Division 4.9. Restructuring Of Publicly Owned Electric Utilities In Connection With The Restructuring Of The Electrical Services Industry of California Public Utilities Code >> Division 4.9.
(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
(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 set forth in Section 368 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
(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.
(a) Except with respect to supply options of the nature
specified in Section 218, with the exception of paragraph (3) of
subdivision (b) of that section, as it existed on December 20, 1995,
no person, corporation, electrical corporation, or local publicly
owned electric utility or other governmental entity other than a
retail customer's existing electric service provider as of December
20, 1995, shall provide partial or full electric service to a retail
customer of a local publicly owned electric utility unless the
customer first confirms in writing an obligation to pay, through
tariff or otherwise, to the utility currently providing electric
service, a nonbypassable generation-related severance fee or
transition charge established by the regulatory body for that
utility. The severance fee or transition charge shall be paid
directly to the local publicly owned utility providing electricity
service in the service area in which the consumer is located.
(b) Except as provided in subdivision (a) of Section 374, no local
publicly owned electric utility or other governmental entity shall
provide partial or full electric service to a retail customer of an
electrical corporation unless the customer of that electrical
corporation first confirms in writing an obligation to pay, through
tariff or otherwise, to the electrical corporation currently
providing electric service, a nonbypassable generation-related
transition charge established by the regulatory body for that
electrical corporation. The charge shall be paid directly to the
electrical corporation providing electricity in the service area in
which the consumer is located.
(c) No local publicly owned electric utility or electrical
corporation shall sell electric power to the retail customers of
another local publicly owned electric utility or electrical
corporation unless the first utility has agreed to allow the second
utility to make sales of electric power to the retail customers of
the first utility.
(d) This section does not apply to an exchange of customers
affected by a local publicly owned electric utility completing a
mutually agreeable condemnation process to resolve a fringe area
agreement in which there exists a balance of benefits between the
customers of the local publicly owned electric utility and the
(a) After a public hearing, the local regulatory body of each
local publicly owned electric utility shall determine whether it
will authorize direct transactions between electricity suppliers and
end use customers, subject to implementation of the nonbypassable
severance fee or transition charge referred to in Section 9603.
(b) If the regulatory body authorizes direct transactions, a
phase-in of these transactions shall commence no later than the
latter of January 1, 2000, or two years after the start of the
phase-in of direct transactions by the electrical corporations
pursuant to subdivision (b) of Section 365, and shall be completed by
the later of December 31, 2010, or two years after the completion of
the phase-in by electrical corporations.
(c) The regulatory body shall develop a phase-in schedule at the
conclusion of which all customers shall have the right to engage in
(d) Any phase-in of customer eligibility for direct transactions
ordered by the regulatory body shall be equitable to all customer
(e) If the regulatory body does not authorize direct access as
contemplated in this section, then the publicly owned electric
utility shall not be eligible to recover the nonbypassable charge as
provided in Section 9603.
(a) Not less than six months prior to the date of
implementation of direct transactions, the regulatory body shall
establish the nonbypassable generation-related severance fee or
transition charge which shall include, but shall not be limited to,
employee related transition costs incurred and projected for
severance, out placement, retraining, early retirement, and related
expenses for employees directly affected by restructuring.
(b) The regulatory body of a local publicly owned electric
utility, prior to adopting any generation related severance fee or
transition charge, shall make available for public review the basis
for the severance fee or transition charge and shall hold at least
one public hearing.
For purposes of this division, the following definitions
(a) "Direct transaction" means a contract between one or more
electric generators, marketers, or brokers, public or private, of
electric power and one or more retail customers providing for the
purchase and sale of electric power and ancillary services.
(b) "Service area" means an area in which, as of December 20,
1995, an investor-owned electric utility or a local publicly owned
electric utility was obligated to provide service.
(c) "Severance fee" or "transition charge" for a local publicly
owned electric utility shall mean that charge or periodic charge
assessed to customers to recover the reasonable uneconomic portion of
costs associated with generation-related assets and obligations,
nuclear decommissioning, and capitalized energy efficiency investment
programs approved prior to August 15, 1996.
(a) Nothing in this division or Chapter 2.3 (commencing with
Section 350) of Part 1 of Division 1 shall affect preexisting
ratemaking authority of a regulatory body of any local publicly owned
(b) Nothing in this division shall modify or abrogate any
agreement, or any rights or obligations in any such agreement,
between retail electric service providers relating to service areas.
(c) Nothing in this division shall limit or affect the statutory
rights of a local publicly owned electric utility to negotiate and
design rates for existing customers and new customers not choosing to
be served by an alternate supplier.
(d) Nothing in this division shall limit electric supply options
within the service territory of a local publicly owned electric
utility to the extent the options are of the nature specified in
Section 218 as it existed on December 20, 1995, with the exception of
paragraph (3) of subdivision (b) of that section, and the imposition
of a severance fee or transition charge on customers electing those
options shall be prohibited whether the elections are made before or
after the availability of direct transactions within the service area
of the local publicly owned electric utility.
All city-owned electric utilities shall report on the
periodic bill the amount expected to be transferred from the utility
to the general fund, and to any special funds, of the city on a no
less than annual basis.
(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
(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
(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
(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
(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
(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 nonbypassable
charges under Sections 367, 368, 375, 376, and 379, 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
(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
(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
(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.
Sections 454.1 and 9607 of this code and Section 56133 of the
Government Code do not apply to an irrigation district with respect
to an area to be served by the irrigation district, if all of the
(a) The irrigation district acquires substantially all the
electric distribution facilities and related subtransmission
facilities of any electrical corporation that has an obligation to
provide electric distribution service within the area to be served by
the irrigation district.
(b) The commission approves a service area agreement between the
irrigation district and the electrical corporation pursuant to
Sections 8101 to 8108, inclusive, which service area agreement
provides that the electrical corporation may not provide electric
distribution service in the area to be served by the irrigation
district and that the irrigation district may not provide electric
distribution service in the remainder of the electrical corporation's
(c) The commission relieves the electrical corporation of its
obligation to serve within the area to be served by the irrigation
Commencing on January 1, 2001, and continuing through
December 31, 2025, inclusive, all of the following shall apply:
(a) An electrical corporation may not provide electric
transmission or distribution service to retail customers in either of
the following areas:
(1) The Modesto Irrigation District electric service area as
defined in the August 15, 1940, Purchase of Properties agreement
between Modesto Irrigation District and Pacific Gas and Electric
(2) The Mountain House Community Services District as defined in
the master specific plan adopted by the Board of Supervisors of the
County of San Joaquin on November 10, 1994.
(b) (1) Within the purchase zone as described in Exhibit "B" of
The Asset Sale Agreement By and Between Pacific Gas and Electric
Company and Modesto Irrigation District Dated July 23, 1997,
contained in Public Utilities Commission Application Number
97-07-030, Pacific Gas and Electric Company and Modesto Irrigation
District may each provide electric transmission and distribution
service to retail customers. The area described in this subdivision
shall be considered to be within both Pacific Gas and Electric
Company's and Modesto Irrigation District's electric service area.
(2) The Legislature recognizes that electrical corporations and
irrigation districts may each construct infrastructure, and that the
infrastructure may, in some cases, be duplicative. In those cases,
the Legislature encourages irrigation districts and electrical
corporations to enter into agreements pursuant to Sections 8101 to
8108, inclusive, where those agreements further the interests of the
state as set forth in Section 8101.
(c) Modesto Irrigation District may provide up to 8 megawatts of
peak sales to Contra Costa Water District for delivery to its Old
River Intake Facility and Rock Slough Pumping Plant.
(d) Except as provided in subdivisions (a), (b), and (c), Modesto
Irrigation District may not provide electric transmission or
distribution service to retail customers in the territory of Pacific
Gas and Electric Company.
Chapter 3 (commencing with Section 56100) of Part 1 of
Division 3 of the Government Code does not apply to electric service
provided by the Modesto Irrigation District within the geographic
areas described in subdivisions (a) and (b) of Section 9610.
The Legislature finds and declares that the policies stated
in Section 8101 to 8108, inclusive, would be furthered and that it
would be in the best interests of the state, and not incompatible
with the public interest, if an agreement embodying the provisions of
Section 9610 were to be approved by the commission. The Legislature
hereby encourages the Pacific Gas and Electric Company and Modesto
Irrigation District to agree on the terms of an agreement embodying
the provisions of Section 9610, and encourages the commission to
approve that agreement to the extent that the agreement is consistent
with the policies of this state.
(a) Beginning January 15, 2002, and at least once monthly
thereafter, a local publicly owned electric utility 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 local publicly owned electric utility's control
or service area with whom the utility 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 electrical customer agrees to reduce or consider
reducing its electrical consumption during periods of peak demand or
at the request of the local publicly owned electric utility 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.
Each local publicly owned electric utility, in procuring
energy to serve the load of its retail end-use customers, shall first
acquire all available energy efficiency and demand reduction
resources that are cost effective, reliable, and feasible.
(a) Each local publicly owned electric utility serving
end-use customers, shall prudently plan for and procure resources
that are adequate to meet its planning reserve margin and peak demand
and operating reserves, sufficient to provide reliable electric
service to its customers. Customer generation located on the customer'
s site or providing electric service through arrangements authorized
by Section 218, shall not be subject to these requirements if the
customer generation, or the load it serves, meets one of the
(1) It takes standby service from the local publicly owned
electric utility on a rate schedule that provides for adequate backup
planning and operating reserves for the standby customer class.
(2) It is not physically interconnected to the electric
transmission or distribution grid, so that, if the customer
generation fails, backup power is not supplied from the electricity
(3) There is physical assurance that the load served by the
customer generation will be curtailed concurrently and commensurately
with an outage of the customer generation.
(b) Each local publicly owned electric utility serving end-use
customers shall, at a minimum, meet the most recent minimum planning
reserve and reliability criteria approved by the Board of Trustees of
the Western Systems Coordinating Council or the Western Electricity
(c) Each local publicly owned electric utility shall prudently
plan for and procure energy storage systems that are adequate to meet
the requirements of Section 2836.
(d) A local publicly owned electric utility serving end-use
customers shall, upon request, provide the Energy Commission with any
information the Energy Commission determines is necessary to
evaluate the progress made by the local publicly owned electric
utility in meeting the requirements of this section, consistent with
the annual targets established pursuant to subdivision (c) of Section
25310 of the Public Resources Code.
(e) The Energy Commission shall report to the Legislature, to be
included in each integrated energy policy report prepared pursuant to
Section 25302 of the Public Resources Code, regarding the progress
made by each local publicly owned electric utility serving end-use
customers in meeting the requirements of this section.
(a) This section shall apply to a local publicly owned
electric utility with an annual electrical demand exceeding 700
gigawatthours, as determined on a three-year average commencing
January 1, 2013.
(b) On or before January 1, 2019, the governing board of a local
publicly owned electric utility shall adopt an integrated resource
plan and a process for updating the plan at least once every five
years to ensure the utility achieves all of the following:
(1) Meets the greenhouse gas emissions reduction targets
established by the State Air Resources Board, in coordination with
the commission and the Energy Commission, for the electricity sector
and each local publicly-owned electric utility that reflect the
electricity sector's percentage in achieving the economywide
greenhouse gas emissions reductions of 40 percent from 1990 levels by
(2) Ensures procurement of at least 50 percent eligible renewable
energy resources by 2030 consistent with Article 16 (commencing with
Section 399.11) of Chapter 2.3.
(3) Meets the goals specified in subparagraphs (C) to (H),
inclusive, of paragraph (1) of subdivision (a) of Section 454.52.
(c) (1) The integrated resource plan shall address procurement for
(A) Energy efficiency and demand response resources pursuant to
(B) Energy storage requirements pursuant to Chapter 7.7
(commencing with Section 2835) of Part 2 of Division 1.
(C) Transportation electrification.
(D) A diversified procurement portfolio consisting of both
short-term and long-term electricity, electricity-related, and demand
(E) The resource adequacy requirements established pursuant to
(2) (A) The governing board of the local publicly owned electric
utility may authorize all source procurement that includes various
resource types, including demand-side resources, supply side
resources, and resources that may be either demand-side resources or
supply side resources, to ensure that the local publicly owned
electric utility procures the optimum resource mix that meets the
objectives of subdivision (b).
(B) The governing board may authorize procurement of resource
types that will reduce overall greenhouse gas emissions from the
electricity sector and meet the other goals specified in subdivision
(b), but due to the nature of the technology or fuel source may not
compete favorably in price against other resources over the time
period of the integrated resource plan.
(d) A local publicly owned electric utility shall satisfy the
notice and public disclosure requirements of subdivision (f) of
Section 399.30 with respect to any integrated resource plan or plan
update it considers.
(a) Integrated resource plans and plan updates adopted
pursuant to Section 9621 shall be submitted to the Energy Commission.
(b) The Energy Commission shall review the integrated resource
plans and plan updates. If the Energy Commission determines an
integrated resource plan or plan update is inconsistent with the
requirements of Section 9621, the Energy Commission shall provide
recommendations to correct the deficiencies.
(c) The Energy Commission may adopt guidelines to govern the
submission of information and data and reports needed to support the
Energy Commission's review of the utility's integrated resource plan
pursuant to this section at a publicly noticed meeting offering all
interested parties an opportunity to comment. The Energy Commission
shall provide written public notice of not less than 30 days for the
initial adoption of guidelines and not less than 10 days for the
subsequent adoption of substantive changes. Notwithstanding any other
law, any guidelines adopted pursuant to this section shall be exempt
from the requirements of Chapter 3.5 (commencing with Section 11340)
of Part 1 of Division 3 of Title 2 of the Government Code.