CC - Item 3C – Staff Report RES No. 98-34 Opposition to Proposition 9 Regarding Electric Utilities ` R °
staff,
eport
TO: HONORABLE MAYOR
AND MEMBERS
ROSEMEAD CITY COUNCIL
FROM: FRANK G. TRIPEPI, CITY MAN.AE.E1.174217
DATE: AUGUST 6, 1998
RE: RESOLUTION NO. 98-34 -OPPOSITION TO PROPOSITION 9 REGARDING
ELECTRIC UTILITIES
The Southern California Edison Company has requested that the Rosemead City Council vote
formally to oppose Proposition 9, which has qualified for the November ballot. The proposition
seeks specifically to nullify the rate reduction bonds that were issued by the State of California in
accordance with the electric utility deregulation legislation signed into law in 1996.
Attached is Resolution No. 98-34 opposing the initiative and a copy of the initiative language
that will appear on the November ballot.
RECOMMENDATION:
Staff recommends that the City Council adopt Resolution No. 98-34.
COUNCIL RGt� :��FEND n
,
AUG 111998
ITEM No. J• C.-
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RESOLUTION NO. 98-34
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ROSEMEAD
OPPOSING PROPOSITION 9 REGARDING ELECTRIC UTILITIES
WHEREAS, in 1996, after obtaining consensus from business interests, labor, energy
experts and diverse consumer groups,the California Legislature approved legislation that began the
process of deregulating the electric utility industry with the ultimate intent to provide true economic
competition in the industry; and
WHEREAS, two key components of the legislation rested in the State's decision to issue
$6 billion in rate reduction bonds to offset the "stranded costs"of the electric utilities doing business
in a regulated environment and(2) electric utilities' being mandated to provide a 10% reduction in
consumer electric rates; and
WHEREAS, some of the same interests that came together in support of the legislation in
1996 have changed their minds and are now opposing the decision by the State to issue the bonds
that are underwriting the rate reduction and are sponsoring Proposition 9 which seeks to nullify the
$6 billion in state bonds that have already been issued; and
WHEREAS, in addition to the reversal of policy among some interests, the bond
nullification provision of Proposition 9 might be cause for significant and costly litigation for debt
already incurred by the State; and
WHEREAS, the City of Rosemead supported the initial legislation to deregulate electric
utilities because the members of the City Council believed strongly in the power of the marketplace
to determine the cost of electricity for commercial and residential consumers; and
WHEREAS,the members of the Rosemead City Council believe that the compromises made
originally to gain consensus on the legislation are appropriate and in the long-term best interests of
California; and
WHEREAS,the sponsors of Proposition 9 have not offered sufficient justification to reverse
the current course of deregulating the electric utility industry.
NOW,THEREFORE,THE CITY COUNCIL OF THE CITY OF ROSEMEAD DOES
HEREBY RESOLVE:
1. To oppose Proposition 9.
2. Authorize the City Clerk to send certified copies of this resolution to the League of
California Cities, the City of Rosemead's Legislative Advocate and other entities
interested in opposing Proposition 9.
DONE THIS 11TH DAY OF AUGUST, 1998.
MAYOR
ATTEST:
CITY CLERK
Amdr
The Utility Rate Reduction and Reform Act
SECTION 1. Findings and Declarations
The People of California find and declare as follows:
The cost and dependability of California's electic utility service are threatened by a new law that was
intended to reduce regulation of electric utility companies in this state.
Any change in the way electricity is sold should benefit all electric utility customers, including
residential and small business customers, and should result in a fair and competitive marketplace.
Instead of creating a fully competitive market for electricity, the new law unfairly favors existing
electric utility monopolies by forcing customers to pay rates more than 40 percent higher than the market
price in order to bail'out utilities for their past bad investments.
As a result of this 528 billion bailout for electric utility companies, the average California household will
pay more than 5250 more per year for electricity than they would in a fully competitive market.
Residential and small business customers should not be required to bear the costs of bonds used by
utility companies to pay for past bad investments.
It is against public policy for residential and small business customers to be required to pay for the
imprudent and uneconomic decisions of electric utility companies to invest in nuclear power plants
which the public did not want and which threaten the health and safety of this state.
Under the new law, deregulation of electric utility companies may result in marketing abuses that hann
residential and small business customers. Such abuses may include the selling of information about
these customers to other companies for profit.
Therefore, the People of California declare that it is necessary to protect residential and small business
customers from unfair and unjustified taxes and surcharges that will force them to subsidize electric
utility companies. It is also necessary to ensure that residential and small business customers directly
benefit from deregulation of electic utility companies.
SECTION 2. Purpose
The purpose of this chapter is to:
I.Reduce residential and small commercial electricity rates by 20 percent to assure that these
customers receive a direct benefit from the transition to the competitive marketplace for electricity.
2. Prohibit taxes, surcharges, bond payments or any other assessment from being added to electricity
bills to pay off utility companies' past bad investments in nuclear power plants and other generation-
related costs.
3. Prohibit bonds from being used to force residential and small business customers to pay for past
bad investments by electric utility companies.
4. Provide for fair and public review of California Public Utilities Commission decisions related to
electricity price and services.
5. Protect the privacy of utility customers and provide the information consumers need to obtain low
cost and high quality electric service.
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SECTION 3. The following Sections are added to the Public Utilities Code:
Electric Utility Rate Reduction -
Section 368.1 .
(a) No later than January 1, 1999, electricity rates for residential and small commercial
customers shall be reduced so that these customers receive rate reductions of at least 20 percent
on their total electivity bill as compared to the rate schedules in effect for these customers on
June 10, 1996.
(b) The rate reductions described in subsection(a) shall be achieved through cutting payments to
electric corporations for their nuclear and other uneconomic generation costs as described in
Sections 367.1 and 367.2.
(c) No utility tax, bond payment, surcharge, or any other assessment in any form shall be levied
against any eleccic utility customer to pay for the rate reductions described in subsections (a) and
(b).
Prohibition Against Utility Taxes,Bond Payments, Surcharges or Any Other Assessments
To Pay For Nuclear Power Plants
Section 367.1
(a) Effective imrnediately, costs for nuclear generation plants and related assets and obligations
shall not be paid for by electric utility customers, except to the extent that such costs are
recovered by the sale of electricity at competitive market prices as reflected in independent
Power Exchange revenues or in contracts with the Independent System Operator.
(b) No utility tax, bond payment, surcharge or other assessment in any form shall be levied
against any electic utility customer for the recovery of nuclear costs described in subsection(a).
(c) This section shall not apply to reasonable nuclear decommissioning costs as referenced in
Section 379 of the Public Utilities Code.
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Limitation On Utility Taxes, Bond Payments, Surcharges, and Any Other Assessments To
Pay for Electric Utility Company Investments in Non-Nuclear Generation Assets
Section 367.2
(a) Effective immediately, costs for non-nuclear generation plants and related assetsand
chiiaations shall not be recovered from electric utility customers under the cost recovery
mechanism provided for by sections 367 through 376 of the Public Utilities Code except to the
e-' that such costs are recovered by the sale of e!ect-icity at competitive market rates from
independent Power Exchange revenues or from contracts with the Independent System Operator,
unless the electric utility ftrstdemonstates to the satisfaction of the Commission at a public
hearing that failure to recover such costs would deprive it of the opportunity to earn a fair rate of
return
(b) This section shall not apply to costs associated with renewable non-nuclear elect-icity
generation facilities described in Section 381(c)(3), or to costs associated with power purchases
from qualifying facilities pursuant to the Public Utility Regulatory Policies Act of 1978 and
related commission decisions,
Prohibition Against Utility Taxes, Bond Payments, Surcharges and Any Other Assessmeut
To Pay For Securitization Bonds.
Section 840.1
Notwithstanding current Sections 840 through 847 of the Public Utilities Code:
(a) No electric corporation, affiliate of an electric corporation or any other financing entity shall
assess or collect any utility tax, bond payment, surcharge or any other assessment authorized by a
Public Utilities Commission financing order issued pursuant to Sections 840 through 847 of the
Public Utilities Code for the purpose of paving principle, interest or any other costs of any bonds
authorized by those sections.
(b) The Public Utilities Commission shall not issue any financing order pursuant to Sections 840
through 847 after the effective date of this measure.
(c) Any electric corporation, affiliate of an electric corporation or any other financing entity
which is subject to a financing order issued under Section 841 that is determined by a court of
competent jurisdiction to be enforceable despite subsection (a) of this section, shall offset any
utility tax, bond payment, surcharge, or other assessment described in subsection (a) collected
from any customer with an equal credit to be applied concurrently with the collection of the
utility tax, bond payment, surcharge or other assessment
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Section 841.1
Any underwriter or bond purchaser who purchases rate reduction bonds after November 24, 1997
issued pursuant to current Sections 840 through 847 shall be deemed to have notice of the
provisions of Sections 367.1, 367.2, 368.1, and 840.1
Public Participation and Judicial Review For Consumer Protection and Electric Company
Accountability
Section 1701.5
(a) Any action Or proceeding of the Public Utilities Commission pursuant to Section 367. 1,
367.2, 368.1 and 840.1 of the Public Utilities Code shall require a public hearing where evidence
is taken by and discretion is vested in the Public Utilities Commission.
(b) Any change to the amount of above-market costs for non-nuclear generation plants and
related assets and obligations being recovered from utility customers shall only be made after the
electrical corporation has provided notice to the public pursuant to Section 454 ofthe Public
Utilities Code.
(c) Any action or proceeding to attack, review, set aside, void or annul a determination, finding,
or decision of the Public Utilities Commission relating to electric restrnctu.-ing under Chapter 2.3
of Part I of Division 1 of the Public Utilities Code and financing of transition costs as described
in Article 5.5 of Chapter 4 of Part 1 of Division 1 of the Public Utilities Code shall be in
accordance with the provisions of Section 1094.5 of the Code of Civil Procedure. In any such
action the writ of mandate shall lie from the court of appeals to the Public Utilities Commission.
The court shall not exercise its independent judgement but shall only determine whether the
determination, fording or decision of the Public Utilities Commission is supported by substantial
evidence in light of the whole record.
Electric Utility Customer Privacy Protection
Section 394.1
The confidentiality of residential and small commercial customer information shall be fully
protected as provided by law. No entity providing electricity services including an electric
corporation shall provide information about a residential or small commercial customer to any
third party without the express written consent of the customer.
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Electric Utility Customer Information
Section 393
The Public Utilities Commission shall require each electric utility or electric service provider to
provide such information or materials with each utility bill issued to residential and small
commercial customers as the Commission determines to be necessary to assist consumers in
obtaining low cost, high quality electric service options, including electric service options that
:educe environmental impacts such as those that rely on renewable energy sources and to protect
consumers' interest in all matters concerning safe and dependable delivery of electric service.
Definitions
Section 330.1 Definitions of Charges
(a) "Utility tax" "bond payments" "surcharge", "assessment" or "involuntary payment"mean
any charge that serves to permit an electric corporation to recover the value of uneconomic assets
from ratepayers, and includes but is not limited to a"fixed transition amount" as defined by
Section 840(d), and the "competition transition charge"that is the nonbypassable charge referred
to in Sections 367 to 376, inclusive.
(o) For purposes of Sections 330.1, 367.1, 367.2, 368.1, 393, and 840.1, the terms "elecuic
utility", "electric utility company", and"electric corporation' have the same meaning as the term
"electrical corporation" as defined in Section 218 of the Public Utilities Code.
Repeat of Existing Law
Sections 367(a), 368(d), 368(h) of the Public Utilities Code are repealed
SECTION 4. Initiative Integrity
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(a) This act shall be broadly construed and applied in order to fully promote its underlying
purposes, and to be consistent with the United States Constitution and the Constitution of the
State of California. Lf any provision of this initiative conflicts directly or indirectly with any
ether provisions of law, including but not limited to the cost recovery mechanism provided for by
Sections 367 through 376 of the Public Utilities Code, or any other statute previously enacted by
the Legislature, it is the intent of the voters that those other provisions shall be null and void to
the extent that they are inconsistent with this initiative and are hereby repealed.
(b) No provision of this act may be amended by the Legislature except to further the purpose of
that provision by a statute passed in each house by roll call vote entered in the journal, two thirds
of the membership concurring, or by a statute that becomes effective only when approved by the
electorate. No amendment by the Legislature shall be deemed to further the purposes of this act
unless it funhers the purpose of the specific provision of this act that is being amended. In any
judicial action with respect to any legislative amendment, the court shall exercise its independent
judgment as to whether or not the amendment satisfies the requirements of this subsection.
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(c) If any prevision of this actor the application thereof to any person or circumstances is held
invalid, that invalidity shall not effect other provisions or applications of the act that can be given
effect in the absence of the invalid provision or application. To this end, the provisions of this act
are severable.
(d) It is the will of the People that any legal challenges to the validity of any provision of this act
be acted upon by the courts upon an expedited basis.
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