Amended in Assembly June 18, 2014

Senate Bill No. 1195

Introduced by Senator Padilla

February 20, 2014

An act to amend begin delete Section end delete begin insert Sections 955.1 and 3440.1 of the Civil Code, to amend Sections 63010, 63025.1, 63041.5, 63043, 63048.3, 63048.56, 63048.7, 63049.2, 63049.62, 64049.64, 63049.67, and 63071 of, and to repeal Article 4 (commencing with Section 63042) of Chapter 2 of Division 1 of Title 6.7 of, the Government Code, to amend Sections 331, end insert 332.1, begin delete 367, end delete begin insert 337, 339, 341.5, 348, 349.5, 359, 364, 365, end insert 369, 370, 371, 372, begin delete 373, end delete 374, 379, begin delete 397, 846.2, end delete begin insert 394.5, 395, 399.2, 2827, end insert 9600, and 9607 of, begin delete and end delete to repeal Sections begin insert 330, 335, 336, 338, 340, 341, 341.1, 341.2, 341.3, 341.4, end insert 350, begin insert 355, 356, 361, 363, 367, end insert 367.7, 368, 368.5, begin insert 373, end insert 374.5, begin delete and 375 end delete begin insert 375, 376, 390, 390.1, and 397 end insert of, begin insert and to repeal Article 5.5 (commencing with Section 840) of Chapter 4 end insert begin insert of Part 1 end insert begin insert of Division 1 end insert begin insert of, end insert the Public Utilities Code, begin insert and to amend Section 31071.5 of the Streets and Highways Code, end insert relating to electricity.

LEGISLATIVE COUNSEL’S DIGEST

SB 1195, as amended, Padilla. Electrical restructuring.

The existing restructuring of the electrical industry within the Public Utilities Act provides for the establishment of an Independent System Operator and a Power Exchange as nonprofit public benefit corporations. Existing law requires the Independent System Operator, within 6 months after receiving 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 would repeal this reporting requirement.

begin insert

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

end insert begin insert

This bill repeals those legislative findings and declarations.

end insert begin insert

In addition to establishing the Independent System Operator and the Power Exchange, electrical restructuring established an Electricity Oversight Board (Oversight Board) to oversee the Independent System Operator and the Power Exchange in order to ensure the success of electrical restructuring and to ensure a reliable supply of electricity in the transition to a new market structure.

end insert begin insert

This bill abolishes the Oversight Board and Power Exchange.

end insert

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 Public Utilities Commission to implement a methodology for calculating certain Power Exchange energy credits.

This bill would repeal this provision.

Electrical restructuring begin insert required the commission to identify and determine those costs and categories of costs for generation-related assets and obligations that were being collected in commission-approved rates on December 20, 1995, that might become uneconomic as a result of a competitive generation market. Electrical restructuring end insert requires each electrical corporation to 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, 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 commission, 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. begin insert Electrical restructuring authorizes an electrical corporation to apply to the commission for a determination that certain transition costs, as 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 commission, and provides for the issuance of rate reduction bonds utilizing the California Infrastructure and Economic Development Bank, to be repaid out of rates. end insert

This bill would repeal these provisions.

begin insert

Electrical restructuring requires the commission 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.

end insert begin insert

This bill would provide that competition transition charges that are authorized by the commission 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.

end insert begin insert

Electrical restructuring directed the commission 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.

end insert begin insert

This bill would replace the various references to the specified statutory charges with “competition transition charges.”

end insert

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 commission by July 1, 2001. Electrical restructuring requires the commission to consider the research results in setting future electrical distribution rates for those customers.

This bill would repeal this provision.

Electrical restructuring requires the commission to allow recovery of reasonable employee related transition costs incurred and projected for severence, 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 would repeal this provision.

begin insert

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 commission 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 2 years, and authorizes the commission to require these conditions for transactions initiated on or after January 1, 2002.

end insert begin insert

This bill would repeal this provision.

end insert begin insert

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 5 years of electrical output to negotiate a contract of an additional 5 years of fixed energy payments upon expiration of the initial 5-year term, at a price to be determined by the commission.

end insert begin insert

This bill would repeal this provision.

end insert begin insert

This bill would repeal 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.

end insert

This bill would strike references to these repealed statutes.

Vote: majority. Appropriation: no. Fiscal committee:  begin delete no end delete begin insert yes end insert . State-mandated local program: no.

The people of the State of California do enact as follows:

begin insert

begin insert SECTION 1. end insert   

end insert

begin insert Section 955.1 of the end insert begin insert Civil Code end insert begin insert is amended to
read: end insert

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) or (3) of
subdivision (a) of Section 9109 of the Commercial Code) of any
payment intangible (Section 9102 of the Commercial Code) and
any transfer of accounts, chattel paper, payment intangibles, or
promissory notes excluded from the coverage of Division 9 of the
Commercial Code by paragraph (4) of subdivision (d) of Section
9109 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.

begin delete

(d) This section does not apply to transfers or assignments of
transition property, as defined in Section 840 of the Public Utilities
Code, or to transfers or assignments of recovery property, as
defined in Section 848 of the Public Utilities Code.

end delete

begin insert

begin insert SEC. 2. end insert   

end insert

begin insert Section 3440.1 of the end insert begin insert Civil Code end insert begin insert is amended to read: end insert

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, chattel paper, payment intangibles, or
promissory notes 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 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, authorized in an authenticated record by the
transferor. The financing statement shall be filed in the office of
the Secretary of State in accordance with Chapter 5 (commencing
with Section 9501) 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 5
(commencing with Section 9501) 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 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.

(j) A transfer of property that (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).

begin delete

(l) Transition property, as defined in Section 840 of the Public
Utilities Code, or recovery property, as defined in Section 848 of
the Public Utilities Code.

end delete begin delete

(m)

end delete

begin insert (l) end insert  A transfer of property by any governmental entity.

begin insert

begin insert SEC. 3. end insert   

end insert

begin insert Section 63010 of the end insert begin insert Government Code end insert begin insert is amended to
read: end insert

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 begin delete indebtedness or ownership, end delete begin insert indebtedness end insert including
certificates of participation begin delete or beneficial interest, asset backed
certificates, end delete or lease-purchase begin delete or installment purchase end delete 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; and 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 begin delete project, and transition costs in the case of an
electrical corporation. end delete begin insert project. end insert

(g) “Economic development facilities” means real and personal
property, structures, buildings, equipment, and supporting
components thereof that are used to provide industrial, recreational,
research, commercial, utility, or service enterprise facilities,
community, educational, cultural, or social welfare facilities and
any parts or combinations thereof, and all facilities or infrastructure
necessary or desirable in connection therewith, including provision
for working capital, but shall not include any housing.

(h) “Electrical corporation” has the meaning set forth in Section
218 of the Public Utilities Code.

(i) “Executive director” means the Executive Director of the
California Infrastructure and Economic Development Bank
appointed pursuant to Section 63021.

(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 begin delete in connection with the issuance of
rate reduction bonds pursuant to a financing order or end delete in connection
with a financing for an economic development facility.

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.

begin delete

(k) “Financing order” has the meaning set forth in Section 840
of the Public Utilities Code.

end delete begin delete

(l)

end delete

begin insert (k) end insert  “Guarantee trust fund” means the California Infrastructure
Guarantee Trust Fund.

begin delete

(m)

end delete

begin insert (l) end insert  “Infrastructure bank fund” means the California Infrastructure
and Economic Development Bank Fund.

begin delete

(n)

end delete

begin insert (m) end insert  “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.

begin delete

(o)

end delete

begin insert (n) end insert  “Participating party” means any person, company,
corporation, association, state or municipal governmental entity,
partnership, firm, or other entity or group of entities, whether
organized for profit or not for profit, engaged in business or
operations within the state and that applies for financing from the
bank in conjunction with a sponsor for the purpose of implementing
a project. begin delete However, in the case of a project relating to the financing
of transition costs or the acquisition of transition property, or both,
on the request of an electrical corporation, or in connection with
a financing for an economic development facility, or for the
financing of insurance claims, the participating party shall be
deemed to be the same entity as the sponsor for the financing. end delete

begin delete

(p)

end delete

begin insert (o) end insert  “Project” means designing, acquiring, planning, permitting,
entitling, constructing, improving, extending, restoring, financing,
and generally developing public development facilities or economic
development facilities within the begin delete state or financing transition costs
or the acquisition of transition property, or both, 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. end delete begin insert state. end insert

begin delete

(q)

end delete

begin insert (p) end insert  “Public development facilities” means real and personal
property, structures, conveyances, equipment, thoroughfares,
buildings, and supporting components thereof, excluding any
housing, that are directly related to providing the following:

(1) “City streets” including 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” including 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, water supply, and flood control” including, but
not limited to, 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” including libraries, child care
facilities, including, but not limited to, day care facilities, and
employment training facilities.

(5) “Environmental mitigation measures” including required
construction or modification of public infrastructure and purchase
and installation of pollution control and noise abatement
equipment.

(6) “Parks and recreational facilities” including local parks,
recreational property and equipment, parkways and property.

(7) “Port facilities” including docks, harbors, ports of entry,
piers, ships, small boat harbors and marinas, and any other
facilities, additions, or improvements in connection therewith.

(8) “Power and communications” including facilities for the
transmission or distribution of electrical energy, natural gas, and
telephone and telecommunications service.

(9) “Public transit” including 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” including 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” including 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” including 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” including, but not limited to, facilities
necessary for successfully converting military bases consistent
with an adopted base reuse plan.

(14) “Public safety facilities” including, but not limited to, police
stations, fire stations, court buildings, jails, juvenile halls, and
juvenile detention facilities.

(15) “State highways” including 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.

(16) (A) Military infrastructure, including, but not limited to,
facilities on or near a military installation, that enhance the military
operations and mission of one or more military installations in this
state. To be eligible for funding, the project shall be endorsed by
the Office of Military and Aerospace Support established pursuant
to Section 13998.2.

(B) For purposes of this subdivision, “military installation”
means any facility under the jurisdiction of the Department of
Defense, as defined in paragraph (1) of subsection (e) of Section
2687 of Title 10 of the United States Code.

begin delete

(r) “Rate reduction bonds” has the meaning set forth in Section
840 of the Public Utilities Code.

end delete begin delete

(s)

end delete

begin insert (q) end insert  “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 begin delete sponsor and any receipts derived from transition property. end delete
begin insert sponsor. end insert Revenues shall not include moneys in the General Fund
of the state.

begin delete

(t)

end delete

begin insert (r) end insert  “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. begin delete Special purpose trust also
means any entity authorized by the bank to acquire transition
property or to issue rate reduction bonds, or both, subject to the
approvals by the bank and powers of the bank as are provided by
the bank in its resolution authorizing the entity to issue rate
reduction bonds. end delete

begin delete

(u)

end delete

begin insert (s) end insert  “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
makes an application to the bank for financial assistance in
connection with a project in a manner prescribed by the bank. This
definition shall not be construed to require that an applicant have
an ownership interest in the project. In addition, begin delete 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 and end delete any person, company,
corporation, partnership, firm, or other entity or group engaged in
business or operation within the state that applies for financing of
any economic development facility, shall be deemed to be the
sponsor as well as the participating party for the project relating
to the financing of that economic development facility.

begin delete

(v)

end delete

begin insert (t) end insert  “State” means the State of California.

begin delete

(w) “Transition costs” has the meaning set forth in Section 840
of the Public Utilities Code.

end delete begin delete

(x) “Transition property” has the meaning set forth in Section
840 of the Public Utilities Code.

end delete

begin insert

begin insert SEC. 4. end insert   

end insert

begin insert Section 63025.1 of the end insert begin insert Government Code end insert begin insert is amended
to read: end insert

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, or borrow
money to pay all or any part of the cost of any project, or to
otherwise carry out the purposes of this division.

(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, begin delete or transition property end delete 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 loans to any sponsor or participating party, either
directly or by making a loan to a lending institution, in connection
with the financing of a project in accordance with an agreement
between the bank and the sponsor or a participating party, either
as a sole lender or in participation with other lenders. 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 loans to any sponsor or participating party, either
directly or by making a loan to a lending institution, 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, either as a
sole lender or in participation with other lenders.

(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.

(l) Assign or pledge all or any portion of the bank’s interests in
begin delete transition property and the revenues therefrom, or end delete assets, things
of value, mortgages, deeds of trust, bonds, bond purchase
agreements, loan agreements, indentures of mortgage or trust, 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) Make, receive, or serve as a conduit for the making of, or
otherwise provide for, grants, 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 of a 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 division 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 begin delete bonds or transition
property. end delete begin insert bonds. end insert

(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 Rural Economic Development Infrastructure
Panel, established pursuant to Section 15373.7.

begin delete

(y) Approve the issuance of rate reduction bonds by an entity
other than the bank or a special purpose trust 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.

end delete begin delete

(z)

end delete

begin insert (y) end insert  Apply for and accept subventions, grants, loans, advances,
and contributions from any source of money, property, labor, or
other things of value. The sources may include bond proceeds,
dedicated taxes, state appropriations, federal appropriations, federal
grant and loan funds, public and private sector retirement system
funds, and proceeds of loans from the Pooled Money Investment
Account.

begin delete

(aa)

end delete

begin insert (z) end insert  Do all things necessary and convenient to carry out its
purposes and exercise its powers, provided, however, that nothing
herein shall be construed to authorize the bank to engage directly
in the business of a manufacturing, industrial, real estate
development, or nongovernmental service enterprise. Further, the
bank shall not be organized to accept deposits of money for time
or demand deposits or to constitute a bank or trust company.

begin insert

begin insert SEC. 5. end insert   

end insert

begin insert Section 63041.5 of the end insert begin insert Government Code end insert begin insert is amended
to read: end insert

63041.5.  

(a) It is the intent of the Legislature to provide a
one-time appropriation for financial assistance to local government
to meet capital outlay and infrastructure needs.

(b) From the funds appropriated in Item 2920-111-0001 of the
Budget Act of 1999, the sum of four hundred twenty-five million
dollars ($425,000,000) shall be available for financial assistance,
including, but not limited to, leveraged revolving fund loans, to
local government sponsors for public development facilities, as
specified in subdivision begin delete (q) end delete begin insert (p) end insert of Section 63010 of the Government
Code.

(c) From the funds appropriated in Item 2920-111-0001 of the
Budget Act of 1999 and in Item 2920-111-0001 of the Budget Act
of 1998 (Chapter 324 of the Statutes of 1998), the California
Infrastructure and Economic Development Bank shall make no
single loan in excess of 10 percent of the combined amount of
these appropriations to the bank unless approved by unanimous
consent of the membership of the Board of Directors of the
California Infrastructure and Economic Development Bank and
the Director of Finance provides a 30-day written notice to the
Chairperson and Vice-Chairperson of the Joint Legislative Budget
Committee.

begin insert

begin insert SEC. 6. end insert   

end insert

begin insert Article 4 (commencing with Section 63042) of Chapter
2 of Division 1 of Title 6.7 of the end insert begin insert Government Code end insert begin insert is repealed. end insert

begin insert

begin insert SEC. 7. end insert   

end insert

begin insert Section 63043 of the end insert begin insert Government Code end insert begin insert is amended to
read: end insert

63043.  

Notwithstanding any other provision of this division,
Article 3 (commencing with Section 63040) begin delete and Article 4
(commencing with Section 63042), end delete shall not apply to any conduit
financing for economic development facilities by the bank directly
for the benefit of a participating party.

begin insert

begin insert SEC. 8. end insert   

end insert

begin insert Section 63048.3 of the end insert begin insert Government Code end insert begin insert is amended
to read: end insert

63048.3.  

Notwithstanding any other provision of this division,
Article 3 (commencing with Section begin delete 63040), Article 4
(commencing with Article 63042), end delete begin insert 63040) end insert and Article 5
(commencing with Section 63043) do not apply to any financing
provided by the bank to, or at the request of, the board in
connection with the revolving fund.

begin insert

begin insert SEC. 9. end insert   

end insert

begin insert Section 63048.56 of the end insert begin insert Government Code end insert begin insert is amended
to read: end insert

63048.56.  

Notwithstanding any other law, Article 3
(commencing with Section begin delete 63040), Article 4 (commencing with
Section 63042), end delete begin insert 63040) end insert and Article 5 (commencing with Section
63043) shall not apply to any financing provided by the bank to,
or at the request of, the department in connection with the revolving
fund.

begin insert

begin insert SEC. 10. end insert   

end insert

begin insert Section 63048.7 of the end insert begin insert Government Code end insert begin insert is amended
to read: end insert

63048.7.  

Notwithstanding any other provision of this division,
Article 3 (commencing with Section begin delete 63040), Article 4
(commencing with Section 63042), end delete begin insert 63040) end insert and Article 5
(commencing with Section 63043) do not apply to any bonds issued
by the special purpose trust established by this article. All matters
authorized in this article are in addition to powers granted to the
bank in this division.

begin insert

begin insert SEC. 11. end insert   

end insert

begin insert Section 63049.2 of the end insert begin insert Government Code end insert begin insert is amended
to read: end insert

63049.2.  

Notwithstanding any other provision of this division,
Article 3 (commencing with Section begin delete 63040), Article 4
(commencing with Section 63042), end delete begin insert 63040) end insert and Article 5
(commencing with Section 63043) do not apply to any bonds issued
by the special purpose trust established by this article. All matters
authorized in this article are in addition to powers granted to the
bank in this division.

begin insert

begin insert SEC. 12. end insert   

end insert

begin insert Section 63049.62 of the end insert begin insert Government Code end insert begin insert is amended
to read: end insert

63049.62.  

Notwithstanding any other provision of this division,
a financing of the costs of claims of insolvent insurers upon the
request of the association pursuant to Section 1063.73 of the
Insurance Code shall be deemed to be in the public interest and
eligible for financing by the bank, and Article 3 (commencing with
Section 63040), begin delete Article 4 (commencing with Section 63042), end delete
Article 5 (commencing with Section 63043), Article 6
(commencing with Section 63048), and Article 7 (commencing
with Section 63049) shall not apply to the financing provided by
the bank to, or at the request of, the association or the department
in connection with the fund. Notwithstanding any other provision
of this division, the bank shall have no authority over any matter
that is subject to the approval of the Insurance Commissioner under
Article 14.2 (commencing with Section 1063) of Chapter 1 of Part
2 of Division 1 of the Insurance Code.

begin insert

begin insert SEC. 13. end insert   

end insert

begin insert Section 63049.64 of the end insert begin insert Government Code end insert begin insert is amended
to read: end insert

63049.64.  

(a) The bank may issue bonds pursuant to Chapter
5 (commencing with Section 63070) and may loan the proceeds
thereof to the association, and deposit the proceeds into a separate
account in the fund, or use the proceeds to refund bonds previously
issued under this article. Bond proceeds may also be used to fund
necessary reserves, capitalized interest, credit enhancement costs,
or costs of issuance.

(b) Bonds issued under this article shall not be deemed to
constitute a debt or liability of the state or of any political
subdivision thereof, other than the bank, or a pledge of the faith
and credit of the state or of any political subdivision, but shall be
payable solely from the fund and other revenues and assets securing
the bonds. All bonds issued under this article shall contain on the
face of the bonds a statement to that effect.

(c) For purposes of this article, the term “project,” as defined
in subdivision begin delete (p) end delete begin insert (o) end insert of Section 63010, shall include financing of
the costs of claims of insolvent workers’ compensation insurers,
in an amount (together with associated costs of financing) that
may be determined by the association in making a request for
financing to the bank.

begin insert

begin insert SEC. 14. end insert   

end insert

begin insert Section 63049.67 of the end insert begin insert Government Code end insert begin insert is amended
to read: end insert

63049.67.  

(a) Notwithstanding any other provision of this
division, a financing of emergency apportionments upon the request
of a school district pursuant to Article 2.7 (commencing with
Section 41329.50) of Chapter 3 of Part 24 of Division 3 of Title
2 of the Education Code, is deemed to be in the public interest and
eligible for financing by the bank. Article 3 (commencing with
Section begin delete 63040), Article 4 (commencing with Section 63042), end delete
begin insert 63040) end insert and Article 5 (commencing with Section 63043) do not
apply to the financing provided by the bank in connection with an
emergency apportionment.

(b) The bank may issue bonds pursuant to Chapter 5
(commencing with Section 63070) and provide the proceeds to a
school district pursuant to a lease agreement. The proceeds may
be used as an emergency apportionment, to reimburse the interim
emergency apportionment from the General Fund authorized
pursuant to subdivision (b) of Section 41329.52 of the Education
Code, or to refund bonds previously issued under this section.
Bond proceeds may also be used to fund necessary reserves,
capitalized interest, credit enhancement costs, and costs of issuance.

(c) Bonds issued under this article are not deemed to constitute
a debt or liability of the state or of any political subdivision of the
state, other than a limited obligation of the bank, or a pledge of
the faith and credit of the state or of any political subdivision. All
bonds issued under this article shall contain on the face of the
bonds a statement to the same effect.

(d) Any fund or account established in connection with the
bonds shall be established outside of the centralized treasury
system. Notwithstanding any other law, the bank shall select the
financing team and the trustee for the bonds, and the trustee shall
be a corporation or banking association authorized to exercise
corporate trust powers.

(e) Pursuant to Section 41329.55 of the Education Code, a school
district other than the Compton Community College District shall
instruct the Controller to repay the lease from moneys in the State
School Fund and the Education Protection Account designated for
apportionment to the school district. Pursuant to Section 41329.55
of the Education Code, if the school district is the Compton
Community College District, the Controller shall be instructed to
repay the lease from moneys in Section B of the State School Fund.
Any amounts necessary to make this repayment shall be drawn
from the total statewide funding available for community college
apportionment consisting of funds in Section B of the State School
Fund. Thereafter the Controller shall transfer to Section B of the
State School Fund, either in a single or multiple transfers, an
amount equal to the total repayment, which amount shall be
transferred from the amount designated for apportionment to the
Compton Community College District from the State School Fund.
If these transfers from the district prove inadequate to repay any
repayments for any reason, the Compton Community College
District is required to use any revenue sources available to it for
transfer and repayment purposes.

(f) Notwithstanding any other law, as long as any bonds issued
pursuant to this section are outstanding, the following requirements
apply:

(1) The school district for which the bonds were issued is not
eligible to be a debtor in a case under Chapter 9 of the United
States Bankruptcy Code, as it may be amended from time to time,
and no governmental officer or organization is or may be
empowered to authorize the school district to be a debtor under
that chapter.

(2) It is the intent of the Legislature that the Legislature should
not in the future abolish the Compton Community College District
or take any action that would prevent the Compton Community
College from entering into or performing binding agreements or
invalidate any prior binding agreements of the Compton
Community College District, where invalidation may have a
material adverse effect on the bonds issued pursuant to this section.

(3) The Compton Community College District shall not be
reorganized or merged with another community college district
unless all of the following apply:

(A) The successor district becomes by operation of law the
owner of all property previously owned by the Compton
Community College District.

(B) Any agreement entered into by the Compton Community
College District in connection with bonds issued pursuant to this
section are assumed by the successor district.

(C) The apportionment authorized by subdivision (e) remains
in effect.

(D) Receipt by the bank of an opinion of bond counsel that the
bonds issued for the Compton Community College District will
remain tax exempt following the reorganization or merger.

(g) Nothing in this section limits the authority of the Legislature
to abolish the Compton Community College District when bonds
issued for that district are no longer outstanding. Further, the
Legislature may provide for the redemption or defeasance of the
bonds at any time so that no bonds are outstanding. If the
Legislature provides for the redemption or defeasance of the bonds
issued for the Compton Community College District in order to
abolish that district, it is the intent of the Legislature that the funds
required for the redemption or defeasance should be appropriated
from Section B of the State School Fund.

(h) The bank may enter into contracts or agreements with banks,
insurers, or other financial institutions or parties that it determines
are necessary or desirable to improve the security and marketability
of, or to manage interest rates or other risks associated with, the
bonds issued pursuant to this section. The bank may pledge
apportionments made by the Controller directly to the bond trustee
pursuant to Section 41329.55 of the Education Code as security
for repayment of any obligation owed to a bank, insurer, or other
financial institution pursuant to this subdivision.

begin insert

begin insert SEC. 15. end insert   

end insert

begin insert Section 63071 of the end insert begin insert Government Code end insert begin insert is amended
to read: end insert

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 issued to finance public
development facilities that may be outstanding at any one time
under this chapter shall not exceed five billion dollars
($5,000,000,000). begin delete 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). end delete

(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 thereon, shall be deemed
not to be outstanding for purposes of this section.

begin insert

begin insert SEC. 16. end insert   

end insert

begin insert Section 330 of the end insert begin insert Public Utilities Code end insert begin insert is repealed. end insert

begin delete

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.

(j) 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.

(l) 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.

(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 workforce
directly caused by electrical restructuring, be accomplished through
offers of voluntary severance, retraining, early retirement,
outplacement, and related benefits. Whether workforce 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 firewall 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 firewall 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.

end delete

begin insert

begin insert SEC. 17. end insert   

end insert

begin insert Section 331 of the end insert begin insert Public Utilities Code end insert begin insert is amended
to read: end insert

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
begin delete customers as described in subdivision (e) of Section 367. end delete
begin insert customers. end insert

(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.

begin delete

(g) “Restructuring trusts” means the two tax-exempt public
benefit trusts established by Decision 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.

end delete begin delete

(h)

end delete

begin insert (g) end insert  “Small commercial customer” means a customer that has a
maximum peak demand of less than 20 kilowatts.

begin delete SECTION 1. end delete
begin insert SEC. 18. end insert   

Section 332.1 of the Public Utilities Code is amended
to read:

332.1.  

(a) (1) It is the intent of the Legislature to enact Item
1 (revised) on the commission’s August 21, 2000, agenda, entitled
“Opinion Modifying Decision (D.) D.00-06-034 and D.00-08-021
to Regarding Interim Rate Caps for San Diego Gas and Electric
Company,” as modified below.

(2) It is also the intent of the Legislature that to the extent that
the Federal Energy Regulatory Commission orders refunds to
electrical corporations pursuant to their findings, the commission
shall ensure that any refunds are returned to customers.

(b) The commission shall establish a ceiling of six and
five-tenths cents ($0.065) per kilowatthour on the energy
component of electric bills for electricity supplied to residential,
small commercial, and street lighting customers by the San Diego
Gas and Electric Company, through December 31, 2002, retroactive
to June 1, 2000. If the commission finds it in the public interest,
this ceiling may be extended through December 2003 and may be
adjusted as provided in subdivision (d).

(c) The commission shall establish an accounting procedure to
track and recover reasonable and prudent costs of providing electric
energy to retail customers unrecovered through retail bills due to
the application of the ceiling provided for in subdivision (b). The
accounting procedure shall utilize revenues associated with sales
of energy from utility-owned or managed generation assets to
offset an undercollection, if undercollection occurs. The accounting
procedure shall be reviewed periodically by the commission, but
not less frequently than semiannually. The commission may utilize
an existing proceeding to perform the review. The accounting
procedure and review shall provide a reasonable opportunity for
San Diego Gas and Electric Company to recover its reasonable
and prudent costs of service over a reasonable period of time.

(d) If the commission determines that it is in the public interest
to do so, the commission, after the date of the completion of the
proceeding described in subdivision (g), may adjust the ceiling
from the level specified in subdivision (b), and may adjust the
frozen rate from the levels specified in subdivision (f), consistent
with the Legislature’s intent to provide substantial protections for
customers of the San Diego Gas and Electric Company and their
interest in just and reasonable rates and adequate service.

(e) For purposes of this section, “small commercial customer”
includes, but is not limited to, all San Diego Gas and Electric
Company accounts on Rate Schedule A of the San Diego Gas and
Electric Company, all accounts of customers who are “general
acute care hospitals,” as defined in Section 1250 of the Health and
Safety Code, all San Diego Gas and Electric Company accounts
of customers who are public or private schools for pupils in
kindergarten or any of grades 1 to 12, inclusive, and all accounts
on Rate Schedule AL-TOU under 100 kilowatts.

(f) The commission shall establish an initial frozen rate of six
and five-tenths cents ($0.065) per kilowatthour on the energy
component of electric bills for electricity supplied to all customers
by the San Diego Gas and Electric Company not subject to
subdivision (b), for the time period ending with the end of the rate
freeze for the Pacific Gas and Electric Company and the Southern
California Edison Company, retroactive to February 7, 2001. The
commission shall consider the comparable energy components of
rates for comparable customer classes served by the Pacific Gas
and Electric Company and the Southern California Edison
Company and, if it determines it to be in the public interest, the
commission may adjust this frozen rate, and may do so, retroactive
to the date that rate increases took effect for customers of Pacific
Gas and Electric Company and Southern California Edison
Company pursuant to the commission’s March 27, 2001, decision.
The commission shall determine the Fixed Department of Water
Resources Set-Aside pursuant to Section 360.5 for customers
subject to this section, reflecting a retail rate consistent with the
rate for the energy component of electric bills as determined in
this subdivision, in place of the retail rate in effect on January 5,
2001. This section shall be construed to modify the payment
provisions, but may not be construed to modify the electric
procurement obligations of the Department of Water Resources,
pursuant to any contract or agreement in accordance with Division
27 (commencing with Section 80000) of the Water Code, and in
effect as of February 7, 2001, between the Department of Water
Resources and San Diego Gas and Electric Company.

(g) The commission shall institute a proceeding to examine the
prudence and reasonableness of the San Diego Gas and Electric
Company in the procurement of wholesale energy on behalf of its
customers, for a period beginning, at the latest, on June 1, 2000.
If the commission finds that San Diego Gas and Electric Company
acted imprudently or unreasonably, the commission shall issue
orders that it determines to be appropriate affecting the retail rates
of San Diego Gas and Electric Company customers including, but
not limited to, refunds.

(h) Nothing in this section may be construed to limit the
authority of the Department of Water Resources pursuant to
Division 27 (commencing with Section 80000) of the Water Code.

begin insert

begin insert SEC. 19. end insert   

end insert

begin insert Section 335 of the end insert begin insert Public Utilities Code end insert begin insert is repealed. end insert

begin delete

335.  

In order to ensure that the interests of the people of
California are served, a five-member Electricity Oversight Board
is hereby created as provided in Section 336. For purposes of this
chapter, any reference to the Oversight Board shall mean the
Electricity Oversight Board. 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
exercise the exclusive right to decline to confirm the appointments
of specific members of the governing board of the Power Exchange.

(c) To serve as an appeal board for majority decisions of the
Independent System Operator governing board, as they relate to
matters subject to exclusive state jurisdiction, as specified in
Section 339.

(d) Those members of the Power Exchange governing board
whose appointments the Oversight Board has the exclusive right
to decline to confirm include proposed governing board members
representing agricultural end users, industrial end users,
commercial end users, residential end users, end users at large,
nonmarket participants, and public interest groups.

(e) To investigate any matter related to the wholesale market
for electricity to ensure that the interests of California’s citizens
and consumers are served, protected, and represented in relation
to the availability of electric transmission and generation and
related costs, during periods of peak demand.

end delete

begin insert

begin insert SEC. 20. end insert   

end insert

begin insert Section 336 of the end insert begin insert Public Utilities Code end insert begin insert is repealed. end insert

begin delete

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.

(d) The Governor shall designate one of the voting members as
the chairperson of the Oversight Board who shall preside over
meetings and direct the executive director in the routine
administration of the Oversight Board’s business. The chairperson
may designate one of the other voting members to preside over
meetings in the absence of the chairperson.

(e) Two voting members shall constitute a quorum. Any decision
or action of the Oversight Board shall be by majority vote of the
voting members.

(f) The members of the Oversight Board shall serve without
compensation, but shall be reimbursed for all necessary expenses
incurred in the performance of their duties.

end delete

begin insert

begin insert SEC. 21. end insert   

end insert

begin insert Section 337 of the end insert begin insert Public Utilities Code end insert begin insert is amended
to read: end insert

337.  

(a) The Independent System Operator governing board
shall be composed of a five-member independent governing board
of directors appointed by the Governor and subject to confirmation
by the Senate. Any reference in this chapter or in any other
provision of law to the Independent System Operator governing
board means the independent governing board appointed under
this subdivision.

(b) A member of the independent governing board appointed
under subdivision (a) may not be affiliated with any actual or
potential participant in any market administered by the Independent
System Operator.

(c) (1) All appointments shall be for three-year terms.

(2) There is no limit on the number of terms that may be served
by any member.

begin delete

(d) The Oversight Board shall require the articles of
incorporation and bylaws of the Independent System Operator to
be revised in accordance with this section, and shall make filings
with the Federal Energy Regulatory Commission as the Oversight
Board determines to be necessary.

end delete begin delete

(e)

end delete

begin insert (d) end insert  For the purposes of the initial appointments to the
Independent System Operator governing board, as provided in
subdivision (a), the Governor shall appoint one member to a
one-year term, two members to a two-year term, and two members
to a three-year term.

begin insert

begin insert SEC. 22. end insert   

end insert

begin insert Section 338 of the end insert begin insert Public Utilities Code end insert begin insert is repealed. end insert

begin delete

338.  

The Oversight Board shall have the exclusive right to
approve procedures and the qualifications for Power Exchange
governing board members specified in subdivision (d) of Section
335, all of whom shall be required to be electricity customers in
the area served by the Power Exchange. The Power Exchange
governing board 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.
The structural composition of the Power Exchange governing
board existing on July 1, 1999, shall remain in effect until an
agreement with a participating state is legally in effect. However,
prior to such an agreement, California shall retain the right to
change the Power Exchange governing board into a nonstakeholder
board. In the event of such a legislative change, revised bylaws
shall be filed with the Federal Energy Regulatory Commission
under Section 205 of the Federal Power Act (16 U.S.C.A. Sec.
824d).

end delete

begin insert

begin insert SEC. 23. end insert   

end insert

begin insert Section 339 of the end insert begin insert Public Utilities Code end insert begin insert is amended
to read: end insert

begin delete

339.  

(a) The Oversight Board is the appeal board for majority
decisions of the Independent System Operator governing board
relating to matters that are identified in subdivision (b) as they
pertain to the Independent System Operator.

(b) The following matters are subject to California’s exclusive
jurisdiction:

end delete

begin insert

begin insert 339. end insert   

end insert begin insert

The following matters are subject to California’s exclusive
jurisdiction:

end insert begin delete

(1)

end delete

begin insert (a) end insert  Selections by California of governing board members, as
described in begin delete Sections 335, 337, and 338. end delete begin insert Section 337. end insert

begin delete

(2)

end delete

begin insert (b) end insert  Matters pertaining to retail electric service or retail sales of
electric energy.

begin delete

(3)

end delete

begin insert (c) end insert  Ensuring that the purposes and functions of the Independent
System Operator begin delete and Power Exchange end delete are consistent with the
purposes and functions of California nonprofit public benefit
corporations, including duties of care and conflict of interest
standards for directors of the corporations.

begin delete

(4)

end delete

begin insert (d) end insert  State functions assigned to the Independent System Operator
begin delete and Power Exchange end delete under state law.

begin delete

(5)

end delete

begin insert (e) end insert  Open meeting standards and meeting notice requirements.

begin delete

(6)

end delete

begin insert (f) end insert  Appointment of advisory representatives representing state
interests.

begin delete

(7)

end delete

begin insert (g) end insert  Public access to corporate records.

begin delete

(8)

end delete

begin insert (h) end insert  The amendment of bylaws relevant to these matters.

begin delete

(c) Only members of the Independent System Operator
governing board may appeal a majority decision of the Independent
System Operator related to any of the matters specified in
subdivision (b) to the Oversight Board.

end delete

begin insert

begin insert SEC. 24. end insert   

end insert

begin insert Section 340 of the end insert begin insert Public Utilities Code end insert begin insert is repealed. end insert

begin delete

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.

end delete

begin insert

begin insert SEC. 25. end insert   

end insert

begin insert Section 341 of the end insert begin insert Public Utilities Code end insert begin insert is repealed. end insert

begin delete

341.  

The Oversight Board may do all of the following:

(a) Meet at the times and places it may deem proper.

(b) Accept appropriations, grants, or contributions from any
public source, private foundation, or individual.

(c) Sue and be sued.

(d) Contract with state, local, or federal agencies for services
or work required by the Oversight Board.

(e) Contract for or employ any services or work required by the
Oversight Board that in its opinion cannot satisfactorily be
performed by its staff or by other state agencies.

(f) Appoint advisory committees from members of other public
agencies and private groups or individuals.

(g) As a body, or on the authorization of the Oversight Board,
as a subcommittee composed of one or more members, hold
hearings at the times and places it may deem proper.

(h) Issue subpoenas to compel the production of books, records,
papers, accounts, reports, and documents and the attendance of
witnesses.

(i) Administer oaths.

(j) Adopt or amend rules and regulations to carry out the
purposes and provisions of this chapter, and to govern the
procedures of the Oversight Board.

(k) Exercise any authority consistent with this chapter delegated
to it by a federal agency or authorized to it by federal law.

(l) Make recommendations to the Governor and the Legislature
at the time or times the Oversight Board deems necessary.

(m) Participate in proceedings relevant to the purposes of this
chapter or to the purposes of Division 4.9 (commencing with
Section 9600) or, as part of any coordinated effort by the state,
participate in activities to promote the formation of interstate
agreements to enhance the reliability and function of the electricity
system and the electricity market.

(n) Do any and all other things necessary to carry out the
purposes of this chapter.

end delete

begin insert

begin insert SEC. 26. end insert   

end insert

begin insert Section 341.1 of the end insert begin insert Public Utilities Code end insert begin insert is repealed. end insert

begin delete

341.1.  

Regulations adopted within 120 days of the effective
date of this section may be adopted as emergency regulations in
accordance with Chapter 3.5 (commencing with Section 11340)
of the Government Code, and for the purposes of that chapter,
including Section 11349.6 of the Government Code, the adoption
of the regulations shall be considered by the Office of
Administrative Law to be necessary for the immediate preservation
of the public peace, health, safety, and general welfare.

end delete

begin insert

begin insert SEC. 27. end insert   

end insert

begin insert Section 341.2 of the end insert begin insert Public Utilities Code end insert begin insert is repealed. end insert

begin delete

341.2.  

The Bagley-Keene Open Meeting Act (Article 9
(commencing with Section 11120) of Chapter 1 of Part 1 of
Division 3 of Title 2 of the Government Code) applies to meetings
of the Oversight Board. In addition to the allowances of that act,
the Oversight Board may hold a closed session to consider the
appointment of one or more candidates to the governing board of
the Power Exchange, deliberate on matters involving the removal
of a member of the governing board of the Power Exchange, or to
consider a matter based on information that has received a grant
of confidential status pursuant to regulations of the Oversight
Board, provided that any action taken on such a matter shall be
taken by vote in an open session.

end delete

begin insert

begin insert SEC. 28. end insert   

end insert

begin insert Section 341.3 of the end insert begin insert Public Utilities Code end insert begin insert is repealed. end insert

begin delete

341.3.  

Voting members of the Oversight Board shall be
required to file financial disclosure statements with the Fair
Political Practices Commission. The appointing authority for voting
members shall avoid appointing persons with conflicts of interest.

end delete

begin insert

begin insert SEC. 29. end insert   

end insert

begin insert Section 341.4 of the end insert begin insert Public Utilities Code end insert begin insert is repealed. end insert

begin delete

341.4.  

The Oversight Board shall appoint, and fix the salary
of, an executive director who shall have charge of administering
the affairs of the Oversight Board, including entering into contracts,
subject to the direction and policies of the Oversight Board.
Notwithstanding Sections 11042 and 11043 of the Government
Code, the Oversight Board shall appoint an attorney who shall
advise the Oversight Board and each member and represent the
Oversight Board as a party in any state or federal action or
proceeding related to the purposes of this chapter or to an action
of the Oversight Board and who shall perform generally all the
duties of attorney to the Oversight Board. For purposes of this
section, the Oversight Board may appoint a person exempt pursuant
to subdivision (e) of Section 4 of Article VII of the California
Constitution. The executive director shall, in accordance with
Article VII of the California Constitution and subject to the
approval of the Oversight Board, appoint employees as may be
necessary to carry out the Oversight Board’s duties and
responsibilities.

end delete

begin insert

begin insert SEC. 30. end insert   

end insert

begin insert Section 341.5 of the end insert begin insert Public Utilities Code end insert begin insert is amended
to read: end insert

341.5.  

(a) The Independent System Operator begin delete and Power
Exchange end delete bylaws shall contain provisions that identify those
matters specified in begin delete subdivision (b) of end delete Section 339 as matters within
state jurisdiction. The bylaws shall also contain provisions which
state that California’s bylaws approval function with respect to
the matters specified in begin delete subdivision (b) of end delete Section 339 shall not
preclude the Federal Energy Regulatory Commission from taking
any action necessary to address undue discrimination or other
violations of the Federal Power Act (16 U.S.C.A. Sec. 791a et
seq.) or to exercise any other commission responsibility under the
Federal Power Act. In taking any such action, the Federal Energy
Regulatory Commission shall give due respect to California’s
jurisdictional interests in the functions of the Independent System
Operator begin delete and Power Exchange end delete and to attempt to accommodate
state interests to the extent those interests are not inconsistent with
the Federal Energy Regulatory Commission’s statutory
responsibilities. The bylaws shall state that any future agreement
regarding the apportionment of the Independent System Operator
begin delete and Power Exchange end delete board appointment function among
participating states associated with the expansion of the
Independent System Operator begin delete and Power Exchange end delete into multistate
entities shall be filed with the Federal Energy Regulatory
Commission pursuant to Section 205 of the Federal Power Act (16
U.S.C.A. Sec. 824d).

(b) Any necessary bylaw changes to implement the provisions
of Section begin delete 335, 337, 338, 339, end delete begin insert 339 end insert or subdivision (a) of this section,
or changes required pursuant to an agreement as contemplated by
subdivision (a) of this section with a participating state for a
regional organization, shall be effective upon approval of the
respective governing boards and the Oversight Board and
acceptance for filing by the Federal Energy Regulatory
Commission.

begin insert

begin insert SEC. 31. end insert   

end insert

begin insert Section 348 of the end insert begin insert Public Utilities Code end insert begin insert is amended
to read: end insert

348.  

The Independent System Operator shall adopt inspection,
maintenance, repair, and replacement standards for the transmission
facilities under its begin delete control no later than September 30, 1997. end delete
begin insert control. end insert 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
Operator shall also adopt standards for reliability, and safety during
periods of emergency and disaster. begin delete The Independent System
Operator shall report to the Oversight Board, at such times as the
Oversight Board may specify, on the development and
implementation of the standards in relation to facilities under the
operational control of the Independent System Operator. end delete 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.

begin insert

begin insert SEC. 32. end insert   

end insert

begin insert Section 349.5 of the end insert begin insert Public Utilities Code end insert begin insert is amended
to read: end insert

349.5.  

(a)  begin delete Beginning January 15, 2002, and at end delete begin insert At end insert least once
begin delete monthly thereafter, end delete begin insert each month, end insert the Independent System Operator
shall notify each air pollution control district and air quality
management district of the name and address of each entity within
the district’s boundaries within the Independent System Operator’s
control area with whom the Independent System Operator enters
into an interruptible service contract or similar arrangement.

(b) For the purposes of this section, “interruptible service
contract or similar arrangement” means any arrangement in which
a nonresidential entity agrees to reduce or consider reducing its
electrical consumption during periods of peak demand or at the
request of the Independent System Operator in exchange for
compensation, or for assurances not to be blacked out or other
similar nonmonetary assurances.

(c) The local air pollution control district or air quality
management district shall maintain in a confidential manner the
information received pursuant to this section. However, nothing
in this subdivision shall affect the applicability of Chapter 3.5
(commencing with Section 6250) of Division 7 of Title 1 of the
Government Code, or of any other similar open records statute or
ordinance, to information provided pursuant to this section.

begin delete SEC. 2. end delete
begin insert SEC. 33. end insert   

Section 350 of the Public Utilities Code is repealed.

begin insert

begin insert SEC. 34. end insert   

end insert

begin insert Section 355 of the end insert begin insert Public Utilities Code end insert begin insert is repealed. end insert

begin delete

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.

end delete

begin insert

begin insert SEC. 35. end insert   

end insert

begin insert Section 356 of the end insert begin insert Public Utilities Code end insert begin insert is repealed. end insert

begin delete

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.

end delete

begin insert

begin insert SEC. 36. end insert   

end insert

begin insert Section 359 of the end insert begin insert Public Utilities Code end insert begin insert is amended
to read: end insert

359.  

(a) It is the intent of the Legislature to provide for the
evolution of the Independent System Operator begin delete and the Power
Exchange end delete into regional organizations to promote the development
of regional electricity transmission markets in the western states
and to improve the access of consumers served by the Independent
System Operator begin delete and the Power Exchange end delete to those markets.

(b) The preferred means by which the voluntary evolution
described in subdivision (a) should occur is through the adoption
of a regional compact or other comparable agreement among
cooperating party states, the retail customers of which states would
reside within the geographic territories served by the Independent
System begin delete Operator and the Power Exchange. end delete begin insert Operat end insert begin insert or. end insert

(c) The agreement described in subdivision (b) should provide
for all of the following:

(1) An equitable process for the appointment or confirmation
by party states of members of the governing boards of the
Independent System begin delete Operator and the Power Exchange. end delete begin insert Operator. end insert

(2) A respecification of the size, structure, representation,
eligible membership, nominating procedures, and member terms
of service of the governing boards of the Independent System
begin delete Operator and the Power Exchange. end delete begin insert Operator. end insert

(3) Mechanisms by which each party state, jointly or separately,
can oversee effectively the actions of the Independent System
Operator begin delete and the Power Exchange end delete as those actions relate to the
assurance of electricity system reliability within the party state
and to matters that affect electricity sales to the retail customers
of the party state or otherwise affect the general welfare of the
electricity consumers and the general public of the party state.

(4) The adherence by publicly owned and investor-owned
utilities located in party states to enforceable standards and
protocols to protect the reliability of the interconnected regional
transmission and distribution systems.

begin insert

begin insert SEC. 37. end insert   

end insert

begin insert Section 361 of the end insert begin insert Public Utilities Code end insert begin insert is repealed. end insert

begin delete

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.

end delete

begin insert

begin insert SEC. 38. end insert   

end insert

begin insert Section 363 of the end insert begin insert Public Utilities Code end insert begin insert is repealed. end insert

begin delete

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 spinoff, 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.

(c) For those bayside fossil fueled electric generation and
associated transmission facilities that an electrical corporation has
proposed to divest in a public auction and for which the Legislature
has appropriated state funds in the Budget Act of 1998 to assist
local governmental entities in acquiring the facilities or to mitigate
environmental and community issues, and where the local
governmental entity proposes that the closure of the power plant
would serve the public interest by mitigating air, water and other
environmental, health and safety, and community impacts
associated with the facilities, and where the local governmental
entity and electrical corporation have engaged in significant
negotiations with the purpose of shutting down the power plant,
and where there is an agreement between the electrical corporation
and the local governmental entity for closure of the facilities or
for the local governmental entity to acquire the facilities, the
commission shall approve the closure of these facilities or the
transfer of these electric generation and associated transmission
facilities to the local governmental entity and shall consider the
utility transactions with the community to be just and reasonable
for its ratepayers. For purposes of calculating the Competition
Transition Charge, the commission shall not use any inferred
market value for the facilities predicated on the continued use of
the plant, the construction of successor facilities or alternative use
of the site and shall net the costs of the depreciated book value of
the power plant and the unrecovered costs of decommissioning,
environmental remediation and site restoration against the net
proceeds received from the local governmental entity for the
acquisition or closure of the facilities. Thereafter, any net proceeds
received from the ultimate disposition, by the electrical corporation,
of the site shall be credited to recovery of Competition Transition
Charges.

end delete

begin insert

begin insert SEC. 39. end insert   

end insert

begin insert Section 364 of the end insert begin insert Public Utilities Code end insert begin insert is amended
to read: end insert

364.  

(a) The commission shall adopt inspection, maintenance,
repair, and replacement standards for the distribution systems of
investor-owned electric begin delete utilities no later than March 31, 1997. end delete
begin insert utilities. end insert 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.

begin insert

begin insert SEC. 40. end insert   

end insert

begin insert Section 365 of the end insert begin insert Public Utilities Code end insert begin insert is amended
to read: end insert

365.  

The begin delete actions of the commission pursuant to this chapter
shall be consistent with the findings and declarations contained in
Section 330. In addition, the end delete 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 begin delete Operator and an independent Power Exchange, end delete
begin insert Operator, end insert for the determination of which transmission and
distribution facilities are subject to the exclusive jurisdiction of
the begin delete commission, and for approval, to the extent necessary, of the
cost recovery mechanism established as provided in Sections 367
to 376, inclusive. end delete begin insert commission. end insert The commission shall also
participate fully in all proceedings before the Federal Energy
Regulatory Commission in connection with the Independent
System Operator begin delete and the independent Power Exchange, end delete 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 begin delete the
nonbypassable charge referred to in Sections 367 to 376, inclusive. end delete
begin insert competition transition charges. end insert 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.

begin delete

SEC. 3.  

Section 367 of the Public Utilities Code is amended
to read:

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 include
transition costs as defined in subdivision (f) of Section 840, and
shall be recovered from all customers or in the case of fixed
transition amounts, from the customers specified in subdivision
(a) of Section 841, 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 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 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.

(6) Fixed transition amounts, as defined in subdivision (d) of
Section 840, may be recovered from the customers specified in
subdivision (a) of Section 841 until all rate reduction bonds
associated with the fixed transition amounts have been paid in full
by the financing entity.

(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 the 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 powerplants 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
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 firewall
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 firewall and rate freeze principles are not
violated.

end delete

begin insert

begin insert SEC. 41. end insert   

end insert

begin insert Section 367 of the end insert begin insert Public Utilities Code end insert begin insert is repealed. end insert

begin delete

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 include
transition costs as defined in subdivision (f) of Section 840, and
shall be recovered from all customers or in the case of fixed
transition amounts, from the customers specified in subdivision
(a) of Section 841, 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 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.

(6) Fixed transition amounts, as defined in subdivision (d) of
Section 840, may be recovered from the customers specified in
subdivision (a) of Section 841 until all rate reduction bonds
associated with the fixed transition amounts have been paid in full
by the financing entity.

(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 the 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 powerplants 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
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 firewall
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 firewall and rate freeze principles are not
violated.

end delete

begin delete SEC. 4. end delete
begin insert SEC. 42. end insert   

Section 367.7 of the Public Utilities Code is repealed.

begin delete SEC. 5. end delete
begin insert SEC. 43. end insert   

Section 368 of the Public Utilities Code is repealed.

begin delete SEC. 6. end delete
begin insert SEC. 44. end insert   

Section 368.5 of the Public Utilities Code is repealed.

begin delete SEC. 7. end delete
begin insert SEC. 45. end insert   

Section 369 of the Public Utilities Code is amended
to read:

369.  

begin delete The commission shall establish an effective mechanism
that ensures recovery of transition costs referred to in Sections 367
and 376, and end delete begin insert Competition transition charges, end insert subject to the
conditions in Sections 371 to 374, inclusive, begin delete from end delete begin insert the recovery of
which was authorized by the commission prior to January 1, 2015,
shall continue to apply to end insert 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.

begin delete SEC. 8. end delete
begin insert SEC. 46. end insert   

Section 370 of the Public Utilities Code is amended
to read:

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
begin delete the costs provided in Sections 367 and 376, and subject end delete begin insert competition
transition charges, and subject end insert 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.

begin delete SEC. 9. end delete
begin insert SEC. 47. end insert   

Section 371 of the Public Utilities Code is amended
to read:

371.  

(a) Except as provided in Sections 372 and 374, begin delete the
uneconomic costs provided in Sections 367 and 376 end delete begin insert competition
transition charges end insert 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 begin delete California Energy Resources
Conservation and Development Commission in Section 383, end delete
begin insert Energy Commission, end insert 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 Chapter 5
(commencing with Section 119075) of Part 15 of Division 104 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.

begin delete SEC. 10. end delete
begin insert SEC. 48. end insert   

Section 372 of the Public Utilities Code is amended
to read:

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
begin delete uneconomic costs as specified in Sections 367 and 376. end delete begin insert competition
transition charges. end insert 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 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 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
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 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 the 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 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 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 firewall 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)  begin delete The costs identified in Sections 367 and 376 end delete begin insert Competition
transition charges end insert 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)  begin delete The costs identified in Sections 367 and 376 end delete begin insert Competition
transition charges end insert 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.

(f) To encourage the continued development, installation, and
interconnection of clean and efficient self-generation and
cogeneration resources, to improve system reliability for consumers
by retaining existing generation and encouraging new generation
to connect to the electric grid, and to increase self-sufficiency of
consumers of electricity through the deployment of self-generation
and cogeneration, both of the following shall occur:

(1) The commission and the Electricity Oversight Board shall
determine if any policy or action undertaken by the Independent
System Operator, directly or indirectly, unreasonably discourages
the connection of existing self-generation or cogeneration or new
self-generation or cogeneration to the grid.

(2) If the commission and the Electricity Oversight Board find
that any policy or action of the Independent System Operator
unreasonably discourages the connection of existing self-generation
or cogeneration or new self-generation or cogeneration to the grid,
the commission and the Electricity Oversight Board shall undertake
all necessary efforts to revise, mitigate, or eliminate that policy or
action of the Independent System Operator.

begin delete

SEC. 11.  

Section 373 of the Public Utilities Code is amended
to read:

373.  

(a) Electrical corporations may apply to the commission
for an order determining that the costs identified in Sections 367
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.

end delete

begin insert

begin insert SEC. 49. end insert   

end insert

begin insert Section 373 of the end insert begin insert Public Utilities Code end insert begin insert is repealed. end insert

begin delete

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.

end delete

begin delete SEC. 12. end delete
begin insert SEC. 50. end insert   

Section 374 of the Public Utilities Code is amended
to read:

374.  

(a)  begin delete In recognition of statutory authority and past
investments existing as of December 20, 1995, and subject to the
firewall specified in subdivision (e) of Section 367, the obligation
to pay the uneconomic costs identified in Sections 367 and 376 end delete
begin insert Competition transition charges end insert 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 that 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 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 timeframe 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,
that any portion of the 110 megawatts that remains unallocated
may be reallocated to projects without regard to the 40 megawatts
limitation. In making 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 timeframe 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 that 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 that 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 begin delete the costs provided in Sections 367 and 376. end delete
begin insert competition transition charges. end insert

(3) To loads served by irrigation districts, water districts, water
storage districts, municipal utility districts, and other water agencies
that, 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 that 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, begin delete the costs provided in Sections 367 and 376 end delete begin insert end insert
begin insert competition transition charges end insert 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 that 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 firewall established in subdivision
(e) of Section 367.

(c) To give effect to an existing relationship, the obligation to
pay begin delete the uneconomic costs specified in Sections 367 and 376 end delete begin insert end insert
begin insert competition transition charges end insert 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 that the power is used solely for the facility load of that
campus and not, directly or indirectly, for sale.

begin delete SEC. 13. end delete
begin insert SEC. 51. end insert   

Section 374.5 of the Public Utilities Code is repealed.

begin delete SEC. 14. end delete
begin insert SEC. 52. end insert   

Section 375 of the Public Utilities Code is repealed.

begin insert

begin insert SEC. 53. end insert   

end insert

begin insert Section 376 of the end insert begin insert Public Utilities Code end insert begin insert is repealed. end insert

begin delete

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.

end delete

begin delete SEC. 15. end delete
begin insert SEC. 54. end insert   

Section 379 of the Public Utilities Code is amended
to read:

379.  

Nuclear decommissioning costs shall not be part of the
begin delete costs described in Sections 367 and 376, end delete begin insert competition transition
charges, end insert 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.

begin insert

begin insert SEC. 55. end insert   

end insert

begin insert Section 390 of the end insert begin insert Public Utilities Code end insert begin insert is repealed. end insert

begin delete

390.  

(a) Subject to applicable contractual terms, energy prices
paid to nonutility power 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 powerplant 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 powerplants,
provided that such additions are necessary for the continued
operation of the powerplants 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
powerplant 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.

end delete

begin insert

begin insert SEC. 56. end insert   

end insert

begin insert Section 390.1 of the end insert begin insert Public Utilities Code end insert begin insert is repealed. end insert

begin delete

390.1.  

Any nonutility power generator using renewable fuels
that has entered into a contract with an electrical corporation prior
to December 31, 2001, specifying fixed energy prices for five years
of output may negotiate a contract for an additional five years of
fixed energy payments upon expiration of the initial five-year term,
at a price to be determined by the commission.

end delete

begin delete

SEC. 16.  

Section 397 of the Public Utilities Code is amended
to read:

397.  

(a) 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.

end delete

begin insert

begin insert SEC. 57. end insert   

end insert

begin insert Section 394.5 of the end insert begin insert Public Utilities Code end insert begin insert is amended
to read: end insert

394.5.  

(a) Except for an electrical corporation as defined in
Section 218, or a local publicly owned electric utility offering
electrical service to residential and small commercial customers
within its service territory, each electric service provider offering
electrical service to residential and small commercial customers
shall, prior to the commencement of service, provide the potential
customer with a written notice of the service describing the price,
terms, and conditions of the service. A notice shall include all of
the following:

(1) A clear description of the price, terms, and conditions of
service, including:

(A) The price of electricity expressed in a format that makes it
possible for residential and small commercial customers to compare
and select among similar products and services on a standard basis.
The commission shall adopt rules to implement this subdivision.
The commission shall require disclosure of the total price of
electricity on a cents-per-kilowatthour basis, including the costs
of all electric services and charges regulated by the commission.
The commission shall also require estimates of the total monthly
bill for the electric service at varying consumption levels, including
the costs of all electric services and charges regulated by the
commission. In determining these rules, the commission may
consider alternatives to the cents-per-kilowatthour disclosure if
other information would provide the customer with sufficient
information to compare among alternatives on a standard basis.

(B) Separate disclosure of all recurring and nonrecurring charges
associated with the sale of electricity.

(C) If services other than electricity are offered, an itemization
of the services and the charge or charges associated with each.

(2) An explanation of the applicability and amount of the
competition transition begin delete charge, as determined pursuant to Sections
367 to 376, inclusive. end delete begin insert charges. end insert

(3) A description of the potential customer’s right to rescind
the contract without fee or penalty as described in Section 395.

(4) An explanation of the customer’s financial obligations, as
well as the procedures regarding past due payments, discontinuance
of service, billing disputes, and service complaints.

(5) The electric service provider’s registration number, if
applicable.

(6) The right to change service providers upon written notice,
including disclosure of any fees or penalties assessed by the
supplier for early termination of a contract.

(7) A description of the availability of low-income assistance
programs for qualified customers and how customers can apply
for these programs.

(b) The commission may assist electric service providers in
developing the notice. The commission may suggest inclusion of
additional information it deems necessary for the consumer
protection purposes of this section. On at least a semiannual basis,
electric service providers shall provide the commission with a copy
of the form of notice included in standard service plans made
available to residential and small commercial customers.

(c) An electric service provider offering electric services who
declines to provide those services to a consumer shall, upon request
of the consumer, disclose to that consumer the reason for the denial
in writing within 30 days. At the time service is denied, the electric
service provider shall disclose to the consumer the right to make
this request. A consumer shall have at least 30 days from the date
service is denied to make the request.

begin insert

begin insert SEC. 58. end insert   

end insert

begin insert Section 395 of the end insert begin insert Public Utilities Code end insert begin insert is amended
to read: end insert

395.  

(a) In addition to any other right to revoke an offer,
residential and small commercial customers of electrical service,
as defined in subdivision begin delete (h) end delete begin insert (g) end insert 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.

(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.

begin insert

begin insert SEC. 59. end insert   

end insert

begin insert Section 397 of the end insert begin insert Public Utilities Code end insert begin insert is repealed. end insert

begin delete

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.

end delete

begin insert

begin insert SEC. 60. end insert   

end insert

begin insert Section 399.2 of the end insert begin insert Public Utilities Code end insert begin insert is amended
to read: end insert

399.2.  

(a) (1) It is the policy of this state, and the intent of the
Legislature, to reaffirm that each electrical corporation shall
continue to operate its electric distribution grid in its service
territory and shall do so in a safe, reliable, efficient, and
cost-effective manner.

(2) In furtherance of this policy, it is the intent of the Legislature
that each electrical corporation shall continue to be responsible
for operating its own electric distribution grid including, but not
limited to, owning, controlling, operating, managing, maintaining,
planning, engineering, designing, and constructing its own electric
distribution grid, emergency response and restoration, service
connections, service turnons and turnoffs, and service inquiries
relating to the operation of its electric distribution grid, subject to
the commission’s authority.

(b) In order to ensure the continued efficient use, and
cost-effective, safe, and reliable operation of the electric
distribution grid, each electrical corporation shall continue to
operate its electric distribution grid in its service begin delete territory consistent
with Section 330. end delete begin insert territory. end insert

(c) In carrying out the purposes of this section, each electrical
corporation shall continue to make reasonable investments in its
electric distribution grid. Each electrical corporation shall continue
to have a reasonable opportunity to fully recover from all customers
of the electrical corporation, in a manner determined by the
commission pursuant to this code, all of the following:

(1) Reasonable investments in its electric distribution grid.

(2) A reasonable return on the investments in its electric
distribution grid.

(3) Reasonable costs to operate its electric distribution grid.

(d) For purposes of this section, the term “electric distribution
grid” means those facilities owned or operated by an electrical
corporation that are not under the control of the Independent
System Operator and that are used to transmit, deliver, or furnish
electricity for light, heat, or power.

(e) Nothing in this section shall be construed to alter or to affect
any of the following:

(1) Section 216, 218, or 2827.

(2) The authority of the commission to establish and enforce
standards and tariff conditions for the interconnection of
customer-owned facilities to the electric distribution grid.

(3) The ratemaking authority of the commission under this code.

(4) The authority of the commission to establish rules governing
the extension of service to new customers.

(f) Nothing in this section shall be construed to alter or affect
any authority or lack of authority of the commission regarding the
ownership and operation of new electric generation used in whole,
or in part, for the purpose of maintaining or enhancing the
reliability of the electric distribution grid.

(g) Nothing in this section diminishes or expands any existing
authority of a local governmental entity.

(h) The commission shall require every electrical corporation
operating an electric distribution grid to inform all customers who
request residential service connections via telephone of the
availability of the California Alternative Rates for Energy (CARE)
program and how they may qualify for and obtain these services
and shall accept applications for the CARE program according to
procedures specified by the commission. Electrical corporations
shall recover the reasonable costs of implementing this subdivision.

begin insert

begin insert SEC. 61. end insert   

end insert

begin insert Article 5.5 (commencing with Section 840) of Chapter
4 of Part 1 of Division 1 of the end insert begin insert Public Utilities Code end insert begin insert is repealed. end insert

begin delete

SEC. 17.  

Section 846.2 of the Public Utilities Code is amended
to read:

846.2.  

(a) Notwithstanding subdivision (c) of Section 841, for
any electrical corporation that ended its rate freeze period prior to
July 15, 1999, the commission may order a fair and reasonable
credit to ratepayers of any excess rate reduction bond proceeds.

(b) “Excess rate reduction bond proceeds,” as used in this
section, means proceeds from the sale of rate reduction bonds
authorized by commission financing orders issued pursuant to this
article that are subsequently determined by the commission to be
in excess of the amounts necessary to provide the 10-percent rate
reduction during the period when the rates were frozen.

end delete

begin insert

begin insert SEC. 62. end insert   

end insert

begin insert Section 2827 of the end insert begin insert Public Utilities Code end insert begin insert is amended
to read: end insert

2827.  

(a) The Legislature finds and declares that a program
to provide net energy metering combined with net surplus
compensation, co-energy metering, and wind energy co-metering
for eligible customer-generators is one way to encourage substantial
private investment in renewable energy resources, stimulate in-state
economic growth, reduce demand for electricity during peak
consumption periods, help stabilize California’s energy supply
infrastructure, enhance the continued diversification of California’s
energy resource mix, reduce interconnection and administrative
costs for electricity suppliers, and encourage conservation and
efficiency.

(b) As used in this section, the following terms have the
following meanings:

(1) “Co-energy metering” means a program that is the same in
all other respects as a net energy metering program, except that
the local publicly owned electric utility has elected to apply a
generation-to-generation energy and time-of-use credit formula
as provided in subdivision (i).

(2) “Electrical cooperative” means an electrical cooperative as
defined in Section 2776.

(3) “Electric utility” means an electrical corporation, a local
publicly owned electric utility, or an electrical cooperative, or any
other entity, except an electric service provider, that offers electrical
service. This section shall not apply to a local publicly owned
electric utility that serves more than 750,000 customers and that
also conveys water to its customers.

(4) “Eligible customer-generator” means a residential customer,
small commercial customer as defined in subdivision begin delete (h) end delete begin insert (g) end insert of
Section 331, or commercial, industrial, or agricultural customer
of an electric utility, who uses a renewable electrical generation
facility, or a combination of those facilities, with a total capacity
of not more than one megawatt, that is located on the customer’s
owned, leased, or rented premises, and is interconnected and
operates in parallel with the electrical grid, and is intended
primarily to offset part or all of the customer’s own electrical
requirements.

(5) “Large electrical corporation” means an electrical
corporation with more than 100,000 service connections in
California.

(6) “Net energy metering” means measuring the difference
between the electricity supplied through the electrical grid and the
electricity generated by an eligible customer-generator and fed
back to the electrical grid over a 12-month period as described in
subdivisions (c) and (h).

(7) “Net surplus customer-generator” means an eligible
customer-generator that generates more electricity during a
12-month period than is supplied by the electric utility to the
eligible customer-generator during the same 12-month period.

(8) “Net surplus electricity” means all electricity generated by
an eligible customer-generator measured in kilowatthours over a
12-month period that exceeds the amount of electricity consumed
by that eligible customer-generator.

(9) “Net surplus electricity compensation” means a per
kilowatthour rate offered by the electric utility to the net surplus
customer-generator for net surplus electricity that is set by the
ratemaking authority pursuant to subdivision (h).

(10) “Ratemaking authority” means, for an electrical
corporation, the commission, for an electrical cooperative, its
ratesetting body selected by its shareholders or members, and for
a local publicly owned electric utility, the local elected body
responsible for setting the rates of the local publicly owned utility.

(11) “Renewable electrical generation facility” means a facility
that generates electricity from a renewable source listed in
paragraph (1) of subdivision (a) of Section 25741 of the Public
Resources Code. A small hydroelectric generation facility is not
an eligible renewable electrical generation facility if it will cause
an adverse impact on instream beneficial uses or cause a change
in the volume or timing of streamflow.

(12) “Wind energy co-metering” means any wind energy project
greater than 50 kilowatts, but not exceeding one megawatt, where
the difference between the electricity supplied through the electrical
grid and the electricity generated by an eligible customer-generator
and fed back to the electrical grid over a 12-month period is as
described in subdivision (h). Wind energy co-metering shall be
accomplished pursuant to Section 2827.8.

(c) (1) Except as provided in paragraph (4) and in Section
2827.1, every electric utility shall develop a standard contract or
tariff providing for net energy metering, and shall make this
standard contract or tariff available to eligible customer-generators,
upon request, on a first-come-first-served basis until the time that
the total rated generating capacity used by eligible
customer-generators exceeds 5 percent of the electric utility’s
aggregate customer peak demand. Net energy metering shall be
accomplished using a single meter capable of registering the flow
of electricity in two directions. An additional meter or meters to
monitor the flow of electricity in each direction may be installed
with the consent of the eligible customer-generator, at the expense
of the electric utility, and the additional metering shall be used
only to provide the information necessary to accurately bill or
credit the eligible customer-generator pursuant to subdivision (h),
or to collect generating system performance information for
research purposes relative to a renewable electrical generation
facility. If the existing electrical meter of an eligible
customer-generator is not capable of measuring the flow of
electricity in two directions, the eligible customer-generator shall
be responsible for all expenses involved in purchasing and
installing a meter that is able to measure electricity flow in two
directions. If an additional meter or meters are installed, the net
energy metering calculation shall yield a result identical to that of
a single meter. An eligible customer-generator that is receiving
service other than through the standard contract or tariff may elect
to receive service through the standard contract or tariff until the
electric utility reaches the generation limit set forth in this
paragraph. Once the generation limit is reached, only eligible
customer-generators that had previously elected to receive service
pursuant to the standard contract or tariff have a right to continue
to receive service pursuant to the standard contract or tariff.
Eligibility for net energy metering does not limit an eligible
customer-generator’s eligibility for any other rebate, incentive, or
credit provided by the electric utility, or pursuant to any
governmental program, including rebates and incentives provided
pursuant to the California Solar Initiative.

(2) An electrical corporation shall include a provision in the net
energy metering contract or tariff requiring that any customer with
an existing electrical generating facility and meter who enters into
a new net energy metering contract shall provide an inspection
report to the electrical corporation, unless the electrical generating
facility and meter have been installed or inspected within the
previous three years. The inspection report shall be prepared by a
California licensed contractor who is not the owner or operator of
the facility and meter. A California licensed electrician shall
perform the inspection of the electrical portion of the facility and
meter.

(3) (A) On an annual basis, every electric utility shall make
available to the ratemaking authority information on the total rated
generating capacity used by eligible customer-generators that are
customers of that provider in the provider’s service area and the
net surplus electricity purchased by the electric utility pursuant to
this section.

(B) An electric service provider operating pursuant to Section
394 shall make available to the ratemaking authority the
information required by this paragraph for each eligible
customer-generator that is their customer for each service area of
an electrical corporation, local publicly owned electrical utility,
or electrical cooperative, in which the eligible customer-generator
has net energy metering.

(C) The ratemaking authority shall develop a process for making
the information required by this paragraph available to electric
utilities, and for using that information to determine when, pursuant
to paragraphs (1) and (4), an electric utility is not obligated to
provide net energy metering to additional eligible
customer-generators in its service area.

(4) (A) An electric utility that is not a large electrical
corporation is not obligated to provide net energy metering to
additional eligible customer-generators in its service area when
the combined total peak demand of all electricity used by eligible
customer-generators served by all the electric utilities in that
service area furnishing net energy metering to eligible
customer-generators exceeds 5 percent of the aggregate customer
peak demand of those electric utilities.

(B)  The commission shall require every large electrical
corporation to make the standard contract or tariff available to
eligible customer-generators, continuously and without
interruption, until such times as the large electrical corporation
reaches its net energy metering program limit or July 1, 2017,
whichever is earlier. A large electrical corporation reaches its
program limit when the combined total peak demand of all
electricity used by eligible customer-generators served by all the
electric utilities in the large electrical corporation’s service area
furnishing net energy metering to eligible customer-generators
exceeds 5 percent of the aggregate customer peak demand of those
electric utilities. For purposes of calculating a large electrical
corporation’s program limit, “aggregate customer peak demand”
means the highest sum of the noncoincident peak demands of all
of the large electrical corporation’s customers that occurs in any
calendar year. To determine the aggregate customer peak demand,
every large electrical corporation shall use a uniform method
approved by the commission. The program limit calculated
pursuant to this paragraph shall not be less than the following:

(i) For San Diego Gas and Electric Company, when it has made
607 megawatts of nameplate generating capacity available to
eligible customer-generators.

(ii) For Southern California Edison Company, when it has made
2,240 megawatts of nameplate generating capacity available to
eligible customer-generators.

(iii) For Pacific Gas and Electric Company, when it has made
2,409 megawatts of nameplate generating capacity available to
eligible customer-generators.

(C) Every large electrical corporation shall file a monthly report
with the commission detailing the progress toward the net energy
metering program limit established in subparagraph (B). The report
shall include separate calculations on progress toward the limits
based on operating solar energy systems, cumulative numbers of
interconnection requests for net energy metering eligible systems,
and any other criteria required by the commission.

(D) Beginning July 1, 2017, or upon reaching the net metering
program limit of subparagraph (B), whichever is earlier, the
obligation of a large electrical corporation to provide service
pursuant to a standard contract or tariff shall be pursuant to Section
2827.1 and applicable state and federal requirements.

(d) Every electric utility shall make all necessary forms and
contracts for net energy metering and net surplus electricity
compensation service available for download from the Internet.

(e) (1) Every electric utility shall ensure that requests for
establishment of net energy metering and net surplus electricity
compensation are processed in a time period not exceeding that
for similarly situated customers requesting new electric service,
but not to exceed 30 working days from the date it receives a
completed application form for net energy metering service or net
surplus electricity compensation, including a signed interconnection
agreement from an eligible customer-generator and the electric
inspection clearance from the governmental authority having
jurisdiction.

(2) Every electric utility shall ensure that requests for an
interconnection agreement from an eligible customer-generator
are processed in a time period not to exceed 30 working days from
the date it receives a completed application form from the eligible
customer-generator for an interconnection agreement.

(3) If an electric utility is unable to process a request within the
allowable timeframe pursuant to paragraph (1) or (2), it shall notify
the eligible customer-generator and the ratemaking authority of
the reason for its inability to process the request and the expected
completion date.

(f) (1) If a customer participates in direct transactions pursuant
to paragraph (1) of subdivision (b) of Section 365, or Section 365.1,
with an electric service provider that does not provide distribution
service for the direct transactions, the electric utility that provides
distribution service for the eligible customer-generator is not
obligated to provide net energy metering or net surplus electricity
compensation to the customer.

(2) If a customer participates in direct transactions pursuant to
paragraph (1) of subdivision (b) of Section 365 with an electric
service provider, and the customer is an eligible
customer-generator, the electric utility that provides distribution
service for the direct transactions may recover from the customer’s
electric service provider the incremental costs of metering and
billing service related to net energy metering and net surplus
electricity compensation in an amount set by the ratemaking
authority.

(g) Except for the time-variant kilowatthour pricing portion of
any tariff adopted by the commission pursuant to paragraph (4) of
subdivision (a) of Section 2851, each net energy metering contract
or tariff shall be identical, with respect to rate structure, all retail
rate components, and any monthly charges, to the contract or tariff
to which the same customer would be assigned if the customer did
not use a renewable electrical generation facility, except that
eligible customer-generators shall not be assessed standby charges
on the electrical generating capacity or the kilowatthour production
of a renewable electrical generation facility. The charges for all
retail rate components for eligible customer-generators shall be
based exclusively on the customer-generator’s net kilowatthour
consumption over a 12-month period, without regard to the eligible
customer-generator’s choice as to from whom it purchases
electricity that is not self-generated. Any new or additional demand
charge, standby charge, customer charge, minimum monthly
charge, interconnection charge, or any other charge that would
increase an eligible customer-generator’s costs beyond those of
other customers who are not eligible customer-generators in the
rate class to which the eligible customer-generator would otherwise
be assigned if the customer did not own, lease, rent, or otherwise
operate a renewable electrical generation facility is contrary to the
intent of this section, and shall not form a part of net energy
metering contracts or tariffs.

(h) For eligible customer-generators, the net energy metering
calculation shall be made by measuring the difference between
the electricity supplied to the eligible customer-generator and the
electricity generated by the eligible customer-generator and fed
back to the electrical grid over a 12-month period. The following
rules shall apply to the annualized net metering calculation:

(1) The eligible residential or small commercial
customer-generator, at the end of each 12-month period following
the date of final interconnection of the eligible
customer-generator’s system with an electric utility, and at each
anniversary date thereafter, shall be billed for electricity used
during that 12-month period. The electric utility shall determine
if the eligible residential or small commercial customer-generator
was a net consumer or a net surplus customer-generator during
that period.

(2) At the end of each 12-month period, where the electricity
supplied during the period by the electric utility exceeds the
electricity generated by the eligible residential or small commercial
customer-generator during that same period, the eligible residential
or small commercial customer-generator is a net electricity
consumer and the electric utility shall be owed compensation for
the eligible customer-generator’s net kilowatthour consumption
over that 12-month period. The compensation owed for the eligible
residential or small commercial customer-generator’s consumption
shall be calculated as follows:

(A) For all eligible customer-generators taking service under
contracts or tariffs employing “baseline” and “over baseline” rates,
any net monthly consumption of electricity shall be calculated
according to the terms of the contract or tariff to which the same
customer would be assigned to, or be eligible for, if the customer
was not an eligible customer-generator. If those same
customer-generators are net generators over a billing period, the
net kilowatthours generated shall be valued at the same price per
kilowatthour as the electric utility would charge for the baseline
quantity of electricity during that billing period, and if the number
of kilowatthours generated exceeds the baseline quantity, the excess
shall be valued at the same price per kilowatthour as the electric
utility would charge for electricity over the baseline quantity during
that billing period.

(B) For all eligible customer-generators taking service under
contracts or tariffs employing time-of-use rates, any net monthly
consumption of electricity shall be calculated according to the
terms of the contract or tariff to which the same customer would
be assigned, or be eligible for, if the customer was not an eligible
customer-generator. When those same customer-generators are
net generators during any discrete time-of-use period, the net
kilowatthours produced shall be valued at the same price per
kilowatthour as the electric utility would charge for retail
kilowatthour sales during that same time-of-use period. If the
eligible customer-generator’s time-of-use electrical meter is unable
to measure the flow of electricity in two directions, paragraph (1)
of subdivision (c) shall apply.

(C) For all eligible residential and small commercial
customer-generators and for each billing period, the net balance
of moneys owed to the electric utility for net consumption of
electricity or credits owed to the eligible customer-generator for
net generation of electricity shall be carried forward as a monetary
value until the end of each 12-month period. For all eligible
commercial, industrial, and agricultural customer-generators, the
net balance of moneys owed shall be paid in accordance with the
electric utility’s normal billing cycle, except that if the eligible
commercial, industrial, or agricultural customer-generator is a net
electricity producer over a normal billing cycle, any excess
kilowatthours generated during the billing cycle shall be carried
over to the following billing period as a monetary value, calculated
according to the procedures set forth in this section, and appear as
a credit on the eligible commercial, industrial, or agricultural
customer-generator’s account, until the end of the annual period
when paragraph (3) shall apply.

(3) At the end of each 12-month period, where the electricity
generated by the eligible customer-generator during the 12-month
period exceeds the electricity supplied by the electric utility during
that same period, the eligible customer-generator is a net surplus
customer-generator and the electric utility, upon an affirmative
election by the net surplus customer-generator, shall either (A)
provide net surplus electricity compensation for any net surplus
electricity generated during the prior 12-month period, or (B) allow
the net surplus customer-generator to apply the net surplus
electricity as a credit for kilowatthours subsequently supplied by
the electric utility to the net surplus customer-generator. For an
eligible customer-generator that does not affirmatively elect to
receive service pursuant to net surplus electricity compensation,
the electric utility shall retain any excess kilowatthours generated
during the prior 12-month period. The eligible customer-generator
not affirmatively electing to receive service pursuant to net surplus
electricity compensation shall not be owed any compensation for
the net surplus electricity unless the electric utility enters into a
purchase agreement with the eligible customer-generator for those
excess kilowatthours. Every electric utility shall provide notice to
eligible customer-generators that they are eligible to receive net
surplus electricity compensation for net surplus electricity, that
they must elect to receive net surplus electricity compensation,
and that the 12-month period commences when the electric utility
receives the eligible customer-generator’s election. For an electric
utility that is an electrical corporation or electrical cooperative,
the commission may adopt requirements for providing notice and
the manner by which eligible customer-generators may elect to
receive net surplus electricity compensation.

(4) (A) An eligible customer-generator with multiple meters
may elect to aggregate the electrical load of the meters located on
the property where the renewable electrical generation facility is
located and on all property adjacent or contiguous to the property
on which the renewable electrical generation facility is located, if
those properties are solely owned, leased, or rented by the eligible
customer-generator. If the eligible customer-generator elects to
aggregate the electric load pursuant to this paragraph, the electric
utility shall use the aggregated load for the purpose of determining
whether an eligible customer-generator is a net consumer or a net
surplus customer-generator during a 12-month period.

(B) If an eligible customer-generator chooses to aggregate
pursuant to subparagraph (A), the eligible customer-generator shall
be permanently ineligible to receive net surplus electricity
compensation, and the electric utility shall retain any kilowatthours
in excess of the eligible customer-generator’s aggregated electrical
load generated during the 12-month period.

(C) If an eligible customer-generator with multiple meters elects
to aggregate the electrical load of those meters pursuant to
subparagraph (A), and different rate schedules are applicable to
service at any of those meters, the electricity generated by the
renewable electrical generation facility shall be allocated to each
of the meters in proportion to the electrical load served by those
meters. For example, if the eligible customer-generator receives
electric service through three meters, two meters being at an
agricultural rate that each provide service to 25 percent of the
customer’s total load, and a third meter, at a commercial rate, that
provides service to 50 percent of the customer’s total load, then
50 percent of the electrical generation of the eligible renewable
generation facility shall be allocated to the third meter that provides
service at the commercial rate and 25 percent of the generation
shall be allocated to each of the two meters providing service at
the agricultural rate. This proportionate allocation shall be
computed each billing period.

(D) This paragraph shall not become operative for an electrical
corporation unless the commission determines that allowing
eligible customer-generators to aggregate their load from multiple
meters will not result in an increase in the expected revenue
obligations of customers who are not eligible customer-generators.
The commission shall make this determination by September 30,
2013. In making this determination, the commission shall determine
if there are any public purpose or other noncommodity charges
that the eligible customer-generators would pay pursuant to the
net energy metering program as it exists prior to aggregation, that
the eligible customer-generator would not pay if permitted to
aggregate the electrical load of multiple meters pursuant to this
paragraph.

(E) A local publicly owned electric utility or electrical
cooperative shall only allow eligible customer-generators to
aggregate their load if the utility’s ratemaking authority determines
that allowing eligible customer-generators to aggregate their load
from multiple meters will not result in an increase in the expected
revenue obligations of customers that are not eligible
customer-generators. The ratemaking authority of a local publicly
owned electric utility or electrical cooperative shall make this
determination within 180 days of the first request made by an
eligible customer-generator to aggregate their load. In making the
determination, the ratemaking authority shall determine if there
are any public purpose or other noncommodity charges that the
eligible customer-generator would pay pursuant to the net energy
metering or co-energy metering program of the utility as it exists
prior to aggregation, that the eligible customer-generator would
not pay if permitted to aggregate the electrical load of multiple
meters pursuant to this paragraph. If the ratemaking authority
determines that load aggregation will not cause an incremental
rate impact on the utility’s customers that are not eligible
customer-generators, the local publicly owned electric utility or
electrical cooperative shall permit an eligible customer-generator
to elect to aggregate the electrical load of multiple meters pursuant
to this paragraph. The ratemaking authority may reconsider any
determination made pursuant to this subparagraph in a subsequent
public proceeding.

(F) For purposes of this paragraph, parcels that are divided by
a street, highway, or public thoroughfare are considered contiguous,
provided they are otherwise contiguous and under the same
ownership.

(G) An eligible customer-generator may only elect to aggregate
the electrical load of multiple meters if the renewable electrical
generation facility, or a combination of those facilities, has a total
generating capacity of not more than one megawatt.

(H) Notwithstanding subdivision (g), an eligible
customer-generator electing to aggregate the electrical load of
multiple meters pursuant to this subdivision shall remit service
charges for the cost of providing billing services to the electric
utility that provides service to the meters.

(5) (A) The ratemaking authority shall establish a net surplus
electricity compensation valuation to compensate the net surplus
customer-generator for the value of net surplus electricity generated
by the net surplus customer-generator. The commission shall
establish the valuation in a ratemaking proceeding. The ratemaking
authority for a local publicly owned electric utility shall establish
the valuation in a public proceeding. The net surplus electricity
compensation valuation shall be established so as to provide the
net surplus customer-generator just and reasonable compensation
for the value of net surplus electricity, while leaving other
ratepayers unaffected. The ratemaking authority shall determine
whether the compensation will include, where appropriate
justification exists, either or both of the following components:

(i) The value of the electricity itself.

(ii) The value of the renewable attributes of the electricity.

(B) In establishing the rate pursuant to subparagraph (A), the
ratemaking authority shall ensure that the rate does not result in a
shifting of costs between eligible customer-generators and other
bundled service customers.

(6) (A) Upon adoption of the net surplus electricity
compensation rate by the ratemaking authority, any renewable
energy credit, as defined in Section 399.12, for net surplus
electricity purchased by the electric utility shall belong to the
electric utility. Any renewable energy credit associated with
electricity generated by the eligible customer-generator that is
utilized by the eligible customer-generator shall remain the property
of the eligible customer-generator.

(B) Upon adoption of the net surplus electricity compensation
rate by the ratemaking authority, the net surplus electricity
purchased by the electric utility shall count toward the electric
utility’s renewables portfolio standard annual procurement targets
for the purposes of paragraph (1) of subdivision (b) of Section
399.15, or for a local publicly owned electric utility, the renewables
portfolio standard annual procurement targets established pursuant
to Section 387.

(7) The electric utility shall provide every eligible residential
or small commercial customer-generator with net electricity
consumption and net surplus electricity generation information
with each regular bill. That information shall include the current
monetary balance owed the electric utility for net electricity
consumed, or the net surplus electricity generated, since the last
12-month period ended. Notwithstanding this subdivision, an
electric utility shall permit that customer to pay monthly for net
energy consumed.

(8) If an eligible residential or small commercial
customer-generator terminates the customer relationship with the
electric utility, the electric utility shall reconcile the eligible
customer-generator’s consumption and production of electricity
during any part of a 12-month period following the last
reconciliation, according to the requirements set forth in this
subdivision, except that those requirements shall apply only to the
months since the most recent 12-month bill.

(9) If an electric service provider or electric utility providing
net energy metering to a residential or small commercial
customer-generator ceases providing that electric service to that
customer during any 12-month period, and the customer-generator
enters into a new net energy metering contract or tariff with a new
electric service provider or electric utility, the 12-month period,
with respect to that new electric service provider or electric utility,
shall commence on the date on which the new electric service
provider or electric utility first supplies electric service to the
customer-generator.

(i) Notwithstanding any other provisions of this section,
paragraphs (1), (2), and (3) shall apply to an eligible
customer-generator with a capacity of more than 10 kilowatts, but
not exceeding one megawatt, that receives electric service from a
local publicly owned electric utility that has elected to utilize a
co-energy metering program unless the local publicly owned
electric utility chooses to provide service for eligible
customer-generators with a capacity of more than 10 kilowatts in
accordance with subdivisions (g) and (h):

(1) The eligible customer-generator shall be required to utilize
a meter, or multiple meters, capable of separately measuring
electricity flow in both directions. All meters shall provide
time-of-use measurements of electricity flow, and the customer
shall take service on a time-of-use rate schedule. If the existing
meter of the eligible customer-generator is not a time-of-use meter
or is not capable of measuring total flow of electricity in both
directions, the eligible customer-generator shall be responsible for
all expenses involved in purchasing and installing a meter that is
both time-of-use and able to measure total electricity flow in both
directions. This subdivision shall not restrict the ability of an
eligible customer-generator to utilize any economic incentives
provided by a governmental agency or an electric utility to reduce
its costs for purchasing and installing a time-of-use meter.

(2) The consumption of electricity from the local publicly owned
electric utility shall result in a cost to the eligible
customer-generator to be priced in accordance with the standard
rate charged to the eligible customer-generator in accordance with
the rate structure to which the customer would be assigned if the
customer did not use a renewable electrical generation facility.
The generation of electricity provided to the local publicly owned
electric utility shall result in a credit to the eligible
customer-generator and shall be priced in accordance with the
generation component, established under the applicable structure
to which the customer would be assigned if the customer did not
use a renewable electrical generation facility.

(3) All costs and credits shall be shown on the eligible
customer-generator’s bill for each billing period. In any months
in which the eligible customer-generator has been a net consumer
of electricity calculated on the basis of value determined pursuant
to paragraph (2), the customer-generator shall owe to the local
publicly owned electric utility the balance of electricity costs and
credits during that billing period. In any billing period in which
the eligible customer-generator has been a net producer of
electricity calculated on the basis of value determined pursuant to
paragraph (2), the local publicly owned electric utility shall owe
to the eligible customer-generator the balance of electricity costs
and credits during that billing period. Any net credit to the eligible
customer-generator of electricity costs may be carried forward to
subsequent billing periods, provided that a local publicly owned
electric utility may choose to carry the credit over as a kilowatthour
credit consistent with the provisions of any applicable contract or
tariff, including any differences attributable to the time of
generation of the electricity. At the end of each 12-month period,
the local publicly owned electric utility may reduce any net credit
due to the eligible customer-generator to zero.

(j) A renewable electrical generation facility used by an eligible
customer-generator shall meet all applicable safety and
performance standards established by the National Electrical Code,
the Institute of Electrical and Electronics Engineers, and accredited
testing laboratories, including Underwriters Laboratories
Incorporated and, where applicable, rules of the commission
regarding safety and reliability. A customer-generator whose
renewable electrical generation facility meets those standards and
rules shall not be required to install additional controls, perform
or pay for additional tests, or purchase additional liability
insurance.

(k) If the commission determines that there are cost or revenue
obligations for an electrical corporation that may not be recovered
from customer-generators acting pursuant to this section, those
obligations shall remain within the customer class from which any
shortfall occurred and shall not be shifted to any other customer
class. Net energy metering and co-energy metering customers shall
not be exempt from the public goods charges imposed pursuant to
Article 7 (commencing with Section 381), Article 8 (commencing
with Section 385), or Article 15 (commencing with Section 399)
of Chapter 2.3 of Part 1.

(l) A net energy metering, co-energy metering, or wind energy
co-metering customer shall reimburse the Department of Water
Resources for all charges that would otherwise be imposed on the
customer by the commission to recover bond-related costs pursuant
to an agreement between the commission and the Department of
Water Resources pursuant to Section 80110 of the Water Code,
as well as the costs of the department equal to the share of the
department’s estimated net unavoidable power purchase contract
costs attributable to the customer. The commission shall
incorporate the determination into an existing proceeding before
the commission, and shall ensure that the charges are
nonbypassable. Until the commission has made a determination
regarding the nonbypassable charges, net energy metering,
co-energy metering, and wind energy co-metering shall continue
under the same rules, procedures, terms, and conditions as were
applicable on December 31, 2002.

(m) In implementing the requirements of subdivisions (k) and
(l), an eligible customer-generator shall not be required to replace
its existing meter except as set forth in paragraph (1) of subdivision
(c), nor shall the electric utility require additional measurement of
usage beyond that which is necessary for customers in the same
rate class as the eligible customer-generator.

(n) It is the intent of the Legislature that the Treasurer
incorporate net energy metering, including net surplus electricity
compensation, co-energy metering, and wind energy co-metering
projects undertaken pursuant to this section as sustainable building
methods or distributive energy technologies for purposes of
evaluating low-income housing projects.

begin delete SEC. 18. end delete
begin insert SEC. 63. end insert   

Section 9600 of the Public Utilities Code is amended
to read:

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 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.

begin delete SEC. 19. end delete
begin insert SEC. 64. end insert   

Section 9607 of the Public Utilities Code is amended
to read:

9607.  

(a) The intent of this section is to avoid cost-shifting to
customers of an electrical corporation resulting from the transfer
of distribution services from an electrical corporation to an
irrigation district.

(b) Except as otherwise provided in this section and Section
9608, and notwithstanding any other provision of law, an irrigation
district that offered electric service to retail customers as of January
1, 1999, may not construct, lease, acquire, install, or operate
facilities for the distribution or transmission of electricity to retail
customers located in the service territory of an electrical
corporation providing electric distribution services, unless the
district has first applied for and received the approval of the
commission and implements its service consistent with the
commission’s order. The commission shall find that service to be
in the public interest and shall approve the request of a district to
provide distribution or transmission of electricity to retail customers
located in the service territory of an electrical corporation providing
electric distribution service if, after notice and hearing, the
commission determines all of the following:

(1) The district will provide universal service to all retail
customers who request service within the area to be served, at
published tariff rates and on a just, reasonable, and
nondiscriminatory basis, comparable to that provided by the current
retail service provider.

(2) If the area the district is proposing to serve is either of the
following:

(A) Is within the district’s boundaries but less than the entire
district, the area to be served includes a percentage of residential
customers and small customers, based on load, comparable to the
percentage of residential and small customers in the district, based
on load.

(B) Includes territory outside the district’s boundaries, in which
case the territory outside the district’s boundaries must include a
percentage of residential customers and small customers, based
on load, comparable to the percentage of residential and small
customers in the county or counties where service is to be provided,
based on load.

(3) Service by the district will be consistent with the intent of
the state to avoid economic waste caused by duplication of facilities
as set forth in Section 8101.

(4) Service by the district will include reasonable mitigation of
any adverse effects on the reliability of an existing service by the
electrical corporation.

(5) The district has established, funded, and is carrying out
public purpose and low-income programs comparable to those
provided by the current electric retail service provider.

(6) That district’s tariffed electric rates, exclusive of commodity
costs, will be at least 15 percent below the tariffed electric rates,
exclusive of commodity costs and begin delete nonbypassable charges under
Sections 367, 376, and 379, end delete begin insert competition transition charges, end insert of the
electrical corporation for comparable services.

(7) Service by the district is in the public interest.

(c) An irrigation district that obtains the approval of the
commission under this section to serve an area shall prepare an
annual report available to the public on the total load and number
of accounts of residential, low-income, agricultural, commercial,
and industrial customers served by the irrigation district in the
approved service area.

(d) The commission shall have jurisdiction to resolve and
adjudicate complaint cases brought against an irrigation district
that offered electric service to retail customers as of January 1,
1999, by an interested party where the complaint concerns retail
electric service outside the boundaries of the district and within
the service territory of an electrical corporation. Nothing in this
section grants the commission jurisdiction to adjudicate complaint
cases involving retail electric service by an irrigation district inside
its boundaries or inside an irrigation district’s exclusive service
territory.

(e) Any project involving electric transmission or distribution
facilities to be constructed or installed by an irrigation district to
serve retail customers located in the service territory of an electrical
corporation providing electric distribution services shall comply
with the California Environmental Quality Act, (Division 13
(commencing with Section 21000)) of the Public Resources Code.
The county in which the construction or installation is to occur
shall act as the lead agency. If a project involves the construction
or installation of electric transmission or distribution facilities in
more than one county, the county where the majority of the
construction is anticipated to occur shall act as the lead agency.

(f) An irrigation district may not offer service to customers
outside of its district boundaries before offering service to all
customers within its district boundaries.

(g) This section does not apply to electric distribution service
provided by Modesto Irrigation District to those customers or
within those areas described in subdivisions (a), (b), and (c) of
Section 9610.

(h) The provisions of this section shall not apply to (1) a
cumulative 90 megawatts of load served by the Merced Irrigation
District that is 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 the district on that date, or (2) electric load served
by the district which was not previously served by an electric
corporation that is 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 the district on that date.

(i) For purposes of this section, a megawatt of load shall be
calculated in accordance with the methodology established by the
California Energy Resource Conservation and Development
Commission in its Docket No. 96-IRR-1890, but the 90 megawatts
shall not include electrical usage by customers that move to the
areas described in paragraph (1) after December 31, 2000.

(j) Subdivision (a) of this section shall not apply to the
construction, modification, lease, acquisition, installation, or
operation of facilities for the distribution or transmission of
electricity to customers electrically connected to a district as of
December 31, 2000, or to other customers who subsequently locate
at the same premises.

(k) In recognition of contractual arrangements and settlements
existing as of June 1, 2000, this section does not apply to the
acquisition or operation of the electric distribution facilities that
are the subject of the Settlement Agreement dated May 1, 2000,
between Pacific Gas and Electric Company and the San Joaquin
Irrigation District.

(l) For purposes of this section, retail customers do not include
an irrigation district’s own electric load being served of retail by
an electrical corporation.

begin insert

begin insert SEC. 65. end insert   

end insert

begin insert Section 31071.5 of the end insert begin insert Streets and Highways Code end insert
begin insert is amended to read: end insert

31071.5.  

(a) Bonds issued under this chapter may not be
deemed to constitute a debt or liability of the state or of any
political subdivision thereof, other than the bank, or a pledge of
the faith and credit of the state or of any political subdivision
thereof, but shall be payable solely from the account, and the assets
of the account, and the security provided by the account. All bonds
issued under this chapter shall contain on the face of the bonds a
statement to this effect.

(b) Notwithstanding any other provision of law, Article 3
(commencing with Section begin delete 63040) of, Article 4 (commencing with
63042) of, end delete begin insert 63040) end insert and Article 5 (commencing with Section 63043)
of Chapter 2 of Division 1 of Title 6.7 of the Government Code
do not apply to any financing provided by the bank to, or at the
request of, the department in connection with the account.