BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                            



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                                 UNFINISHED BUSINESS


          Bill No:  SB 38
          Author:   Padilla (D)
          Amended:  8/19/14
          Vote:     21

           
          PRIOR VOTES NOT RELEVANT

           ASSEMBLY FLOOR  : 78-0, 08/27/14 - See last page for vote


           SUBJECT  :    Electrical restructuring

           SOURCE  :     Author


           DIGEST  :    This bill repeals or modifies several sections of the  
          Public Utilities Code which were added in 1996 as part of  
          statutes enacted to deregulate electricity.

           Assembly Amendments  delete the Senate version of this bill,  
          which dealt with firearms possession, and instead add the  
          current language.

           NOTE:  This bill is substantially similar to SB 1195 (Padilla)  
                 which passed the Senate Floor 37-0 on May 5, 2014, and  
                 was gutted and used as part of the water bond package.

           ANALYSIS  :    Existing law states that restructuring of the  
          electrical industry within the Public Utilities Act provides for  
          the establishment of an Independent System Operator (ISO) and a  
          Power Exchange as nonprofit public benefit corporations.   
          Existing law requires the ISO, within six months after receiving  
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          approval for its operation by the Federal Energy Regulatory  
          Commission, to provide a report to the Legislature and the  
          Electricity Oversight Board containing specified matter.

          This bill repeals this reporting requirement, and abolishes the  
          Power Exchange.

          Electrical restructuring makes legislative findings and  
          declarations in order to provide guidance to the Public  
          Utilities Commission (PUC) in carrying out restructuring.

          This bill repeals those legislative findings and declarations.

          Electrical restructuring states the intent of the Legislature  
          that individual customers not experience rate increases as a  
          result of the allocation of transition costs, as specified, and  
          requires the PUC to implement a methodology for calculating  
          certain Power Exchange energy credits.

          This bill repeals this provision.

          Electrical restructuring required the PUC to identify and  
          determine those costs and categories of costs for  
          generation-related assets and obligations that were being  
          collected in PUC-approved rates on December 20, 1995, that might  
          become uneconomic as a result of a competitive generation  
          market.  Electrical restructuring requires each electrical  
          corporation to propose a cost recovery plan to the PUC for the  
          recovery of the uneconomic costs of an electrical corporation's  
          generation-related assets and obligations, requires that the  
          plan contain specified matter, and requires that the plan 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 be reduced so that  
          these customers receive rate reductions of no less than 10% for  
          1998 continuing through 2002.  Electrical restructuring  
          prohibits the PUC, upon the termination of the 10% rate  
          reduction for residential and small commercial customers, from  
          subjecting those residential and small commercial customers to  
          any rate increase or future rate obligations solely as a result  
          of the termination of the 10% rate reduction.  Electrical  
          restructuring authorizes an electrical corporation to apply to  
          the PUC for a determination that certain transition costs, as  

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          defined, may be recovered through fixed transition amounts,  
          which constitute transition property, as defined, and provides,  
          until December 31, 2015, for the issuance of financing orders by  
          the PUC, and provides for the issuance of rate reduction bonds  
          utilizing the California Infrastructure and Economic Development  
          Bank, to be repaid out of rates.

          This bill repeals these provisions.

          Electrical restructuring requires the PUC to establish an  
          effective mechanism that ensures recovery of specified  
          transition costs from all existing and future consumers in the  
          service territory in which the utility provided electricity  
          services as of December 20, 1995, except 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.

          This bill provides that competition transition charges that are  
          authorized by the PUC prior to January 1, 2015, continue to  
          apply to all existing and future consumers in the service  
          territory in which the utility provided electricity services as  
          of December 20, 1995, subject to the exception described above.

          Electrical restructuring directed the PUC to authorize direct  
          transactions between electricity suppliers and end-use  
          customers, subject to implementation of nonbypassable charges,  
          as specified.  Other provisions reference these charges as a  
          nonbypassable charge, while other provisions reference these  
          charges as an obligation to pay uneconomic costs, as specified.

          This bill replaces the various references to the specified  
          statutory charges with "competition transition charges."

          Electrical restructuring requires any electrical corporation  
          serving agricultural customers with multiple meters to conduct  
          research based on a statistically valid sample of those  
          customers and meters to determine the typical simultaneous peak  
          load of those customers and to report the results to those  
          customers and the PUC by July 1, 2001.  Electrical restructuring  
          requires the PUC to consider the research results in setting  
          future electrical distribution rates for those customers.

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          This bill repeals this provision.

          Electrical restructuring requires the PUC to allow recovery of  
          reasonable employee related transition costs incurred and  
          projected for severance, retraining, early retirement,  
          outplacement, and related expenses for the employees in order to  
          mitigate potential negative impacts on utility personnel  
          directly affected by restructuring.

          This bill repeals this provision.

          Existing law requires, for an electric generating facility sold  
          by an electrical corporation in a transaction initiated prior to  
          December 31, 2001, and approved by the PUC by December 31, 2002,  
          that the selling utility contract with the purchaser for the  
          selling utility, an affiliate, or a successor corporation to  
          operate and maintain the facility for at least two years, and  
          authorizes the PUC to require these conditions for transactions  
          initiated on or after January 1, 2002.

          This bill repeals this provision.

          Existing law, enacted as part of restructuring, prescribes how  
          energy prices paid to nonutility electrical generators, known as  
          qualifying facilities under federal law, by an electrical  
          corporation based on the commission's "short run avoided cost  
          energy methodology" are to be determined, subject to applicable  
          contractual terms. Existing law authorizes a nonutility  
          electrical generator using renewable fuels that entered into a  
          contract with an electrical corporation prior to December 31,  
          2001, specifying fixed energy prices for five years of  
          electrical output to negotiate a contract of an additional five  
          years of fixed energy payments upon expiration of the initial  
          five-year term, at a price to be determined by the PUC.

          This bill repeals this provision.

          This bill repeals a provision authorizing an electrical  
          corporation that was also a gas corporation that served fewer  
          than 4,000,000 customers as of December 20, 1995, to file a rate  
          cap mechanism that includes a Fuel Price Index Mechanism, as  
          specified, which authorization became inoperative on December  
          31, 2001.

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           Comments
           
          This is a code clean-up bill revises and repeals sections of  
          current law regarding deregulation which has largely been made  
          obsolete as a result of the energy crisis, suspension of direct  
          access, and related budget and regulatory actions.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  No


           ASSEMBLY FLOOR  :  78-0, 8/27/14
          AYES: Achadjian, Alejo, Allen, Ammiano, Bigelow, Bloom,  
            Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian  
            Calderon, Campos, Chau, Chávez, Chesbro, Conway, Cooley,  
            Dababneh, Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox,  
            Frazier, Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon,  
            Gorell, Gray, Grove, Hagman, Hall, Roger Hernández, Holden,  
            Jones, Jones-Sawyer, Levine, Linder, Logue, Lowenthal,  
            Maienschein, Mansoor, Medina, Melendez, Mullin, Muratsuchi,  
            Nazarian, Nestande, Olsen, Pan, Patterson, Perea, John A.  
            Pérez, V. Manuel Pérez, Quirk, Quirk-Silva, Rendon,  
            Ridley-Thomas, Rodriguez, Salas, Skinner, Stone, Ting, Wagner,  
            Waldron, Weber, Wieckowski, Wilk, Williams, Yamada, Atkins
          NO VOTE RECORDED: Harkey, Vacancy


          JG:d  8/27/14   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  NONE RECEIVED

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