BEFORE THE PUBLIC UTILITIES COMMISSION
                             OF THE
                       STATE OF CALIFORNIA



                                          
                                          )
Order Instituting Rulemaking on the       )
Commission's Proposed Policies            )
Governing Restructuring California's      )   R.94-04-031
Electric Services Industry and            )
Reforming Regulation                      )
                                          )

Order Instituting Investigation on the    )
Commission's Proposed Policies            )
Governing Restructuring California's      )   I.94-04-032
Electric Services Industry and            )
Reforming Regulation                      )
                                          )



                      INITIAL COMMENTS OF 
                 THE CITY OF VERNON, CALIFORNIA
          WITH RESPECT TO THE THIRD FULL PANEL HEARING


          Pursuant to the Assigned Commissioners' Ruling of July
8, 1994, the City of Vernon, California ("Vernon") comments on
the issues set for discussion at the "third full panel hearing"
scheduled for August 4, 1994.
          Vernon believes that many of the economic efficiencies
which could be achieved through a Commission imposed restructur-
ing of the California electric industry could be realized through
vigorous wholesale competition.  In order to ensure such competi-
tion it may be necessary for the industry to adopt arrangements
somewhat akin to the Poolco concept advocated by Southern Cali-
fornia Edison Company ("Edison") (see, e.g., Edison June 21, 1994
Reply Comments at pages 7-16), shaped to guarantee participants
in the wholesale market fair access to dispatch services.  It may
prove necessary that the natural monopoly functions of transmis-
sion and dispatch be severed from monopolization of control area
services.  See Vernon June 17, 1994 Reply Comments.  Formation of
a Poolco would involve highly technical issues including such
matters as the sharing of system condition restraints on power
imports.  San Diego Gas & Electric Company ("SDG&E") has already
taken the lead in creating a working group to flesh out the
details of a competitive pool proposal.  See, e.g., SDG&E June
21, 1994 Reply Comments at 10.  The Commission should encourage
such voluntary efforts and, to the extent it is able to do so
within its authority, ensure that the final result is not skewed
in favor of those with greater negotiating strength.  Clearly,
such a pool could not and should not discriminate against munici-
pal utilities or municipal utility resources.
          Vernon looks forward to studying, and reserves its
rights to comment upon, a more fleshed out Poolco-type proposal
or proposals. 
          Vernon is also concerned, as stated at pages 2-4 of its
June 7, 1994 initial comments in this proceeding, that in any
restructured environment, some entity or entities, whether Poolco
itself or others, be provided with sufficient legal responsibili-
ty and economic incentives to solve sudden, unexpected or emer-
gency problems in the interconnected electric systems.  Lower
costs resulting from a degradation in reliability of service
because no entity has responsibility to respond to system emer-
gencies would not be an economic benefit to California.  Such
degradation should not necessarily result from the promotion of
competitive wholesale markets, but could result from efforts to
encourage such competition if participants in the market are
provided incentives to cut costs irrespective of overall system
reliability.
          Vernon appreciates the opportunity to comment in
connection with the Commission's consideration of wholesale
electric markets and requests that the Commission consider the matters raised in these comments, and in Vernon's previous com-
ments, in any actions taken in this proceeding.


                                Respectfully submitted,

                                David B. Brearley
                                City of Vernon, City Attorney
                                2440 South Hacienda Boulevard
                                Unit 223
                                Hacienda Heights, CA  91745
                                Tel. (818) 336-3408
                                Fax  (818) 330-5818



                                Channing D. Strother, Jr.
                                David C. Hjelmfelt
                                Goldberg, Fieldman & Letham, P.C.
                                1100 Fifteenth Street, N.W.
                                Suite 200
                                Washington, D.C.  20005
                                Tel. (202) 463-8300
                                Fax  (202) 463-8309


                                Attorneys for the
                                City of Vernon, California



July 1994



                     CERTIFICATE OF SERVICE


          I hereby certify that I have this day caused a copy of
the INITIAL COMMENTS OF THE CITY OF VERNON, CALIFORNIA WITH
RESPECT TO THE THIRD FULL PANEL HEARING to be served the special
rules for service established herein, in among other places, the
June 9, 1994 order of Judge Malcom.

Dated at Washington, D.C., this 25th day of July, 1994.





                                                                 
                                Channing D. Strother, Jr.