CCC PPPPP U U CCC N N EEEEE W W W SSS C C P p U U C C NN N E W W W S S C P P U U C N N N E W W W S C PPPPP U U C N N N EEE W W W W SSS C P U U C N N N E WW WW S C C P U U C C N NN E W W S S CCC P UUUU CCC N N EEEEE W W SSS California Public Utilities Commission 505 Van Ness Avenue, Room 5301 San Francisco, CA 94102 CONTACT: Dianne Dienstein 415-703-2423 September 23, 1996 James Hendry 415-703-1383 CPUC-79 GOVERNOR SIGNS ASSEMBLY BILL 1890, RESTRUCTURING CALIFORNIA'S ELECTRIC INDUSTRY Governor Pete Wilson today signed Assembly Bill (AB) 1890 in San Diego. AB 1890 begins a new era of competition in California's electric industry. The goal of AB 1890 is to bring the benefits of increased competition and lower electric rates to all Californians. AB 1890 is designed to provide a 10 percent rate reduction to all residential and small commercial customers of California's three largest investor-owned utilities (Pacific Gas & Electric, Southern California Edison, and San Diego Gas & Electric). Residential and small commercial customers of these utilities should see a 20 percent reduction off of current electric rates by the year 2002. Larger customers will benefit from AB 1890 by being able to competitively "shop around" and purchase electricity on the open market. Ultimately, all electric consumers in California will be able to choose their own provider of electric generation, in the same manner that today's consumers are free to choose their own long-distance telephone carrier. The legislation embodies the fundamental concept that customer choice and marketplace competition are the preferred method to benefit customers. "I believe today's legislation reaffirms the efforts already being carried out by the California Public Utilities Commission to restructure the electric industry and promote competition," said Commission President P. Gregory Conlon. "Today's legislation codifies into statute significant portions of the restructuring proposal the Commission issued in December of 1995. - more - "California's consumers spend over $23 billion per year for electric service. I am happy that the Governor's Office, the Legislature, and many of the affected parties have reached agreement on the policy direction California should take in this important area." President Conlon also praised Senator Steve Peace, who chaired the conference committee where AB 1890 was written and debated, as well as the other members of the conference committee: "It is through their tireless efforts that this legislation was crafted to provide balance of interests between utilities, other market participants, and especially residential and small commercial California ratepayers." "Clearly, there are many areas of implementation that must be accomplished in order for electric restructuring to begin by January 1, 1998, the date established by both the Commission and the Legislature," stated President Conlon. "I have already committed to the Governor's Office to implement all of the provisions of AB 1890 as soon as possible." The legislation differs from the Commission's proposal in several ways. First, it shortens the time period California's investor-owned utilities have to recover their uneconomic costs from the year 2003 to the year 2001. Second, the legislation uses bond financing to achieve the 10 percent rate reduction for residental and small commercial customers. The use of bond financing to achieve this reduction was an option that was not available to the Commission. Third, the legislation continues California's commitment to funding renewable energy and energy efficiency programs but adopts funding guidelines that are different from what the Commission had proposed. In addition, it shortens the phase-in for consumer choice from five years to four, however, any customer purchasing power produced from renewable sources may do so when competition initially begins. - more - AB 1890 also encourages California's municipally-owned electric utilities to participate in electric restructuring. The Commission does not have authority to regulate municipal utilities. AB 1890 and the Commission's restructuring proposal both provide for a competitive market for the generation of electricity. The transmission and distribution systems of California's investor-owned utilities will continue to be regulated on a performance-basis, and will be available to all customers and electric generators and suppliers on an open and non-discriminatory basis. AB 1890 and the Commission's proposal both contain safeguards to ensure that reliability of the electric system is not affected by the movement towards competition. Under AB 1890, California's investor-owned electric utilities will be given a reasonable opportunity to collect their utility-related uneconomic costs over a time period of just slightly over five years. After that time, these costs cannot be recovered in electric rates. Utility-related uneconomic costs are investments and obligations that the utilities entered into in the past, back when they had an obligation to provide electric service to all customers, and which may not be economic in the competitive marketplace that AB 1890 and the Commission's proposal would create. In order for competition to occur, both AB 1890 and the Commission's proposal call for the creation of two new institutions -- a Power Exchange and an Independent System Operator. The Power Exchange will act as a marketplace in which electric generators and suppliers will compete to meet customer's needs for electric energy. The Independent System Operator will act as the "traffic cop" for California's electric system. It will coordinate the scheduling and dispatch of electricity, and ensure that the reliability of the electric system is maintained. The Commission is already actively involved in proceedings at both the state and federal level to create these institutions in time for competition to start by January 1, 1998. - more - The original sponsor and author of AB 1890 is Assemblyman James Brulte (R-Ontario). Principal Senate co- authors of the legislation include Senators Steve Peace (D-El Cajon), Bill Leonard (R-Upland), and Byron Sher (D-Palo Alto). Principal Assembly coauthors are Assemblymembers Mickey Conroy (R-Orange), Steven Kuykendall (R-Long Beach), and Diane Martinez (D-Alhambra). AB 1890 was sponsored by a broad coalition of investor-owned and municipal electric utilities; independent power producers, industrial and agricultural groups; labor unions, and environmental groups. ###