation,
where the service is performed for, or the commodity is delivered to,the public or any
portion thereof.
(b) Whenever any common carrier,toll bridge corporation, pipeline corporation,
gas corporation, electrical corporation, telephone corporation, telegraph corporation,
water corporation, sewer system corporation, or heat corporation performs a service for,
or delivers a commodity to,the public or any portion thereof for which any compensation
or payment whatsoever is received,that common carrier,toll bridge corporation,pipeline
corporation, gas corporation, electrical corporation, telephone corporation,telegraph
corporation, water corporation, sewer system corporation, or heat corporation, is a public
utility subject to the jurisdiction, control, and regulation of the commission and the
provisions of this part.
(c) When any person or corporation performs any service for, or delivers any
commodity to, any person,private corporation, municipality, or other political
subdivision of the state,that in turn either directly or indirectly,mediately or
immediately, performs that service for, or delivers that commodity to,the public or any
portion thereof, that person or corporation is a public utility subject to the jurisdiction,
control, and regulation of the commission and the provisions of this part.
(d) Ownership or operation of a facility that employs cogeneration technology or
produces power from other than a conventional power source or the ownership or
operation of a facility which employs landfill gas technology does not make a corporation �.
or person a public utility within the meaning of this section solely because of the
ownership or operation of such a facility.
(e) Any corporation or person engaged directly or indirectly in developing,
producing,transmitting, distributing, delivering, or selling any form of heat derived from
geothermal or solar resources or from cogeneration technology to any privately owned or
publicly owned public utility, or to the public or any portion thereof, is not a public utility
within the meaning of this section solely by reason of engaging in any of those activities.
(f) The ownership or operation of a facility that sells compressed natural gas at
retail to the public for use only as a motor vehicle fuel, and the selling of compressed
natural gas at retail from such a facility to the public for use only as a motor vehicle fuel,
does not make the corporation or person a public utility within the meaning of this section
solely because of that ownership, operation, or sale.
(g) Generation assets owned by any public utility prior to January 1, 1997, and
subject to rate regulation by the commission, shall continue to be subject to regulation by
the commission until those assets have undergone market valuation in accordance with
procedures established by the commission.
(h) The ownership, control, operation, or management of an electric plant used for
direct transactions or participation directly or indirectly in direct transactions, as
permitted by subdivision(b) of Section 365,sales into the Power Exchange referred to in
Section 365, or the use or sale as permitted under subdivisions(b)to (d), inclusive, of
Section 218, shall not make a corporation or person a public utility within the meaning of
this section solely because of that ownership,participation, or sale.
SEC. 9.5. Section 216 of the Public Utilities Code is amended o read:
216. (a) "Public utility" includes every common carrier,toll bridge corporation,
pipeline corporation, gas corporation, electrical corporation,telephone corporation,
telegraph corporation,water corporation, sewer system corporation,and heat corporation,
where the service is performed for, or the commodity is delivered to,the public or any
portion thereof.
(b) Whenever any common carrier,toll bridge corporation,pipeline corporation,
gas corporation, electrical corporation, telephone corporation,telegraph corporation,
water corporation, sewer system corporation, or heat corporation performs a service for,
or delivers a commodity to, the public or any portion thereof for which any compensation
or payment whatsoever is received,that common carrier,toll bridge corporation,pipeline
corporation, gas corporation, electrical corporation,telephone corporation, telegraph
corporation, water corporation, sewer system corporation, or heat corporation, is a public
utility subject to the jurisdiction, control, and regulation of the commission and the
provisions of this part.
(c) When any person or corporation performs any service for, or delivers any
commodity to, any person, private corporation, municipality, or other political
subdivision of the state, that in turn either directly or indirectly, mediately or
immediately, performs that service for, or delivers that commodity to,the public or any
portion thereof, that person or corporation is a public utility subject to the jurisdiction,
control, and regulation of the commission and the provisions of this part.
(d) Ownership or operation of a facility that employs cogeneration technology or
produces power from other than a conventional power source or the ownership or
operation of a facility which employs landfill gas technology does not make a corporation
or person a public utility within the meaning of this section solely because of the
ownership or operation of such a facility.
(e)Any corporation or person engaged directly or indirectly in developing,
producing, transmitting, distributing, delivering, or selling any form of heat derived from
geothermal or solar resources or from cogeneration technology to any privately owned or
publicly owned public utility, or to the public or any portion thereof, is not a public utility
within the meaning of this section solely by reason of engaging in any of those activities.
(f) The ownership or operation of a facility that sells compressed natural gas at
retail to the public for use only as a motor vehicle fuel, and the selling of compressed
natural gas at retail from such a facility to the public for use only as a motor vehicle fuel,
does not make the corporation or person a public utility within the meaning of this section
solely because of that ownership, operation,or sale.
(g) Ownership or operation of a facility that has been certified by the Federal
Energy Regulatory Commission as an exempt wholesale generator pursuant to Section 32
of the Public Utility Holding Company Act of 1935 (Chapter 2C (commencing with
Section 79) of Title 15 of the United States Code)does not make a corporation or person
a public utility within the meaning of this section, solely due to the ownership or
operation of that facility.
(h) Generation assets owned by any public utility prior to January 1, 1997, and
subject to rate regulation by the commission, shall continue to be subject to regulation by
the commission until those assets have undergone market valuation in accordance with
procedures established by the commission.
(i) The ownership, control, operation, or management of an electric plant used for
direct transactions or participation directly or indirectly in direct transactions, as
permitted by subdivision(b) of Section 365, sales into the Power Exchange referred to in
Section 365, or the use or sale as permitted under subdivisions(b)to (d), inclusive, of
Section 218, shall not make a corporation or person a public utility within the meaning of
this section solely because of that ownership,participation, or sale.
SEC. 10. Chapter 2.3 (commencing with Section 330) is added to Part 1 of
Division 1 of the Public Utilities Code, to read:
CHAPTER 2.3. ELECTRICAL RESTRUCTURING
Article 1. General Provisions and Definitions
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.
0) 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.
(1) The commission has properly concluded that:
(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 intention 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.
(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 work force directly caused by electrical
restructuring, be accomplished through offers of voluntary severance,retraining,early
retirement, outplacement, and related benefits. Whether work force 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 Public Utilities 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.
331. The definitions set forth in this section shall govern the construction of this �.
chapter.
(a) "Aggregator" means any marketer, broker,public agency, city, county, or
special district, that combines the loads of multiple end-use customers in facilitating the
sale and purchase of electric energy,transmission, and other services on behalf of these
customers.
(b) "Broker" means an entity that arranges the sale and purchase of electric
energy, transmission, and other services between buyers and sellers, but does not take
title to any of the power sold.
(c) "Direct transaction" means a contract between any one or more electric
generators, marketers, or brokers of electric power and one or more retail customers
providing for the purchase and sale of electric power or any ancillary services.
(d) "Fire wall" means the line of demarcation separating residential and small
commercial customers from all other customers as described in subdivision(e) of Section
367.
(e) "Marketer" means any entity that buys electric energy, transmission, and other
services from traditional utilities and other suppliers, and then resells those services at
wholesale or to an end-use customer.
(f) "Microcogeneration facility" means a cogeneration facility of less than one
(, megawatt.
(g) "Restructuring trusts" means the two tax-exempt public benefit trusts
established by Decision D. 96-08-038 of the Public Utilities Commission to provide for
design and development of the hardware and software systems for the Power Exchange
and the Independent.System Operator,respectively,and that may undertake other
activities, as needed, as ordered by the commission.
(h) "Small commercial customer" means a customer that has a maximum peak
demand of less than 20 kilowatts.
Article 2. Oversight Board
334. The Legislature finds and declares that in order to ensure the success of
electric industry restructuring, in the transition to a new market structure it is important to
ensure a reliable supply of electricity. Reliable electric service is of paramount
importance to the safety, health,and comfort of the people of California. Transmission
connections between electric utilities allow them to share generation resources and reduce
the number of power plants necessary to maintain a reliable system. The connections
between utilities also create exposure to events that can cause widespread and extended
transmission and service outages that reach far beyond the originating utility service area.
California utilities and those in the western United States voluntarily adhere to reliability
standards developed by the Western Systems Coordinating Council. The economic cost
of extended electricity outages, such as those that occurred in California and throughout
the Western Systems Coordinating Council on July 2, 1996, and August 10, 1996,to
California's residential, commercial,agricultural,and industrial customers is significant.
The proposed restructuring of the electricity industry would transfer responsibility for
ensuring short- and long-term reliability away from electric utilities and regulatory bodies
to the Independent System Operator and various market-based mechanisms. The
Legislature has an interest in ensuring that the change in the locus of responsibility for
reliability does not expose California citizens to undue economic risk in connection with
system reliability.
335. In order to ensure that the interests of the people of California are served, a
five-member Oversight Board shall be formed as provided in Section 336. Its functions
shall be all of the following:
(a) To oversee the Independent System Operator and the Power Exchange.
(b) To determine the composition and terms of service and to appoint the
members of the governing boards of the Independent System Operator and the Power
Exchange.
(c) To serve as an appeal board for majority decisions of the Independent System
Operator governing board.
336. (a) The five-member Oversight Board shall be comprised as follows:
(1)Three members,who are California residents and electricity ratepayers,
appointed by the Governor from a list jointly provided by the California Energy
Resources Conservation and Development Commission and the Public Utilities
Commission, and subject to confirmation by the Senate.
(2) One member of the Assembly appointed by the Speaker of the
Assembly. -
(3) One member of the Senate appointed by the Senate Committee on
Rules.
(b) Legislative members shall be nonvoting members,however,they are
otherwise full members of the board with all rights and privileges pertaining thereto.
(c) Oversight Board members shall serve three-year terms with no limit on
reappointment. For purposes of the initial appointments set forth in paragraph(1), the
Governor shall appoint one member to a one-year term, one to a two-year term, and one,
to a three-year term.
337. The Oversight Board,as the appointing body, shall establish nominating
procedures and qualifications for Independent System Operator governing board
members. The Independent System Operator governing board shall be composed of
California residents and shall include, but not be limited to, representatives of investor-
owned utility transmission owners, publicly owned utility transmission owners, nonutility
electricity sellers, public buyers and sellers, private buyers and sellers, industrial end-
users, commercial end-users, residential end-users, agricultural end-users,public interest
groups, and nonmarket participant representatives. A simple majority of the board shall
consist of persons who are themselves unaffiliated with electric generation, transmission
or distribution corporations.
338. The Oversight Board,as the appointing body, shall establish nominating
procedures and qualifications for Power Exchange governing board members. The Power
Exchange governing board shall be composed of California residents and shall include,
but not be limited to, representatives of investor-owned electric distribution companies,
publicly owned electric distribution companies, nonutility generators, public buyers and
sellers, private buyers and sellers, industrial end-users, commercial end-users, residential
end-users, agricultural end-users, public interest groups, and nonmarket participant
representatives.
�i
339. The Oversight Board is the appeal board for majority decisions of the
Independent System Operator governing board. Only members of the Independent
System Operator governing board may appeal a majority decision to the Oversight Board.
340. The Oversight Board shall take the steps that are necessary to ensure the
earliest possible incorporation of the Independent System Operator and the Power
Exchange as separately incorporated public benefit, nonprofit corporations under the
Corporations Code.
Article 3. Independent System Operator
345. The Independent System Operator shall ensure efficient use and reliable
operation of the transmission grid consistent with achievement of planning and operating
reserve criteria no less stringent than those established by the Western Systems
Coordinating Council and the North American Electric Reliability Council.
346. The Independent System Operator shall immediately participate in all
relevant Federal Energy Regulatory Commission proceedings. The Independent System
Operator shall ensure that additional filings at the Federal Energy Regulatory
Commission request confirmation of the relevant provisions of this chapter and seek the
authority needed to give the Independent System Operator the ability to secure generating
and transmission resources necessary to guarantee achievement of planning and operating
reserve criteria no less stringent than those established by the Western Systems
Coordinating Council and the North American Electric Reliability Council.
347. The Independent System Operator governing board may form appropriate
technical advisory committees composed of market and nonmarket participants to advise
the Independent System Operator governing board on issues including, but not limited to,
rules and protocols and operating procedures.
348. The Independent System Operator shall adopt inspection, maintenance,
repair, and replacement standards for the transmission facilities under its control no later
than March 31, 1997. The standards, which shall be performance or prescriptive
standards, or both, as appropriate, for each substantial type of transmission equipment or
facility, shall provide for high quality, safe, and reliable service. In adopting its
standards, the Independent System Operator shall consider: cost, local geography and
weather, applicable codes, national electric industry practices, sound engineering
judgment, and experience. The Independent System Operators shall also adopt standards
for reliability, and safety during periods of emergency and disaster. The Independent
System Operator shall require each transmission facility owner or operator to report
annually on its compliance with the standards. That report shall be made available to the
public.
349. The Independent System Operator shall perform a review following a major
outage that affects at least 10 percent of the customers of the entity providing the local
distribution service. The review shall address the cause of the major outage, the response
time and effectiveness, and whether the transmission facility owner or operator's
operation and maintenance practices enhanced or undermined the ability to restore service
efficiently and in a timely manner. If the Independent System Operator finds that the
operation and maintenance practices of the transmission facility owner or operator
prolonged the response time or was responsible for the outage,the Independent System
Operator may order appropriate sanctions, subject to the Federal Energy Regulatory
Commission approving that authority.
350. The Independent System Operator, in consultation with the California
Energy Resources Conservation and Development Commission, the Public Utility
Commission, the Western Systems Coordinating Council, and concerned regulatory
agencies in other western states, shall within six months after the Federal Energy
Regulatory Commission approval of the Independent System Operator,provide a report
to the Legislature that does the following:
(a) Conducts an independent review and assessment of Western Systems
Coordinating Council operating reliability criteria.
(b) Quantifies the economic cost of major transmission outages relating to the
Pacific Intertie, Southwest Power Link, DC link, and other important high voltage lines
that carry power both into and from California.
(c) Identifies the range of cost-effective options that would prevent or mitigate the
consequence of major transmission outages.
(d) Identifies communication protocols that may be needed to be established to
provides advance warning of incipient problems.
(e) Identifies the need for additional generation reserves and other voltage support
equipment, if any, or other resources that may be necessary to carry out its functions.
(f)Identifies transmission capacity additions that may be necessary at certain
times of the year or under certain conditions.
(g) Assesses the adequacy of current and prospective institutional provisions for
the maintenance of reliability.
(h) Identifies mechanisms to enforce transmission right-of-way maintenance.
(i) Contains recommendations regarding cost-beneficial improvements to electric
system reliability for the citizens of California.
Article 4. Power Exchange
355. The Power Exchange shall provide an efficient competitive auction, open on
a nondiscriminatory basis to all suppliers, that meets the loads of all exchange customers
at efficient prices.
356. The Power Exchange governing board may form appropriate technical
advisory committees comprised of market and nonmarket participants to advise the
governing board on relevant issues.
Article 5. Regional Compact
359. 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.
Article 6. Requirements for the Public Utilities Commission
360. The commission shall ensure that existing, and if necessary, additional
filings at the Federal Energy Regulatory Commission request confirmation of the relevant
provisions of this chapter and seek the authority needed to give the Independent System
Operator the ability to secure generating and transmission resources necessary to
guarantee achievement of planning and operating reserve criteria no less stringent than
those established by the Western Systems Coordinating Council and the North American
Electric Reliability Council.
361. The commission shall ensure that any funds secured by the restructuring
trusts established for the purposes of developing the Independent System Operator and
the Power Exchange shall be placed at the disposal of the Independent System Operator
and the Power Exchange respectively.
362. In proceedings pursuant to Section 455.5, 851, or 854, the commission shall
ensure that facilities needed to maintain the reliability of the electric supply remain
available and operational, consistent with maintaining open competition and avoiding an
overconcentration of market power. In order to determine whether the facility needs to
remain available and operational, the commission shall utilize standards that are no less
stringent that the Western Systems Coordinating Council and North American Electric
Reliability Council standards for planning reserve criteria.
363. (a) In order to ensure the continued safe and reliable operation of public
utility electric generating facilities, the commission shall require in any proceeding under
Section 851 involving the sale, but not spin-off, of a public utility electric generating
facility, for transactions initiated prior to December 31, 2001, and approved by the
commission by December 31, 2002, that the selling utility contract with the purchaser of
the facility for the selling utility, an affiliate, or a successor corporation to operate and
maintain the facility for at least two years. The commission may require these conditions
to be met for transactions initiated on or after January 1,2002. The commission shall
require the contracts to be reasonable for both the seller and the buyer.
(b) Subdivision(a) shall apply only if the facility is actually operated
during the two-year period following the sale. Subdivision(a)shall not require the
purchaser to operate a facility,nor shall it preclude a purchaser from temporarily closing
the facility to make capital improvements.
364. (a)The commission shall adopt inspection,maintenance,repair; and
replacement standards for the distribution systems of investor-owned electric utilities no
later than March 31, 1997. The standards, which shall be performance or prescriptive
standards, or both, as appropriate, for each substantial type of distribution equipment or
facility, shall provide for high quality, safe and reliable service.
(b) In setting its standards, the commission shall consider: cost, local geography
and weather, applicable codes, national electric industry practices, sound engineering
judgment, and experience. The commission shall also adopt standards for operation,
reliability, and safety during periods of emergency and disaster. The commission shall
require each utility to report annually on its compliance with the standards. That report
shall be made available to the public.
(c)The commission shall conduct a review to determine whether the standards
prescribed in this section have been met. If the commission finds that the standards have
not been met, the commission may order appropriate sanctions, including penalties in the
form of rate reductions or monetary fines. The review shall be performed after every
major outage. Any money collected pursuant to this subdivision shall be used to offset
funding for the California Alternative Rates for Energy Program.
365. The actions of the commission pursuant to this chapter shall be consistent
with the findings and declarations contained in Section 330. In addition, the commission
shall do all of the following:
(a) Facilitate the efforts of the state's electrical corporations to develop and obtain
authorization from the Federal Energy Regulatory Commission for the creation and
operation of an Independent System Operator and an independent Power Exchange, for
the determination of which transmission and distribution facilities are subject to the
exclusive jurisdiction of the commission, and for approval,to the extent necessary, of the
cost recovery mechanism established as provided in Sections 367 to 376, inclusive. The
commission shall also participate fully in all proceedings before the Federal Energy
Regulatory Commission in connection with the Independent System Operator and the
independent Power Exchange, and shall encourage the Federal Energy Regulatory
Commission to adopt protocols and procedures that strengthen the reliability of the
interconnected transmission grid,encourage all publicly owned utilities in California to
become full participants, and maximize enforceability of such protocols and procedures
by all market participants.
(b) (1)Authorize direct transactions between electricity suppliers and end use
customers, subject to implementation of the nonbypassable charge referred to in Sections
367 to 376, inclusive. Direct transactions shall commence simultaneously with the start
of an Independent System Operator and Power Exchange referred to in subdivision(a).
The simultaneous commencement shall occur as soon as practicable,but no later than
January 1, 1998. The commission shall develop a phase-in schedule at the conclusion of
which all customers shall have the right to engage in direct transactions. Any phase-in of
customer eligibility for direct transactions ordered by the commission shall be equitable
to all customer classes and accomplished as soon as practicable, consistent with
operational and other technological considerations, and shall be completed for all
customers by January 1, 2002.
(2) Customers shall be eligible for direct access irrespective of any direct
access phase-in implemented pursuant to this section if at least one-half of that customer's
electrical load is supplied by energy from a renewable resource provider certified
pursuant to Section 383, provided however that nothing in this section shall provide for
direct access for electric consumers served by municipal utilities unless so authorized by
the governing board of that municipal utility.
366. (a) The commission shall take actions as needed to facilitate direct
transactions between electricity suppliers and end use customers. Customers shall be
entitled to aggregate their electric loads on a voluntary basis,provided that each customer
does so by a positive written declaration. If no positive declaration is made by a
customer,that customer shall continue to be served by the existing electrical corporation
or its successor in interest.
(b) Aggregation of customer electrical load shall be authorized by the commission
for all customer classes, including, but not limited to small commercial or residential
customers. Aggregation may be accomplished by private market aggregators, cities,
counties, special districts or on any other basis made available by market opportunities
and agreeable by positive written declaration by individual consumers.
(c) If a public agency seeks to serve as a community aggregator on behalf of
residential customers, it shall be obligated to offer the opportunity to purchase electricity
to all residential customers within its jurisdiction.
(d) No electric utility, or any person, firm, corporation, or governmental entity
shall make any change or authorize a different electric utility or electric marketer to make
any change in the aggregator or provider of electric power for any small commercial
customer until one of the following means of confirming the change has been completed.
(1) Independent third-party telephone verification.
(2) Receipt of a written confirmation received in the mail from the
consumer after the consumer has received an information package confirming the
telephone agreement.
(3) The customer signs a document fully explaining the nature and effect
of the change in service.
(4) The customer's consent is obtained through electronic means, including
but not limited to, computer transactions.
(e)For residential customers no change in the aggregator or provider"of electric
power may be made until the change has been confirmed by an independent third-parry
verification company, as follows:
(1).The third-party verification company shall meet each of the following
criteria:
(A) Be independent from the entity that seeks to provide the new
service.
(B)Not be directly or indirectly managed, controlled, or directed, `.
or owned wholly or in part, by an entity that seeks to provide the new service or by any
corporation, firm, or person who directly or indirectly manages, controls, or directs, or
owns more than 5 percent of the entity.
(C) Operate from facilities physically separate from those of the
entity that seeks to provide the new service.
(D)Not derive commissions or compensation based upon the
number of sales confirmed.
(2) The entity seeking to verify the sale shall do so by connecting the
resident by telephone to the third-party verification company or by arranging for the
third-party verification company to call the resident to confirm the sale.
(3) The third-party verification company shall obtain the resident' s oral
confirmation regarding the change, and shall record that confinnation by obtaining
appropriate verification data. The record shall be available to the resident upon request.
Information obtained from the subscriber through confirmation shall not be used for
marketing purposes. Any unauthorized release of this information is grounds for a civil
suit by the aggrieved resident against the entity or its employees who are responsible for
the violation.
(4)Notwithstanding paragraphs (1), (2), and (3), a service provider shall
not be required to comply with these provisions when the customer directly calls the
service provider to make changes in service providers. However, a service provider shall
not avoid the verification requirements by asking a customer to contact a service provider
directly to make any change in the service provider. A service provider shall be required
to comply with these verification requirements for its own competitive services.
However, a service provider shall not be required to perform any verification
requirements for any changes solicited by another service provider.
367. The commission shall identify and determine those costs and categories of
costs for generation-related assets and obligations,consisting of generation facilities,
generation-related regulatory assets,nuclear settlements, and power purchase contracts,
including, but not limited to,restructurings, renegotiations or terminations thereof
approved by the commission,that were being collected in commission-approved rates on
December 20, 1995, and that may become uneconomic as a result of a competitive
generation market, in that these costs may not be recoverable in market prices in a
competitive market, and appropriate costs 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 these additions are
necessary to maintain the facilities through December 31, 2001. These uneconomic costs
shall be recovered from all customers on a nonbypassable basis and shall:
(a) Be amortized over a reasonable time period, including collection on an
accelerated basis, consistent with not increasing rates for any rate schedule, contract, or
tariff option above the levels in effect on June 10, 1996; provided that, the recovery shall
not extend beyond December 31, 2001, except as follows:
(1) Costs associated with employee-related transition costs as set forth in
subdivision (b) of Section 375 shall continue until fully collected; provided, however,
that the cost collection shall not extend beyond December 31, 2006.
(2) Power purchase contract obligations shall continue for the duration of
the contract. Costs associated with any buy-out, buy-down, or renegotiation of the
contracts shall continue to be collected for the duration of any agreement governing the
buy-out, buy-down, or renegotiated contract; provided, however, no power purchase
contract shall be extended as a result of the buy-out, buy-down, or renegotiation.
(3) Costs associated with contracts approved by the commission to settle
issues associated with the Biennial Resource Plan Update may be collected through
March 31, 2002; provided that only 80 percent of the balance of the costs remaining after
December 31, 2001, shall be eligible for recovery.
(4) Nuclear incremental cost incentive plans for the San Onofre nuclear
j generating station shall continue for the full term as authorized by the commission in
Decision 96-01-011 and Decision 96-04-059; provided that the recovery shall not extend
beyond December 31, 2003.
(5) Costs associated with the exemptions provided in subdivision(a) of
Section 374 may be collected through March 31,2002,provided that only fifty million
dollars($50,000,000)of the balance of the costs remaining after December 31, 2001,
shall be eligible for recovery.
(b) Be based on a calculation mechanism that nets the negative value of all above
market utility-owned generation-related assets against the positive value of all below
market utility-owned generation related assets. For those assets subject to valuation,the
valuations used for the calculation of the uneconomic portion of the net book value shall
be determined not later than December 31,2001, and shall be based on appraisal, sale, or
other divestiture. The commission's determination of the costs eligible for recovery and of
the valuation of those assets at the time the assets are exposed to market risk or retired, in
a proceeding under Section 455.5, 851, or otherwise, shall be final, and notwithstanding
Section 1708 or any other provision of law,may not be rescinded, altered or amended.
(c) Be limited in the case of utility-owned fossil generation to the uneconomic
portion of the net book value of the fossil capital investment existing as of January 1,
1998, and appropriate costs 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 additions are necessary to �.
maintain such facilities through December 31, 2001. All "going forward costs" of fossil
plant operation, including operation and maintenance, administrative and general, fuel
and fuel transportation costs, shall be recovered solely from independent Power Exchange
Revenues or from contracts with the Independent System Operator, provided that for the
purposes of this chapter,the following costs may be recoverable pursuant to this section:
(1) Commission-approved operating costs for particular utility-owned
fossil power plants or units, at particular times when reactive power/voltage support is
not yet procurable at market-based rates in locations where it is deemed needed for the
reactive power/voltage support by the Independent System Operator,provided that the
units are otherwise authorized to recover market-based rates and provided further that for
an electrical corporation that is also a gas corporation and that serves at least four million
customers as of December 20, 1995,the commission shall allow the electrical corporation
to retain any earnings from operations of the reactive power/voltage support plants or
units and shall not require the utility to apply any portions to offset recovery of transition
costs.
Cost recovery under the cost recovery mechanism shall end on December
31, 2001.
(2) An electrical corporation that, as of December 20, 1995, served at least
four million customers, and that was also a gas corporation that served less than four
thousand customers, may recover, pursuant to this section, 100 percent of the uneconomic
t portion of the fixed costs paid under fuel and fuel transportation contracts that were
executed prior to December 20, 1995, and were subsequently determined to be reasonable
by the commission,or 100 percent of the buy-down or buy-out costs associated with the
contracts to the extent the costs are determined to be reasonable by the commission.
(d) Be adjusted throughout the period through March 31, 2002, to track accrual
and recovery of costs provided for in this subdivision.
Recovery of costs prior to December 31, 2001, shall include a return as provided
for in Decision 95-12-063, as modified by Decision 96-01-009,together with associated
taxes.
(e) (1) Be allocated among the various classes of customers, rate schedules, and
tariff options to ensure that costs are recovered from these classes,rate schedules,
contract rates, and tariff options, including self-generation deferral, interruptible,and
standby rate options in substantially the same proportion as similar costs are recovered as
of June 10, 1996, through the regulated retail rates of the relevant electric utility,
provided that there shall be a fire wall segregating the recovery of the costs of
competition transition charge exemptions such that the costs of competition transition
charge exemptions granted to members of the combined class of residential and small
commercial customers shall be recovered only from these customers, and the costs of
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 these customers.
(2) Individual customers shall not experience rate increases as a result of
the allocation of transition costs. However,customers who elect to purchase energy from
suppliers other than the Power Exchange through a direct transaction, may incur increases
in the total price they pay for electricity to the extent the price for the energy exceeds the
Power Exchange price.
(3) The commission shall retain existing cost allocation authority,
provided the fire wall and rate freeze principles are not violated.
368. Each electrical corporation shall propose a cost recovery plan to the
commission for the recovery of the uneconomic costs of an electrical corporation's
generation-related assets and obligations identified in Section 367. The commission shall
authorize the electrical corporation to recover the costs pursuant to the plan where the
plan meets the following criteria:
(a) The cost recovery plan shall set rates for each customer class, rate schedule,
contract, or tariff option, at levels equal to the level as shown on electric rate schedules as
of June 10, 1996, provided that rates for residential and small commercial customers shall
be reduced so that these customers shall receive rate reductions of no less than 10 percent
for 1998 continuing through 2002. These rate levels for each customer class, rate
schedule, contract, or tariff option shall remain in effect until the earlier of March 31,
2002, or the date on which the commission-authorized costs for utility generation-related
assets and obligations have been fully recovered. The electrical corporation shall be at
risk for those costs not recovered during that time period. Each utility shall amortize its
total uneconomic costs,to the extent possible, such that each year during the transition
period its recorded rate of return on the remaining uneconomic assets does not exceed its
authorized rate of return for those assets. For purposes of determining the extent to which
the costs have been recovered, any over-collections recorded in Energy Costs Adjustment
Clause and Electric Revenue Adjustment Mechanism balancing accounts, as of December
31, 1996, shall be credited to the recovery of the costs.
(b) The cost recovery plan shall provide for identification and separation of
individual rate components such as charges for energy,transmission, distribution, public
benefit programs, and recovery of uneconomic costs. The separation of rate components
required by this subdivision shall be used to ensure that customers of the electrical
corporation who become eligible to purchase electricity from suppliers other than the
electrical corporation pay the same unbundled component charges, other than energy, a
bundled service customer pays. No cost shifting among customer classes,rate schedules,
contract, or tariff options shall result from the separation required by this paragraph.
Nothing in this provision is intended to affect the rates, terms, and conditions or to limit
the use of any Federal Energy Regulatory Commission-approved contract entered into by
the electrical corporation prior to the effective date of this provision. �.
(c)In consideration of the risk that the uneconomic costs identified in Section 367
may not be recoverable within the period identified in subdivision(a)of Section 367, an
electrical corporation that, as of December 20, 1995, served more than four million
customers, and that was also a gas corporation that served less than four thousand
customers, shall have the flexibility to employ risk management tools, such as forward
hedges, to manage the market price volatility associated with unexpected fluctuations in
natural gas prices and the out-of-pocket costs of acquiring the risk management tools
shall be considered reasonable and collectible within the transition freeze period. This
subdivision applies only to the transaction costs associated with the risk management
tools and shall not include any losses from changes in market prices.
(d) In order to ensure implementation of the cost recovery plan, the limitation on
the maximum amount of cost recovery for nuclear facilities that may be collected in any
year adopted by the commission in Decision 96-01-011 and Decision 96-04-059 shall be
eliminated to allow the maximum opportunity to collect the nuclear costs within the
transition cap period.
(e) As to an electrical corporation that is also a gas corporation serving more than
four million California customers, so long as any cost recovery plan adopted in
accordance with this section satisfies subdivision (a), it shall also provide for annual .
increases in base revenues, effective January 1, 1997, and January 1, 1998, equal to the
inflation rate for the prior year plus two percentage points, as measured by the consumer
price index. The increase shall do both of the following:
(1)Remain in effect pending the next general rate case review,which shall
be filed not later than December 31, 1997,for rates which would become effective in
January 1999. For purposes of any commission-approved performance-based ratemaking
mechanism or general rate case review,the increases in base revenue authorized by this
subdivision shall create no presumption that the level of base revenue reflecting those
increases constitute the appropriate starting point for subsequent revenues.
(2)Be used by the utility for the purposes of enhancing its transmission
and distribution system safety and reliability, including, but not limited to,vegetation
management and emergency response. To the extent the revenues are not expended for
system safety and reliability,they shall be credited against subsequent safety and
reliability base revenue requirements. Any excess revenues carried over shall not be used
to pay any monetary sanctions imposed by the commission.
(f) The cost recovery plan shall provide the electrical corporation with the
flexibility to manage the renegotiation,buy-out, or buy-down of the electrical
corporation's power purchase obligations, consistent with review by the commission to
assure that the terms provide net benefits to ratepayers and are otherwise reasonable in
protecting the interests of both ratepayers and shareholders.
(h) An example of a plan authorized by this section is the document entitled
"Restructuring Rate Settlement" transmitted to the commission by Pacific Gas and
Electric Company on June 12, 1996.
369. The commission shall establish an effective mechanism that ensures
recovery of transition costs referred to in Sections 367, 368, 375, and 376, and subject to
the conditions in Sections 371 to 374, inclusive, from all existing and future consumers in
the service territory in which the utility provided electricity services as of December 20,
1995; provided, that the costs shall not be recoverable for new customer load or
incremental load of an existing customer where the load is being met through a direct
transaction and the transaction does not otherwise require the use of transmission or
distribution facilities owned by the utility. However, the obligation to pay the
competition transition charges cannot be avoided by the formation of a local publicly
owned electrical corporation on or after December 20, 1995,or by annexation of any
portion of an electrical corporation's service area by an existing local publicly owned
electric utility.
This section shall not apply to service taken under tariffs, contracts, or rate
schedules that are on file, accepted, or approved by the Federal Energy Regulatory
Commission, unless otherwise authorized by the Federal Energy Regulatory
Commission.
370. The commission shall require, as a prerequisite for any consumer in
California to engage in direct transactions permitted in Section 365,that beginning with '
the commencement of these direct transactions, the consumer shall have an obligation to
pay the costs provided in Sections 367, 368, 375,and 376, and subject to the conditions
in Sections 371 to 374, inclusive, directly to the electrical corporation providing
electricity service in the area in which the consumer is located. This obligation shall be
set forth in the applicable rate schedule, contract, or tariff option under which the
customer is receiving service from the electrical corporation. To the extent the consumer
does not use the electrical corporation's facilities for direct transaction,the obligation to
pay shall be confirmed in writing, and the customer shall be advised by any electricity
marketer engaged in the transaction of the requirement that the customer execute a
confirmation. The requirement for marketers to inform customers of the written
requirement shall cease on January 1, 2002.
371. (a)Except as provided in Sections 372 and 374,the uneconomic costs
provided in Sections 367, 368, 375, and 376 shall be applied to each customer based on
the amount of electricity purchased by the customer from an electrical corporation or
alternate supplier of electricity, subject to changes in usage occurring in the normal
course of business.
(b) Changes in usage occurring in the normal course of business are those
resulting from changes in business cycles,termination of operations, departure from the
utility service territory, weather, reduced production, modifications to production
equipment or operations, changes in production or manufacturing processes, fuel
switching, including installation of fuel cells pending a contrary determination by the
California Energy Resources Conservation and Development Commission in Section
383, enhancement or increased efficiency of equipment or performance of existing self-
cogeneration equipment, replacement of existing cogeneration equipment with new
power generation equipment of similar size as described in paragraph(1) of subdivision
(a)of Section 372, installation of demand-side management equipment or facilities,
energy conservation efforts,or other similar factors.
(c)Nothing in this section shall be interpreted to exempt or alter the obligation of
a customer to comply with the requirements of Section 119075 et seq. of the Health and
Safety Code. Nothing in this section shall be construed as a limitation on the ability of
residential customers to alter their pattern of electricity purchases by activities on the
customer side of the meter.
372. (a) It is the policy of the state to encourage and support the development of
cogeneration as an efficient, environmentally beneficial, competitive energy resource that
will enhance the reliability of local generation supply, and promote local business
growth. Subject to the specific conditions provided in this section, the commission shall
determine the applicability to customers of uneconomic costs as specified in Sections
367, 368, 375, and 376. Consistent with this state policy, the commission shall provide
that these costs shall not apply to any of the following:
(1) To load served onsite or under an over the fence arrangement by a
nonmobile self-cogeneration or cogeneration facility that was operational on or before
December 20, 1995, or by increases in the capacity of such a facility to the extent that
such increased capacity was constructed by an entity holding an ownership interest in or
operating the facility and does not exceed 120 percent of the installed capacity as of
December 20, 1995, provided that prior to June 30, 2000, the costs shall apply to over the
fence arrangements entered into after December 20, 1995, between unaffiliated parties.
For the purposes of this subdivision, "affiliated" means any person or entity that directly,
or indirectly through one or more intermediaries, controls, is controlled by, or is under
common on control with another specified entity. "Control" means either of the
following:
(A)The possession, directly or indirectly, of the power to direct or
to cause the direction of the management or policies of a person or entity, whether
through an ownership; beneficial, contractual, or equitable interest.
(B) Direct or indirect ownership of at least 25 percent of an entity,
whether through an ownership,beneficial or equitable interest.
(2)To load served by onsite or under an over the fence arrangement by a
nonmobile self-cogeneration or cogeneration facility for which the customer was
committed to construction as of December 20, 1995,provided that the facility was
substantially operational on or before January 1, 1998, or by increases in the capacity of
such a facility to the extent that the increased capacity was constructed by an entity
holding an ownership interest in or operating the facility and does not exceed 120 percent
of the installed capacity as of January 1, 1998, provided that prior to June 30, 2000,the
costs shall apply to over the fence arrangements entered into after December 20, 1995,
between unaffiliated parties.
(3) To load served by existing, new, or portable emergency generation
equipment used to serve the customer's load requirements during periods when utility
service is unavailable, provided such emergency generation is not operated in parallel
with the integrated electric grid,except on a momentary parallel basis.
(4) After June 30, 2000, to any load served onsite or under an over the
fence arrangement by any nonmobile self-cogeneration or cogeneration facility.
(b) Further, consistent with state policy, with respect to self-cogeneration or
cogeneration deferral agreements, the commission shall do the following:
(1) Provide that a utility shall execute a final self-cogeneration or
cogeneration deferral agreement with any customer that, on or before December 20, 1995,
had executed a letter of intent (or similar documentation) to enter into the agreement with
the utility, provided that the final agreement shall be consistent with the terms and
conditions set forth in the letter of intent and the commission shall review and approve
the final agreement.
(2)Provide that a customer that holds a self-cogeneration or cogeneration.
deferral agreement that was in place on or before December 20, 1995, or that was
executed pursuant to paragraph(1) in the event the agreement expires, or is terminated,
may do any of the following:
(A)Continue through December 31,2001,to receive utility service
at the rate and under terms and conditions applicable to the customer under the deferral
agreement that, as executed, includes an allocation of uneconomic costs consistent with
subdivision(e) of Section 367.
(B) Engage in a direct transaction for the purchase of electricity
and pay uneconomic costs consistent with Sections 367, 368, 375, and 376.
(C) Construct a self-cogeneration or cogeneration facility of
approximately the same capacity as the facility previously deferred, provided that the
costs provided in Sections 367, 368, 375, and 376 shall apply consistent with subdivision
(e)of Section 367,unless otherwise authorized by the commission pursuant to
subdivision(c).
(3) Subject to the fire wall described in subdivision (e) of Section 367 �.
provide that the ratemaking treatment for self-cogeneration or cogeneration deferral
agreements executed prior to December 20, 1995, or executed pursuant to paragraph(1)
shall be consistent with the ratemaking treatment for the contracts approved before
January 1995.
(c) The commission shall authorize, within 60 days of the receipt of a joint
application from the serving utility and one or more interested parties, applicability
conditions as follows:
(1) The costs identified in Sections 367, 368, 375, and 376 shall not, prior
to June 30, 2000, apply to load served onsite by a nonmobile self-cogeneration or
cogeneration facility that became operational on or after December 20, 1995.
(2) The costs identified in Sections 367, 368, 375, and 376 shall not, prior
to June 30, 2000, apply to any load served under over the fence arrangements entered into
after December 20, 1995, between unaffiliated entities.
(d) For the purposes of this subdivision, all onsite or over the fence arrangements
shall be consistent with Section 218 as it existed on December 20, 1995.
(: (e) To facilitate the development of new microcogeneration applications,
electrical corporations may apply to the commission for a financing order to finance the
transition costs to be recovered from customers employing the applications.
373. (a)Electrical corporations may apply to the commission for an order
determining that the costs identified in Sections 367, 368, 375, and 376 not be collected
from a particular class of customer or category of electricity consumption.
(b) Subject to the fire wall specified in subdivision(e) of Section 367,the
provisions of this section and Sections 372 and 374 shall apply in the event the
commission authorizes a nonbypassable charge prior to the implementation of an
Independent System Operator and Power Exchange referred to in subdivision(a) of
Section 365.
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
shall not apply to 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 time
frame 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
time frame 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.
(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.
375. (a) In order to mitigate potential negative impacts on utility personnel
directly affected by electric industry restructuring, as described in Decision 95-12-063, as
modified by Decision 96-01-009, the commission shall allow the recovery of reasonable
employee related transition costs incurred and projected for severance, retraining, early
retirement,outplacement and related expenses for the employees.
(b)The costs, including employee related transition costs for employees
performing services in connection with Section 363, shall be added to the amount of
uneconomic costs allowed to be recovered pursuant to this section and Sections 367, 368,
and 376, provided recovery of these employee related transition costs shall extend beyond
December 31, 2001, provided recovery of the costs shall not extend beyond December
31, 2006. However,there shall be no recovery for employee related transition costs
associated with officers, senior supervisory employees, and professional employees
performing predominantly regulatory functions.
376. To the extent that the costs of programs to accommodate implementation of
direct access,the Power Exchange, and the Independent System Operator,that have been
funded by an electrical corporation and have been found by the commission or the
Federal Energy Regulatory Commission to be recoverable from the utility's customers,
reduce an electrical corporation's opportunity to recover its utility generation-related plant
and regulatory assets by the end of the year 2001, the electrical corporation may recover
unrecovered utility generation-related plant and regulatory assets after December 31,
2001, in an amount equal to the utility's cost of commission-approved or Federal Energy
Regulatory Commission approved restructuring-related implementation programs. An
electrical corporation's ability to collect the amounts from retail customers after the year
2001 shall be reduced to the extent the Independent System Operator or the Power
Exchange reimburses the electrical corporation for the costs of any of these programs.
377. The commission shall continue to regulate the nonnuclear generation assets
owned by any public utility prior to January 1, 1997; that are subject to commission
regulation until those assets have been subject to market valuation in accordance with
procedures established by the commission. If, after market valuation,the public utility
wishes to retain ownership of nonnuclear generation assets in the same corporation as the
distribution utility,the public utility shall demonstrate to the satisfaction of the
commission, 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.
378. The commission shall authorize new optional rate schedules and tariffs,
including new'service offerings, that accurately reflect the loads, locations, conditions of
service, cost of service, and market opportunities of customer classes and subclasses.
379. Nuclear decommissioning costs shall not be part of the costs described in
Sections 367, 368, 375, and 376,but shall be recovered as a nonbypassable charge until
the time as the costs are fully recovered. Recovery of decommissioning costs may be
accelerated to the extent possible. ;
Article 7. Research, Environmental, and Low-Income Funds
381. (a)To ensure that the funding for the programs described in subdivision (b)
and Section 382 are not commingled with other revenues, the commission shall require
each electrical corporation to identify a separate rate component to collect the revenues
used to fund these programs. The rate component shall be a nonbypassable element of
the local distribution service and collected on the basis of usage. This rate component
shall fall within the rate levels identified in subdivision(a) of Section 368.
(b) The commission shall allocate funds collected pursuant to subdivision(a), and
f any interest earned on collected funds,to programs which enhance system reliability and
provide in-state benefits as follows:
(1) Cost-effective energy efficiency and conservation activities.
(2)Public interest research and development not adequately provided by
competitive and regulated markets.
(3)In-state operation and development of existing and new and emerging
renewable resource technologies defined as electricity produced from other than a
conventional power source within the meaning of Section 2805, provided that a power
source utilizing more than 25 percent fossil fuel may not be included.
(c) The Public Utilities Commission shall order the respective electrical
corporations to collect and spend these funds, as follows:
(1) Cost-effective energy efficiency and conservation activities shall be
funded at not less than the following levels commencing January 1, 1998, through
December 31, 2001: for San Diego Gas and Electric Company a level of thirty-two
million dollars ($32,000,000)per year; for Southern California Edison Company a level
of ninety million dollars ($90,000,000) for each of the years 1998, 1999, and 2000; fifty
million dollars ($50,000,000) for the year 2001; and for Pacific Gas and Electric
Company a level of one hundred six million dollars ($106,000,000) per year.
(2) Research, development, and demonstration programs to advance
science or technology that are not adequately provided by competitive and regulated
markets shall be funded at not less than the following levels commencing January 1, 1998
through December 31,2001: for San Diego Gas and Electric Company a level of four
million dollars ($4,000,000) per year; for Southern California Edison Company a level of
twenty-eight million five hundred thousand dollars ($28,500,000)per year; and for
Pacific Gas and Electric Company a level of thirty million dollars ($30,000,000)per year.
(3) In-state operation and development of existing and new and emerging
renewable resource technologies shall be funded at not less than the following levels on a
statewide basis: one hundred nine million five hundred thousand dollars ($109,500,000)
per year for each of the years 1998, 1999, and 2000, and one hundred thirty-six million
five hundred thousand dollars ($136,500,000) for the year 2001. To accomplish these
funding levels over the period described herein the San Diego Gas and Electric Company
shall spend twelve million dollars ($12,000,000) per year, the Southern California Edison
Company shall expend no less than forty-nine million five hundred thousand dollars
($49,500,000) for the years 1998, 1999, and 2000, and no less than seventy-six million
five hundred thousand dollars ($76,500,000) for the year 2001, and the Pacific Gas and
Electric Company shall expend no less than forty-eight million dollars ($48,000,000) per
year through the year 2001. Additional funding not to exceed seventy-five million
dollars ($75,000,000) shall be allocated from moneys collected pursuant to subdivision
(d) in order to provide a level of funding totaling five hundred forty million dollars
($540,000,000).
(4) Up to fifty million dollars($50,000,000) of the amount collected
pursuant to subdivision(d) may be used to resolve outstanding issues related to
implementation of subdivision(a) of Section 374. Moneys remaining after fully funding
the provisions of this paragraph shall be reallocated for purposes of paragraph(3).
(5)Up to ninety million dollars ($90,000,000) of the amount collected
pursuant to subdivision(d)may be used to resolve outstanding issues related to
contractual arrangements in the Southern California Edison service territory-stemming
from the Biennial Resource Planning Update auction. Moneys remaining after fully
funding the provisions of this paragraph shall be reallocated for purposes of paragraph
(3)•
(d)Notwithstanding any other provisions of this chapter,entities subject to the
jurisdiction of the Public Utilities Commission shall extend the period for competition
transition charge collection up to three months beyond its otherwise applicable
termination of December 31, 2001, so as to ensure,that the aggregate portion of the
research, environmental, and low-income funds allocated to renewable resources shall
equal five hundred forty million dollars ($540,000,000) and that the costs specified in
paragraphs (3), (4), and (5) of subdivision(c) are collected. _ _
(e) Each electrical corporation shall allow customers to make voluntary
contributions through their utility bill payments as either a fixed amount or a variable
amount to support programs established pursuant to paragraph(3) of subdivision(b).
Funds collected by electrical corporations for these purposes shall be forwarded in a
timely manner to the appropriate fund as specified by the commission.
(f) The commission shall determine how to utilize funds for purposes of
paragraphs(1) and(2)of subdivision.(b),provided that only those research and
development funds for transmission and distribution functions shall remain with the
regulated public utilities under the supervision of the commission. The commission shall
provide for the transfer of all research and development funds collected for purposes of
paragraph (2) of subdivision(b) other than those for transmission and distribution
functions and funds collected for purposes of paragraph(3) of subdivision(b)to the
California Energy Resources Conservation and Development Commission pursuant to
administration and expenditure criteria to be established by the Legislature.
(g) The commission's authority to collect fiends pursuant to this section for
purposes of paragraph(3) of subdivision(b) shall become inoperative on March 31, 2002.
(h) For purposes of this article, "emerging renewable technology" means a new
renewable technology, including, but not limited to, photovoltaic technology, that is
determined by the California Energy Resources Conservation and Development
Commission to be emerging from research and development and that has significant
commercial potential.
382. Programs provided to low-income electricity customers, including,but not
limited to,targeted energy-efficiency services and the California Alternative Rates for
Energy Program shall be funded at not less than 1996 authorized levels based on an
assessment of customer need. The commission shall allocate funds necessary to meet the
low-income objectives in this section.
383. (a)Moneys collected pursuant to paragraph(3)of subdivision(b) of Section
381 shall be transferred to a subaccount of the Energy Resources Programs Account of
the California Energy Resources Conservation and Development Commission to be held
until further action by the Legislature for purposes of:
(1) Supporting the operation of existing and the development of new and
emerging in-state renewable resource technologies.
(2) Supporting the operations of existing renewable resource generation
facilities which provide fire suppression benefits, reduce materials going into landfills,
and mitigate the amount of open-field burning of agricultural waste.
(3) Supporting the operations of existing, innovative solar thermal
technologies that provide essential peak generation and related reliability benefits.
(b) The California Energy Resources Conservation and Development Commission
shall review the purposes described in this section and report to the Legislature by March
31, 1997, with recommendations regarding market-based mechanisms to allocate
available funds. The programs should be based on market principles and include options
and implementation mechanisms which:
(1) Reward the most cost-effective generation meeting the purposes of
subdivision(a) through mechanisms such as the establishment of a clearinghouse or a
marketing agent to identify the most competitive renewable resource providers while
fostering a market for renewable resources.
(2) Implement a process for certifying eligible renewable resource
providers.
(3) Allow customers to receive a rebate from the fund through
mechanisms such as a reduction in their electricity bill or a direct payment from the fund
for the transition charges that would otherwise apply to their purchases from renewable
resource providers.
(4) Allocate moneys between(A) new and emerging and(B) existing
renewable resource technology providers,provided that no less than 40 percent of the
funds shall be allocated to either category.
(5) Utilize financing and other mechanisms to maximize the effectiveness
of available funds.
(c) The report described in this section shall also include consideration of-
(1)
f(1) The need for mechanisms to ensure that cogeneration facilities that
utilize energy from environmental pollution in its process, or microcogeneration facilities
with a total generating capacity of less than one megawatt remain competitive in the
electric services market.
(2) Whether fuel cells should be treated as fuel switching for purposes of
application of the competition transition charge as specified in Section 371.
Article 8. Publicly Owned Utilities
385. (a) Each local publicly owned electric utility shall establish a
nonbypassable, usage based charge on local distribution service of not less than the
lowest expenditure level of the three largest electrical corporations in California on a
percent of revenue basis, calculated from each utility's total revenue requirement for the �.
year ended December 31, 1994, and each utility's total annual expenditure under _
paragraphs (1), (2), and (3) of subdivision(c) of Section 381 and Section 382,to fund
investments by the utility and other parties in any or all of the following:
(1) Cost-effective demand-side management services to promote energy-
efficiency and energy conservation.
(2)New investment in renewable energy resources and technologies
consistent with existing statutes and regulations which promote those resources and
technologies.
(3) Research,development and demonstration programs for the public
interest to advance science or technology which is not adequately provided by
competitive and regulated markets.
(4) Services provided for low-income electricity customer, including but
not limited to, targeted energy efficiency service and rate discounts.
Article 9. State Agencies
388. (a)Notwithstanding any other provision of law, any state agency may enter
into an energy savings contract with a qualified energy service company for the purchase
( or exchange of thermal or electrical energy or water,or to acquire energy efficiency
and/or water conservation services, for a term not exceeding 35 years, at those rates and
upon those terms that are approved by the agency.
(b) The Department of General Services or any other state or local agency
intending to enter into an energy savings contract may establish a pool of qualified energy
service companies based on qualifications, experience,pricing or other pertinent factors.
Energy service contracts for individual projects undertaken by any state or local agency
may be awarded through a competitive selection process to individuals or firms identified
in such a pool. The pool of qualified energy service companies and contractors shall be
reestablished at least every two years or shall expire.
(c)For purposes of this section, the following definitions apply:
(1) "Energy savings" means a measured and verified reduction in fuel,
energy or water consumption when compared to an established baseline of consumption.
(2) "Qualified energy service company" means a company with a
demonstrated ability to provide or arrange for building or facility energy auditors,
selection and design of appropriate energy savings measures,project financing,
implementation of these measures, and maintenance and ongoing measurement of these
measures as to ensure and verify energy savings.
389. The Secretary of the California Environmental Protection Agency, in
consultation with interested stakeholders including relevant state and federal agencies,
boards, and commissions, shall evaluate and recommend to the Legislature public policy
strategies that address the feasibility of shifting costs from electric utility ratepayers, in
whole or in part, to other classes of beneficiaries. This evaluation also shall address the
quantification of benefits attributable to the solid-fuel biomass industry and
implementation requirements, including statutory amendments and transition period
issues that may be relevant,to bring about equitable and effective allocation of solid-fuel
biomass electricity costs that ensure the retention of the economic and environmental
benefits of the biomass industry while promoting measurable reduction in real costs to
ratepayers. This evaluation shall be in coordination with the California Energy Resources
Conservation and Development Commission's efforts pursuant to subdivision(b) of
Section 383, addressing renewable policy implementation issues. The Secretary shall
submit a final report to the Legislature, using existing agency resources, prior to March
31, 1997.
Article 10. Nonutility Power Generators
390. (a) Subject to applicable contractual terms, energy prices paid to nonutility
poNver generators by a public utility electrical corporation based upon the commission's
prescribed "short run avoided cost energy methodology" shall be determined as set forth
in subdivisions (b) and (c).
(b) Until the requirements of subdivision(c) have been satisfied, short run
avoided cost energy payments paid to nonutility power generators by an electrical
corporation shall be based on a formula that reflects a starting energy price, adjusted
monthly to reflect changes in a starting gas index price in relation to an average of current
California natural gas border price indices. The starting energy price shall be based on
12-month averages of recent,pre-January 1, 1996,short-run avoided energy prices paid
by each public utility electrical corporation to nonutility power generators.
The starting gas index price shall be established as an average of index gas prices
for the same annual periods.
(c) The short-run avoided cost energy payments paid to nonutility power
generators by electrical corporations shall be based on the clearing price paid.by the
independent Power Exchange if(1)the commission has issued an order determining that
the independent Power Exchange is functioning properly for the purposes of determining
the short-run avoided cost energy payments to be made to nonutility power generators,
and either(2)the fossil-fired generation units owned, directly or indirectly, by the public
utility electrical corporation are authorized to charge market-based rates and the "going
forward" costs of those units are being recovered solely through the clearing prices paid
by the independent Power Exchange or from contracts with the Independent System
Operator, whether those contracts are market-based or based on operating costs for
particular utility-owned power plant units and at particular times when reactive
power/voltage support is not yet procurable at market-based rates at locations where it is
needed, and are not being recovered directly or indirectly through any other source, or(3)
the public utility electrical corporation has divested 90 percent of its gas-fired generation
facilities that were operated to meet load in 1994 and 1995. However, nonutility power
generators subject to this section may, upon appropriate notice to the public utility
electrical corporation, exercise a one-time option to elect to thereafter receive energy
payments based upon the clearing price from the independent Power Exchange.
(d) If a nonutility power generator is being paid short-run avoided costs energy
payments by an electrical corporation by a firm capacity contract, a forecast as-available
capacity contract,or a forecast as-delivered capacity contract on the basis of the clearing
price paid by the independent Power Exchange as described in subdivision(c) above,the
value of capacity in the clearing price, if any, shall not be paid to the nonutility power
generator. The value of capacity in the clearing price, if any, equals the difference
between the market clearing customer demand bid at the level of generation dispatched
by the independent Power Exchange and the highest supplier bid dispatched.
(e) Short-run avoided energy cost payments made pursuant to this section are in
addition to contractually specified capacity payments.
Nothing in this section shall be construed to affect, modify or amend the terms
and conditions of existing nonutility power generators' contracts with respect to the sale
of energy or capacity or otherwise.
(f)Nothing in this section shall be construed to limit the level of transition cost
recovery provided to utilities under electric industry restructuring policies established by
the commission.
(g) The term "going forward costs" shall include,but not be limited to,all costs
associated with fuel transportation and fuel supply, administrative and general, and
operation and maintenance; provided that, for purposes of this section,the following shall
not be considered"going forward costs": (1) commission-approved capital costs for
capital additions to fossil-fueled power plants,provided that such additions are necessary
for the continued operation of the power plants utilized to meet load and such additions
are not undertaken primarily to expand,repower or enhance the efficiency of plant
operations; or, (2)commission-approved operating costs for particular utility-owned
power plant units and at particular times when reactive power/voltage support is not yet
procurable at market-based rates in locations where it is needed,provided that the
recovery shall end on December 31, 2001.
Article 11. Information Practices
392. (a) The restructuring of the electricity industry will create a new electricity
market with new marketers and sellers offering new goods and services, many of which
may not be readily evaluated by the average consumer.
(b) It is the intent of the Legislature that (1) electricity consumers be provided
with sufficient and reliable information to be able to compare and select among products
and services provided in the electricity market, and (2) consumers be provided with
mechanisms to protect themselves from marketing practices that are unfair or abusive.
(c) (1) Electrical corporations shall disclose each component of the electrical bill
as follows:
(A) The total charges associated with transmission and distribution,
including that portion comprising the research, environmental, and low income funds.
(B) The total charges associated with generation, including the
competition transition charge.
(2) Electrical corporations shall provide conspicuous notice that if the
customer elects to purchase electricity from another provider that the customer will
continue to be liable for payment of the competition transition charge. This paragraph
does not limit the commission from requiring additional information.
(d) Prior to the implementation of the competition transition charge, electric
corporations, in conjunction with the commission, shall devise and implement a customer
education program informing customers of the changes to the electric industry. The
program shall provide customers with information necessary to help them make
appropriate choices as to their electric service. The education program shall be subject to
approval by the commission. '
Article 12. Consumer Protection
394. (a) Except for an electrical corporation as defined in Section 218, each entity
offering electrical service to residential and small commercial customers within the
service territory of an electrical corporation shall register with the commission. The
registration shall include the following seller information:
(1)Legal name.
(2) Current telephone number.
(3)Current address.
(4)Agent for service of process.
(b) Except for an electrical corporation as defined in Section 218, each entity
offering electrical service to residential and small commercial customers with the service
territory of an electrical corporation shall, at the time of the offering, provide the potential
customer with a written notice describing the price, terms, and conditions of the service,
an explanation of the applicability and amount of the competition transition charge, as
determined pursuant to Sections 367 to 375, inclusive, and a notice describing the
potential customer's right to rescind the contract.. The commission shall assist these
entities in developing the notice. The commission may suggest inclusion of additional
information that would be useful to the customer.
(c) The commission shall accept, compile, and help resolve consumer complaints
regarding entities offering electrical service that are required to be registered pursuant to
this section.
395. (a) In addition to any other right to revoke an offer, residential and small
commercial customers of electrical service, as defined in subdivision (h) of Section 331,
have the right to cancel a contract for electric service until midnight of the third business
day after the day on which the buyer signs an agreement or offer to purchase.
(b) Cancellation occurs when the buyer gives written notice of cancellation to the
seller at the address specified in the agreement or offer.
(c)Notice of cancellation, if given by mail, is effective when deposited in the mail
properly addressed with postage prepaid.
f (d)Notice of cancellation given by the buyer need not take the particular form as
provided with the contract or offer to purchase and, however expressed, is effective if it
indicates the intention of the buyer not to be bound by the contract.
396. (a) A consumer damaged by a violation of this article by an entity offering
electrical service is entitled to recover all of the following:
(1)Actual damages.
(2) The consumer's reasonable attorney's fees and court costs.
(3) Exemplary damages, in the amount the court deems proper, for
intentional or willful violations.
(4) Equitable relief as the court deems proper.
(b) The rights, remedies, and penalties established by this article are in addition to
the rights, remedies, or penalties established under any other law.
(c)Nothing in this article shall abrogate any authority of the Attorney General to
enforce existing law.
(d) This article shall remain in effect only until January 1, 2002, and as of that
date is repealed, unless a later enacted statute, that is enacted before January 1, 2002,
deletes or extends that date.
Article 13. Fuel Price Volatility
397. (a)Notwithstanding subdivision(a) of Section 368,to ensure the continued
safe and reliable provision of electric service during the transition to competition, and to
limit the effect of fuel price volatility in electric rates paid by California consumers, it is
in the public interest to allow an electrical corporation which is also a gas corporation and
served fewer than four million customers as of December 20, 1995, to file with the
commission a rate cap mechanism which shall include a Fuel Price Index Mechanism
requiring limited adjustments in an electrical corporation's authorized System Average
Rate in effect on June 10, 1996, to reflect price changes in the fuel market. The
commission shall authorize an electrical corporation to implement a rate cap mechanism
which includes a Fuel Price Index Mechanism provided the following criteria are met:
(1) The Fuel Price Index Mechanism shall be based on the
Southern California Border Index price for natural gas as published periodically in
Natural Gas Intelligence Magazine. The "Starting Point" of the Fuel Price Index
Mechanism shall be defined as the California Border Index price as published in Natural
Gas Intelligence for January 1, 1996.
(2)The Fuel Price Index Mechanism shall include a"deadband"
defined as a price range for natural gas that is any price up to 10 percent higher,or lower, '
than the Starting Point.
(3) The electrical corporation shall not file for a change in its
authorized System Average Rate unless the California Border Index price,on a 12-month,
rolling average basis, is outside the deadband.
If the published California Border Index is outside of the
deadband,the electrical corporation shall increase,or decrease,its authorized System
Average Rate by an amount equal to the product of 25 percent multiplied by the
percentage by which the 12-month rolling average natural gas price is higher;.or lower,
than the deadband.
(4) In no case shall an electrical corporation's authorized System
Average Rate under the Fuel Price Index Mechanism exceed the average of the
authorized system average rates for the two largest electrical corporations as of June 10,
1996.
(5) This section shall become inoperative on December 31, 2001.
SEC. 11. Article 5.5 (commencing with Section 840) is added to Chapter 4 of
Part 1 of Division 1 of the Public Utilities Code, to read:
Article 5.5. Financing of Transition Costs
840. For the purposes of this article, the following terms shall have the following
meanings:
(a) "Bank" means the California Infrastructure and Economic Development Bank.
(b) "Financing entity" means the bank, any special purpose trust, as defined in
Section 63101 of the Government Code,that is authorized by the bank to issue rate
reduction bonds and acquire transition property, or any other entity authorized by the
bank to issue rate reduction bonds and acquire transition property. The bank may
authorize another entity to issue rate reduction bonds only if all of the following
conditions are met:
(1) The bank by resolution has determined that allowing another
entity to issue rate reduction bonds would produce greater overall ratepayer savings,
taking into account all relevant considerations including, but not limited to,the exclusion
of interest on rate reduction bonds issued by the bank from investors' gross income for
California or federal income tax purposes, or both, earnings on funds collected and held
by the electrical corporation prior to deposit in a fund or account for the benefit of holders
of rate reduction bonds, and all costs of issuance and other transaction costs.
(2) The bank submits to the Joint Legislative Budget Committee a
certified copy of the bank's resolution,together with a report setting forth the basis for the
bank's determination that a financing entity other than the bank or a special purpose trust
will produce greater ratepayer savings and at least 30 days have elapsed from the date of
submission.
(c) "Financing order" shall mean an order of the commission adopted in
accordance with this article, which shall include, without limitation, a procedure to
require the expeditious approval by the commission of periodic adjustments to fixed
transition amounts included therein to ensure recovery of all transition costs and the costs
of capital associated with the proposed provision,recovery, financing, or refinancing
thereof, including the costs of issuing, servicing, and retiring the rate reduction bonds
contemplated by the financing order. These adjustments shall not impose fixed transition
amounts upon classes of customers who were not subject to the fixed transition amounts
in the pertinent financing order.
(d) "Fixed transition amounts" means those nonbypassable rates and other
charges, including, but not limited to, distribution, connection, disconnection, and
termination rates and charges, that are authorized by the commission in a financing order
to recover(1) transition costs, and(2)the costs of providing,recovering,financing, or
refinancing the transition costs through a plan approved by the commission in the
financing order, including the costs of issuing, servicing, and retiring rate reduction
bonds. If requested by the electrical corporation in its application for a financing order,
fixed transition amounts shall include nonbypassable rates and other charges to recover
federal and state taxes whose recovery period is modified by the transactions approved in
the financing order.
(e) "Rate reduction bonds" means bonds, notes, certificates of participation or
beneficial interest, or other evidences of indebtedness or ownership, issued pursuant to an
executed indenture or other agreement of a financing entity,the proceeds of which are
used to provide, recover, finance, or refinance transition costs and to acquire transition
property and that are secured by or payable from transition property.
(f) "Transition costs" means the costs, and categories of costs, of an electrical
corporation for generation-related assets and obligations, consisting of generation
facilities, generation-related regulatory assets, nuclear settlements, and power purchase
contracts, including, but not limited to, voluntary restructuring, renegotiations, or
terminations thereof approved by the commission, that were being collected in
commission-approved rates on December 20, 1995, and that may become uneconomic as
a result of a competitive generation market in that those costs may not be recoverable in
market prices in a competitive market, and appropriate costs 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 these
costs are necessary to maintain the facilities through December 31, 2001. Transition
costs shall also include the costs of refinancing or retiring of debt or equity capital of the
electrical corporation,and associated federal and state tax liabilities.
(g) "Transition property" means the property right created pursuant to this article
including, without limitation, the right,title,and interest of an electrical corporation or a
financing entity to all revenues, collections, claims,payments,money, or proceeds of or
arising from or constituting fixed transition amounts that are the subject of a financing
order, including those nonbypassable rates and other charges referred to in subdivision
(b)that are authorized by the commission in the financing order to recover transition
costs and the costs of providing,recovering, financing,or refinancing the transition costs,
including the costs of issuing, servicing, and retiring rate reduction bonds.
841. (a) An electrical corporation shall,by June 1, 1997, and may from time to
time thereafter apply to the commission for a determination that certain transition costs
may be recovered through fixed transition amounts, which would therefore constitute
transition property under this article. An electrical corporation may request this
determination by the commission in separate proceedings or in an order instituting
investigation or order instituting rulemaking, or both. The electrical corporation shall in
its application specify that the residential and small commercial customers as defined in
subdivision (h) of Section 331 would benefit from reduced rates through the issuance of
rate reduction bonds. The commission shall designate fixed transition amounts as
recoverable in one or more financing orders if the commission determines, as part of its
findings in connection with the financing order, that the designation of the fixed tansition
amounts, and issuance of rate reduction bonds in connection with some or all of the fixed
transition amounts would reduce rates that residential and small commercial customers
would have paid if the financing order were not adopted. These customers shall continue
to pay fixed transition amounts after December 31, 2001, until the bonds are paid in full
by the financing entity. No electrical corporation shall be found to have acted
inprudently or unreasonably for failing to amend a power purchase contract where the
amendment would modify or waive an existing requirement that the seller be a qualifying
facility pursuant to federal law.
(b) The commission may issue financing orders in accordance with this article to
facilitate the provision, recovery, financing, or refinancing of transition costs. A
financing order may be adopted only upon the application of an electrical corporation and
shall become effective in accordance with its terms only after the electrical corporation
files with the commission the electrical corporation's written consent to all terms and
conditions of the financing order. A financing order may specify how amounts collected
from a customer shall be allocated between fixed transition amounts and other charges.
(c)Notwithstanding Section 455.5, Section 1708, or any other provision of law,
except as otherwise provided in this subdivision with respect to transition property that
has been made the basis for the issuance of rate reduction bonds, the financing orders and
the fixed transition amounts shall be irrevocable and the commission shall not have
authority either by rescinding, altering, or amending the financing order or otherwise, to
revalue or revise for ratemaking purposes the transition costs, or the costs of providing,
t^ recovering, financing,or refinancing the transition costs,determine that the fixed
transition amounts or rates are unjust or unreasonable, or in any way reduce or impair the
value of transition property either directly or indirectly by taking fixed transition amounts
into account when setting other rates for the electrical corporation; nor shall the amount
of revenues arising with respect thereto be subject to reduction, impairment,
postponement, or termination. Except as otherwise provided in this subdivision, the State
of California does hereby pledge and agree with the owners of transition property and
holders of rate reduction bonds that the state shall neither limit nor alter the fixed
transition amounts,transition property, financing orders, and all rights thereunder until
the obligations,together with the interest thereon, are fully met and discharged,provided
nothing contained in this section shall preclude the limitation or alteration if and when
adequate provision shall be made by law for the protection of the owners and holders.
The bank as agent for the state is authorized to include this pledge and undertaking for the
state in these obligations. Notwithstanding any other provision of this section, the
commission shall approve the adjustments to the fixed transition amounts as may be
necessary to ensure timely recovery of all transition costs that are the subject of the
pertinent financing order, and the costs of capital associated with the provision, recovery,
financing, or refinancing thereof, including the costs of issuing, servicing, and retiring the
rate reduction bonds contemplated by the financing order. The adjustments shall not
impose fixed transition amounts upon classes of customers who were not subject to the
fixed transition amounts in the pertinent financing order.
(d) (1) Financing orders issued under this article do not constitute a debt or
liability of the state or of any political subdivision thereof, other than the financing entity,
and do not constitute a pledge of the full faith and credit of the state or any of its political
subdivisions, other than the financing entity, but are payable solely from the funds
provided therefor under this article and shall be consistent with Sections 1 and 18 of
Article XVI of the California Constitution. This subdivision shall in no way preclude
bond guarantees or enhancements pursuant to this article. All the bonds shall contain on
the face thereof a statement to the following effect:
"Neither the full faith and credit nor the taxing power of the State
of California is pledged to the payment of the principal of, or interest on, this bond."
(2) The issuance of bonds under this article shall not directly,
indirectly, or contingently obligate the state or any political subdivision thereof to levy or
to pledge any form of taxation therefor or to make any appropriation for their payment.
Nothing in this section shall prevent,or construed to prevent,the financing entity from
pledging the full faith and credit of the infrastructure bank fund to the payment of bonds
or issuance of bonds authorized pursuant to this article.
(e) The commission shall establish procedures for the expeditious processing of
applications for financing orders, including the approval or disapproval thereof within
120 days of the electrical corporation's making application therefor. The commission
shall provide in any financing order for a procedure for the expeditious approval by the
commission of periodic adjustments to the fixed transition amounts that are the subject of '
the pertinent financing order, as required by subdivision(c). The procedure shall require
the commission to determine whether the adjustments are required on each anniversary of
the issuance of the financing order, and at the additional intervals as may be provided for
in the financing order, and for the adjustments, if required,to be approved within 90 days
of each anniversary of the issuance of the financing order, or of each additional interval
provided for in the financing order.
(f) Fixed transition amounts shall constitute transition property when, and to the
extent that, a financing order authorizing the fixed transition amounts has become
effective in accordance with this article, and the transition property shall thereafter
continuously exist as property for all purposes with all of the rights and privileges of this
article for the period and to the extent provided in the financing order,but in any event
until the transition bonds are paid in full, including all principal, interest,premium, costs,
and arrearages thereon.
(g) Any surplus fixed transition amounts in excess of the amounts necessary to
pay principal, premium, if any, interest and expenses of the issuance of the rate reduction
bonds shall be remitted to the financing entity and may be used to benefit residential and
small commercial customers if this would not result in a recharacterization of the tax,
accounting, and other intended characteristics of the financing, including,but not limited
to, the following:
(1) Avoiding the recognition of debt on the electrical corporation' s
balance sheet for financial accounting and regulatory purposes.
(2)Treating the rate reduction bonds as debt of the electrical
corporation or its affiliates for federal income tax purposes.
(3) Treating the transfer of the transition property by the electrical
corporation as a true sale for bankruptcy purposes.
(4)Avoiding any adverse impact of the financing on the electrical
corporation's credit rating.
842. (a) Financing entities may issue rate reduction bonds upon approval by the
commission in the pertinent financing orders. Rate reduction bonds shall be nonrecourse
to the credit or any assets of the electrical corporation, other than the transition property
as specified in the pertinent financing order.
(b) Electrical corporations may sell and assign all or portions of their interest in
transition property to an affiliate. Electrical corporations or their affiliates may sell or
assign their interests to one or more financing entities that make that property the basis
for issuance of rate reduction bonds to the extent approved in the pertinent financing
orders. Electrical corporations,their affiliates,or financing entities may pledge transition
property as collateral for rate reduction bonds to the extent approved in the pertinent
financing orders providing for a security interest in the transition property, in the manner
as set forth in Section 843. In addition transition property may be sold or assigned by (1)
the financing entity or a trustee for the holders of rate reduction bonds in connection with
the exercise of remedies upon a default, or(2)any person acquiring the transition
property after a sale or assignment pursuant to this subdivision.
(c) To the extent that any interest in transition property is so sold or assigned, or is
so pledged as collateral,the commission shall authorize the electrical corporation to
contract with the financing entity that it will continue to operate its system to provide
service to its customers,will collect amounts in respect of the fixed transition amounts for
the benefit and account of the financing entity,and will account for and remit these
amounts to or for the account of the financing entity. Contracting with the financing
entity in accordance with that authorization shall not impair or negate the characterization
of the sale, assignment, or pledge as an absolute transfer, a true sale, or security interest,
as applicable.
(d)Notwithstanding Section 1708 or any other provision of law, any requirement
under this article or a financing order that the commission take action with respect to the
subject matter of a financing order shall be binding upon the commission, as it may be
constituted from time to time, and any successor agency exercising functions similar to
the commission and the commission shall have no authority to rescind, alter, or amend
that requirement in a financing order. The approval by the commission in a financing
order of the issuance by an electrical corporation or a financing entity of rate reduction
bonds shall include the approvals, if any, as may be required by Article 5 (commencing
with Section 816) and Section 701.5. Nothing in Section 701.5 shall be construed to
prohibit the issuance of rate reduction bonds upon the terms and conditions as may be
approved by the commission in a financing order. Section 851 shall not be applicable to
the transfer or pledge of transition property,the issuance of rate reduction bonds, or
related transactions approved in a financing order.
843. (a) A security interest in transition property is valid, is enforceable against
the pledgor and third parties, subject to the rights of any third parties holding security
interests in the transition property perfected in the manner described in this section, and
attaches when all of the following have taken place:
(1)The commission has issued the financing order authorizing the
bondable transition amounts included in the transition property.
(2)Value has been given by the pledgees of the transition property.
(3) The pledgor has signed a security agreement covering the
transition property.
(b) A valid and enforceable security interest in transition property is perfected j
when it has attached and when a financing statement has been filed in accordance with
Chapter 4 (commencing with Section 9401) of Division 9 of the Commercial Code
naming the pledgor of the transition property as "debtor" and identifying the transition
property. Any description of the transition-property shall be sufficient if it refers to the
financing order creating the transition property. A copy of the financing statement shall
be filed with the commission by the electrical corporation that is the pledgor or transferor
of the transition property, and the commission may require the electrical corporation to
make other filings with respect to the security interest in accordance with procedures it
may establish,provided that the filings shall not affect the perfection of the security
interest.
(c)A perfected security interest in transition property is a continuously perfected
security interest in all revenues and proceeds arising with respect thereto,whether or not
the revenues or proceeds have accrued. Conflicting security interests shall rank according
to priority in time of perfection. Transition property shall constitute property for all
purposes, including for contracts securing rate reduction bonds,whether or not the
revenues and proceeds arising with respect thereto have accrued.
(d) Subject to the terms of the security agreement covering the transition property
and the rights of any third parties holding security interests in the transition property
perfected in the manner described in this section, the validity and relative priority of a
security interest created under this section is not defeated or adversely affected by the
commingling of revenues arising with respect to the transition property with other funds
of the electrical corporation that is the pledgor or transferor of the transition property, or
by any security interest in a deposit account of that electrical corporation perfected under
Division 9 (commencing with Section 9101) of the Commercial Code into which the
revenues are deposited. Subject to the terms of the security agreement, upon compliance
with the requirements of subdivision(g) of Section 9302 of the Commercial Code, the
pledgees of the transition property shall have a perfected security interest in all cash and
deposit accounts of the electrical corporation in which revenues arising with respect to
the transition property have been commingled with other funds, but the perfected security
interest shall be limited to an amount not greater than the amount of the revenues with
respect to the transition property received by the electrical corporation within 12 months
before (1) any default under the security agreement or(2)the institution of insolvency
proceedings by or against the electrical corporation, less payments from the revenues to
the pledgees during that 12-month period.
(e) If an event of default occurs under the security agreement covering the
transition property, the pledgees of the transition property, subject to the terms of the
security agreement, shall have all rights and remedies of a secured party upon default
under Division 9 (commencing with Section 9101) of the Commercial Code, and shall be
entitled to foreclose or otherwise enforce their security interest in the transition property,
subject to the rights of any third parties holding prior security interests in the transition .
property perfected in the manner provided in this section. In addition, the commission
may require, in the financing order creating the transition property, that, in the event of
default by the electrical corporation in payment of revenues arising with respect to the
transition property, the commission and any successor thereto, upon the application by
the pledgees or transferees, including transferees under Section 844, of the transition
property, and without limiting any other remedies available to the pledgees or transferees
by reason of the default, shall order the sequestration and payment to the pledgees or
transferees of revenues arising with respect to the transition property. Any order shall
remain in full force and effect notwithstanding any bankruptcy, reorganization, or other
insolvency proceedings with respect to the debtor, pledgor, or transferor of the transition
property. Any surplus in excess of amounts necessary to pay principal, premium, if any,
interest, costs, and arrearages on the rate reduction bonds, and other costs arising under
the security agreement, shall be remitted to the debtor or to the pledgor or transferor.
(f) Section 5451 of the Government Code shall not apply to any pledge of
transition property by a financing entity.
844. (a) A transfer of transition property by an electrical corporation to an
affiliate or to a financing entity, or by an affiliate of an electrical corporation or a
financing entity to another financing entity, which the parties have in the governing
documentation expressly stated to be a sale or other absolute transfer, in a transaction
pproved in a financing order, shall be treated as an absolute transfer of all of the
transferor's right, title, and interest (as in a true sale), and not as a pledge or other
financing, of the transition property, other than for federal and state income and franchise
tax purposes. Granting to holders of rate reduction bonds a preferred right to revenues of
the electrical corporation, or the provision by the company of other credit enhancement
with respect to rate reduction bonds, shall not impair or negate the characterization of any
transfer as a true sale, other than for federal and state income and franchise tax purposes.
(b) A transfer of transition property shall be deemed perfected as against third
persons when both of the following have taken place:
(1) The commission has issued the financing order authorizing
the fixed transition amounts included in the transition property.
(2) An assignment of the transition property in writing has been
executed and delivered to the transferee.
(c) As between bona fide assignees of the same right for value without notice, the
assignee first filing a financing statement in accordance with Chapter 4 (commencing
with Section 9401) of Division 9 of the Commercial Code naming the assignor of the
transition property as debtor and identifying the transition property has priority. Any
description of the transition property shall be sufficient if it refers to the financing order
creating the transition property. A copy of the financing statement shall be filed by the
assignee with the commission, and the commission may require the assignor or the
f assignee to make other filings with respect to the transfer in accordance with procedures
it may establish, but these filings shall not affect the perfection of the transfer.
845. Any successor to the electrical corporation, whether pursuant to any
bankruptcy, reorganization, or other insolvency proceeding, or pursuant to any merger,
sale, or transfer,by operation of law,or otherwise, shall perform and satisfy all
obligations of the electrical corporation pursuant to this article in the same manner and to
the same extent as the electrical corporation, including, but not limited to, collecting and
paying to the holders of rate reduction bonds or their representatives or the applicable
financing entity revenues arising with respect to the transition property sold to the
applicable financing entity or pledged to secure rate reduction bonds.
846. The authority of the commission to issue financing orders pursuant to
Section 841 shall expire on December 31, 2015. The expiration of the authority shall
have no effect upon financing orders adopted by the commission pursuant to this article
or any transition property arising therefrom, or upon the charges authorized to be levied
thereunder, or the rights, interests, and obligations of the electrical corporation or a
financing entity or holders of transition bonds pursuant to the financing order, or the
authority of the commission to monitor, supervise, or take further action with respect to
the order in accordance with the terms of this article and of the order.
847. Regulations adopted to implement this article shall not be subject to the
Administrative Procedure Act(Chapter 3.5 (commencing with Section 113 40) of Part 1
of Division 3 of Title 2 of the Government Code).
SEC. 12. Division 4.9 (commencing with Section 9600) is added to the Public
Utilities Code, to read:
DIVISION 4.9. RESTRUCTURING OF PUBLICLY OWNED ELECTRIC UTILITIES
IN CONNECTION WITH THE RESTRUCTURING OF THE ELECTRICAL
SERVICES INDUSTRY
9600. (a) It is the intent of the Legislature that California's local publicly owned
electric utilities and electric corporations should commit control of their transmission
facilities to the Independent System Operator as described in Chapter 2.3 (commencing
with Section 330) of Part 1 of Division 1. 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 and is based on the following
principles:
(1)Utility specific access charge rates as proposed in Docket No.
EC96-19-000 as finally approved by the Federal Energy Regulatory Commission
reflecting the costs of that utility's transmission facilities shall go into effect on the first
day of the Independent System Operator operation. The utility specific rates shall honor
all of the terms and conditions of existing transmission service contracts and shall
recognize any wheeling revenues of existing transmission service arrangements to the
transmission owner.
(2) (A)No later than two years after the initial operation of the
Independent System Operator, the Independent System Operator shall recommend for
adoption by the Federal Energy Regulatory Commission a rate methodology determined
by a decision of the Independent System Operator governing board, provided that the
decision shall be based on principles approved by the governing board including, but not
limited to, an equitable balance of costs and benefits, and shall define the transmission
facility costs, if any, which shall be rolled in to the transmission service rate and spread
equally among all Independent System Operator transmission users, and those
transmission facility costs, if any,which should be specifically assigned to a specific
utility's service area.
(B) If there is no governing board decision,the rate methodology
shall be determined following a decision by the alternative dispute resolution method set
forth in the Independent System Operator bylaws.
(C) If no alternative dispute resolution decision is rendered, then a
default rate methodology shall be a uniform regional transmission access charge and a
utility specific local transmission access charge, provided that the default rate
methodology shall be recommended for implementation upon termination of the cost
recovery plan set forth in Section 368 or no later than two years after the initial operation
of the Independent System Operator, whichever is later. For purposes of this paragraph,
regional transmission facilities are defined to be transmission facilities operating at or
above 230 kilovolts plus an appropriate percentage of transmission facilities operating
below 230 kilovolts; all other transmission facilities shall be considered local. The
appropriate percentage of transmission facilities described above shall be consistent with
the guidelines in Federal Energy Regulatory Commission Order No. 888 and any
exception approved by that commission.
(3) If the rate methodology implemented as a result of a decision by the
Independent System Operator governing board or resulting from the independent system
operator alternative dispute resolution process results in rates different than those in effect
prior to the decision for any transmission facility owner, the amount of any differences
between the new rates and the prior rates shall be recorded in a tracking account to be
recovered from customers and paid to the appropriate transmission owners by the
transmission facility owner after termination of the cost recovery plan set forth in Section
368. The recovery and payments shall be based on an amortization period not to exceed
three years in the case of the electrical corporations or five years in the case of the local
publicly owned electric utilities.
(. (4)The costs of transmission facilities placed in service after the date of
initial implementation of the Independent System Operator shall be recovered using the
rate methodology in effect at the time the facilities go into operation.
(5)The electrical corporations and the local publicly owned electric
utilities shall jointly develop language for implementation proposals to the Federal
Energy Regulatory Commission based on these principles.
(6)Nothing in this section shall compel any party to violate restrictions
applicable to facilities financed with tax-exempt bonds or contractual restrictions and
covenants regarding use of transmission facilities existing as of December 20, 1995.
(b) Following a final Federal Energy Regulatory Commission decision approving
the Independent System Operator, no California electrical corporation or local publicly
owned electric utility shall be authorized to collect any competition transition charge
authorized pursuant to this division and Chapter 2.3 (commencing with Section 330) of
Part 1 of Division 1 unless it commits control'of its transmission facilities to the
Independent System Operator.
9601. (a) Except with respect to supply options of the nature specified in Section
218, with the exception of paragraph (3) of subdivision(b) of that section, as it existed on
December 20, 1995, no person, corporation, electrical corporation, or local publicly
owned electric utility or other governmental entity other than a retail customer's existing
electric service provider as of December 20, 1995, shall provide partial or full electric
service to a retail customer of a local publicly owned electric utility unless the customer
first confirms in writing an obligation to pay, through tariff or otherwise, to the utility
currently providing electric service, a nonbypassable generation-related severance fee or
transition charge established by the regulatory body for that utility. The severance fee or
transition charge shall be paid directly to the local publicly owned utility providing
electricity service in the service area in which the consumer is located.
(b) Except as provided in subdivision(a) of Section 374, no local publicly owned
electric utility or other governmental entity shall provide partial or full electric service to
a retail customer of an electrical corporation unless the customer of that electrical
corporation first confirms in writing an obligation to pay, through tariff or otherwise, to
the electrical corporation currently providing electric service, a nonbypassable
generation-related transition charge established by the regulatory body for that electrical
corporation. The charge shall be paid directly to the electrical corporation providing
electricity in the service area in which the consumer is located.
(c)No local publicly owned electric utility or electrical corporation shall sell
electric power to the retail customers of another local publicly owned electric utility or
electrical corporation unless the first utility has agreed to let the second utility make sales
of electric poNver to the retail customers of the first utility.
9602. (a) After a public hearing, the local regulatory body of each local publicly
owned electric utility shall determine whether it will authorize direct transactions
between electricity suppliers and end use customers, subject to implementation of the
nonbypassable severance fee or transition charge referred to in Section 9603.
(b) If the regulatory body authorizes direct transactions, a phase-in of these
transactions shall commence no later than the latter of January 1, 2000,or two years after
the start of the phase-in of direct transactions by the electrical corporations pursuant to
subdivision (b) of Section 365, and shall be completed by the later of December 31, 2010,
or two years after the completion of the phase-in by electrical corporations.
(c) The regulatory body shall develop a phase-in schedule at the conclusion of
which all customers shall have the right to engage in direct transactions.
(d) Any phase-in of customer eligibility for direct transactions ordered by the
regulatory body shall be equitable to all customer classes.
(e) If the regulatory body does not authorize direct access as contemplated in this
section, then the publicly owned electric utility shall not be eligible to recover the
nonbypassable charge as provided in Section 9603.
9603. (a)Not less than six months prior to the date of implementation of direct
transactions, the regulatory body shall establish the nonbypassable generation-related
severance fee or transition charge which shall include,but shall not be limited to,
employee related transition costs incurred and projected for severance, out placement,
retraining, early retirement, and related expenses for employees directly affected by
restructuring.
(b) The regulatory body of a local publicly owned electric utility,prior to
adopting any generation related severance fee or transition charge, shall make available
for public review the basis for the severance fee or transition charge and shall hold at
least one public hearing.
9604. For purposes of this division, the following definitions apply:
(a) "Direct transaction" means a contract between one or more electric generators,
marketers, or brokers, public or private, of electric power and one or more retail
customers providing for the purchase and sale of electric power and ancillary services.
(b) "Service area" means an area in which, as of December 20, 1995, an investor-
owned electric utility or a local publicly owned electric utility was obligated to provide
service.
(c) "Severance fee" or "transition charge" for a local publicly owned electric
utility shall mean that charge or periodic charge assessed to customers to recover the
{ reasonable uneconomic portion of costs associated with generation-related assets and
obligations, nuclear decommissioning, and capitalized energy efficiency investment
programs approved prior to August 15, 1996.
(d) "Local publicly owned electric utility" as used in this division means a
municipality or municipal corporation operating as a"public utility" furnishing electric
service as provided in Section 10001, a municipal utility district furnishing electric
service formed pursuant to Division 6 (commencing with Section 11501), a public utility
district furnishing electric services formed pursuant to the Public Utility District Act set
forth in Division 7 (commencing with Section 15501), an irrigation district furnishing
electric services formed pursuant to the Irrigation District Law set forth in Division 11
(commencing with Section 20500)of the Water Code,or a joint powers authority that
includes one or more of these agencies and that owns generation or transmission
facilities, or furnishes electric services over its own or its member's electric distribution
system.
9605. (a)Nothing in this division or Chapter 2.3 (commencing with Section 350)
of Part 1 of Division 1 shall affect preexisting ratemaking authority of a regulatory body
of any local publicly owned electric utility.
(b)Nothing in this division shall modify or abrogate any agreement, or any rights
or obligations in any such agreement, between retail electric service providers relating to
service areas.
(c) Nothing in this division shall limit or affect the statutory rights of a local
publicly owned electric utility to negotiate and design rates for existing customers and
new customers not choosing to be served by an alternate supplier.
(d)Nothing in this division shall limit electric supply options within the service
territory of a local publicly owned electric utility to the extent the options are of the
nature specified in Section 218 as it existed on December 20, 1995, with the exception of
paragraph(3) of subdivision(b) of that section, and the imposition of a severance fee or
transition charge on customers electing those options shall be prohibited whether the
elections are made before or after the availability of direct transactions within the service
area of the local publicly owned electric utility.
9606. All city-owned electric utilities shall.report on the periodic bill the amount
expected to be transferred to the general fund of the city on a no less than annual basis.
SEC. 13. Section 9.5 of this bill incorporates amendments to Section 216 of the
Public Utilities Code proposed by both this bill and AB 2501. It shall only become
operative if(1) both bills are enacted and become effective on or before January 1, 1997,
(2) each bill amends Section 216 of the Public Utilities Code, and(3) this bill is enacted
after AB 2501, in which case Section 9 of this bill shall not become operative.
j SEC. 14. The provisions of this act are severable. If any provision of this act or
its application is held invalid,that invalidity shall not affect other provisions or
applications that can be given effect without the invalid provision or application.
SEC. 15. No reimbursement is required by this act pursuant to Section 6 of
Article XIIIB of the California Constitution because of costs that may be incurred by a
local agency or school district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty for a crime or
infraction, within the meaning of Section 17556 of the Government Code, or changes the
definition of a crime within the meaning of Section 6 of Article XIIIB of the California
Constitution.
Notwithstanding Section 17580 of the Government Code, unless otherwise
specified, the provisions of this act shall become operative on the same date that the act
takes effect pursuant to the California Constitution.
No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of
the California Constitution because of the other costs that may be incurred by a local
agency or school district are the result of a program for which legislative authority was
requested by that local agency or school district, within the meaning of Section 17556 of
the Government Code and Section 6 of Article XIIIB of the California Constitution.
SEC. 16. This act is an urgency statute necessary for the immediate preservation
of the public peace, health, or safety within the meaning of Article IV of the Constitution
and shall go into immediate effect. The facts constituting the necessity are:
In order to provide for meaningful participation in hearings before the Federal.
Energy Regulatory Commission and to provide for the safety and reliability of electrical
services to Californians at the earliest possible time, it is necessary for this act to take
effect immediately.