BILL NUMBER: AB 1890	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY   JULY 11, 1995
	AMENDED IN ASSEMBLY   JUNE 19, 1995
	AMENDED IN ASSEMBLY   APRIL 25, 1995

INTRODUCED BY  Assembly Member Conroy
    (Principal coauthor:  Assembly Member Martinez) 

                        FEBRUARY 24, 1995

   An act to add Section 702.1 to the Public Utilities Code, relating
to public utilities, and declaring the urgency thereof, to take
effect immediately.



	LEGISLATIVE COUNSEL'S DIGEST


   AB 1890, as amended, Conroy.  Public utilities:  restructuring.
   Under existing law, the Public Utilities Commission is vested with
regulatory authority over public utilities.
   This bill would  declare the intent of the Legislature
that specified requirements be implemented in order to ensure a
smooth and equitable restructuring of   require that the
commission's decision to restructure  the electrical services
industry in California,  and the orders implementing that
decision, comply with specified criteria, and would state
findings and declarations in that regard.
  This bill would declare that it is to take effect immediately as an
urgency statute.
   Vote:  2/3.  Appropriation:  no.  Fiscal committee:  no.
State-mandated local program:  no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  
  SECTION 1.  The Legislature finds and declares that:
   (a) The Public Utilities Commission in its Order Instituting
Rulemaking and Order Instituting Investigation (OIR 94-04-031 and OII
94-04-032, commonly referred to as "The Blue Book") set forth a
proposed policy statement on restructuring California's electric
services industry and reforming its regulatory policy.
   (b) The Public Utilities Commission determined that the people of
the State of California pay some of the highest energy rates in the
nation.
   (c) The high rates paid by California ratepayers are primarily due
to an existing regulatory structure comprised of policies which are
fragmented, outdated, arcane, and overly complex, engendering a lack
of competitiveness among utilities, providing weak incentives to
utilities to operate and invest efficiently, and is administratively
burdensome and acts as a barrier to public participation.
   (d) In 1994 the Legislature passed Assembly Concurrent Resolution
143 (Resolution Chapter 148 of the Statutes of 1994) which sets forth
general terms that reflect the state's ongoing policy concerns by
which proposed electric restructuring policies should comply.  The
criteria included achieving significant rate reductions, establishing
performance standards for utilities that assure their performance is
among the most efficient in the nation, promoting fair competition
and customer choice, protecting public health and complying with all
federal and state law, reducing regulation costs and burdens, and
insuring safety and reliability of the utility grid.
   (e) The primary purposes of the restructuring of the electrical
industry are as follows:
   (1) To reduce rates and ensure that the benefits of the
restructuring inure to all classes of California ratepayers.
   (2) To foster a competitive electrical services industry and to
implement significant reduction in regulation of utilities.
   (3) To enable all utility providers to engage in equitable
competition through guaranteed open, equal, and comparable access to
transmission and distribution systems.
   (4) To ensure that all existing contracts will be honored.
   (5) To ensure that the costs of public policy programs, including
social, economic, and environmental programs, shall continue to be
supported by all customers and providers.
   (6) To ensure that all classes of ratepayers eventually obtain the
ability to exercise choice in the selection of an electrical service
provider.
   (7) To ensure that the current standards of safety, reliability,
and service are maintained in a restructured electrical service
industry.
  SEC. 2.  Section 702.1 is added to the Public Utilities Code, to
read:
   702.1.  (a) To ensure a smooth and equitable restructuring of the
electrical services industry in California, it is the intent of the
Legislature that the following requirements shall be implemented:
   (1) The establishment of a five-year transition period for the
restructuring of the electrical industry beginning no later than
January 1, 1997.
   (2) All stranded costs as identified by the utilities and the
Public Utilities Commission and approved by the Legislature shall be
paid off no later than January 1, 2003.
   (3) Electricity rates for all consumer classes shall not rise
above current levels throughout the transition period.  If possible,
electrical rates for all consumers shall be lowered when feasible.
   (4) All transition costs shall be recovered by virtue of the
savings generated by the restructuring of the electrical service
industry.
   (5) All classes of customers shall share equally in the transition
costs through a charge on the distribution system.
   (6) Electrical bills for all classes shall be unbundled, utilizing
line itemization to reveal the various component costs of providing
electrical services.
   (7) All public benefit programs currently authorized by the
Legislature or the commission, or both, shall be reevaluated and
reauthorized no later than January 1, 1999.
   (8) Charges for public benefit programs currently authorized by
the Legislature or the commission, or both, shall be unbundled and
appear in line item format on electrical bills for all classes of
customer.
   (b) For purposes of this section, "public benefit programs" means
all social, economic, and environmental programs currently funded
through rates charged to customers receiving electrical services in
the State of California.
   (c) This section shall become inoperative on January 1, 2003.
 
  SECTION 1.  The Legislature finds and declares that:
   (a) The Public Utilities Commission in its Order Instituting
Rulemaking and Order Instituting Investigation (OIR 94-04-031 and OII
94-04-032, commonly referred to as "The Blue Book") set forth a
proposed policy statement on restructuring California's electric
services industry and reforming its regulatory policy.
   (b) The Public Utilities Commission determined that the people of
the State of California pay some of the highest energy rates in the
nation.
   (c) The high rates paid by California ratepayers are primarily due
to an existing regulatory structure comprised of policies that are
fragmented, outdated, arcane, and overly complex, engendering a lack
of competitiveness among utilities, providing weak incentives to
utilities to operate and invest efficiently, and is administratively
burdensome and acts as a barrier to public participation.
   (d) In 1994, the Legislature passed Assembly Concurrent Resolution
No.  143 (Resolution Chapter 148 of the Statutes of 1994) which sets
forth general terms that reflect the state's ongoing policy concerns
with which proposed electric restructuring policies should comply.
The criteria included achieving significant rate reductions,
establishing performance standards for utilities that assure their
performance is among the most efficient in the nation, promoting fair
competition and customer choice, protecting public health and
complying with all federal and state law, reducing regulation costs
and burdens, and ensuring safety and reliability of the utility grid.

  SEC. 2.  Section 702.1 is added to the Public Utilities Code, to
read:
   702.1.  (a) The commission's decision to restructure the electric
services industry and the order, or orders, implementing that
decision shall comply with the following criteria:
   (1) The order shall establish a definite period for the transition
to a restructured electrical services industry no later than January
1, 1997.  The transition period shall establish a suitable timeframe
for changing the present operating practices and conventions of the
electric services industry to operating practices and conventions
appropriate to the restructured competitive industry.
   (2) (A) With respect to transition costs the order shall establish
and implement a methodology for determining transition costs
associated with the restructuring of the electric services industry.

   (B) The methodology shall do all of the following:
   (i) Determine what constitutes a noneconomic utility asset.
   (ii) Determine the value of the noneconomic utility assets.
   (iii) Prescribe a fair, just, and equitable allocation of the
value of the noneconomic assets among all consumer classes.
   (iv) Prescribe a reasonable amortization period for the recovery
of the amounts from all consumer classes.
   (v) Prescribe a mechanism to be used to recover the costs.
   (3) The order shall ensure that reductions in the cost of
electricity that result from restructuring are not entirely offset by
charges for recovering transition costs.  Accordingly, the
amortization period over which the costs will be recovered, together
with the collection mechanism used for recovering those costs, shall
not result in annual transition cost payments from any consumer class
that exceed 50 percent of the estimated annual reduction in the cost
of electricity for that class, which is attributable to
restructuring.
   (b) The commission shall provide that consumer bills for electric
services be unbundled, and show separately, among other items, the
cost of electricity, the cost of transmission and distribution
charges, itemized transition cost recovery charges, and charges for
public benefit programs.
   (c) The commission shall not order the restructuring of the
electric services industry unless it determines that the proposed
restructuring shall provide retail consumers the opportunity to
purchase electricity at prices no greater than would have been the
case without restructuring.
   (d) Prior to issuing a restructuring order, the commission shall
enumerate the various public benefit programs currently required by
statute or regulation, shall identify the cost of each program
enumerated, and shall separately list the enumerated costs on bills
to customers.  These programs currently authorized by the Legislature
or the commission, or both, shall be reevaluated and reauthorized no
later than January 1, 1999.
   (e) The commission shall establish a methodology that shall
provide residential and small business consumers with the opportunity
to share in the benefits of a restructured electrical services
industry either by providing for the relative ease of aggregation for
small business and residential customers in a geographical area
consistent with the area of the franchise or other method to be
determined consistent with the requirements of the restructured
electric services industry established by statute or regulation.
   (f) In conjunction with the commission's ultimate goal of
implementing direct access, the commission shall develop proposed
tariffs consistent with this goal.  The proposed tariffs shall
provide for direct nondiscriminatory open access transmission to all
retail buyers of electric energy who choose to purchase electricity
from any third party power producer.
   (g) For purposes of this section:
   (1) "Public benefit programs" means all social, economic, and
environmental programs currently funded through rates charged to
customers receiving electrical services in the state of California.
   (2) "Transition period" means the period required for the
electrical services industry to convert from a command and control
system to a system employing competitive market practices.
   (3) "Transition costs" means those costs determined to arise as a
result of the restructuring of the electrical services industry.
   (h) This section shall become inoperative on January 1, 2003, and
as of that date is repealed, unless a later enacted statute that is
chaptered on or before January 1, 2003, deletes or extends that date.

  SEC. 3.  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 facilitate the transition of the current regulatory
utility structure to a new utility structure which will have a
profound and immediate impact on the people and State of California,
it is necessary that this act take effect immediately.