BILL NUMBER: SB 1194	CHAPTERED
	BILL TEXT

	CHAPTER   1050
	FILED WITH SECRETARY OF STATE   SEPTEMBER 30, 2000
	APPROVED BY GOVERNOR   SEPTEMBER 30, 2000
	PASSED THE SENATE   AUGUST 31, 2000
	PASSED THE ASSEMBLY   AUGUST 23, 2000
	AMENDED IN ASSEMBLY   AUGUST 21, 2000
	AMENDED IN ASSEMBLY   AUGUST 10, 2000
	AMENDED IN ASSEMBLY   JULY 5, 2000
	AMENDED IN ASSEMBLY   JUNE 21, 2000
	AMENDED IN ASSEMBLY   JUNE 15, 2000
	AMENDED IN ASSEMBLY   JUNE 8, 2000
	AMENDED IN ASSEMBLY   MAY 25, 2000
	AMENDED IN SENATE   APRIL 20, 1999

INTRODUCED BY   Senator Sher
   (Principal coauthors:  Assembly Members Pescetti and Wright)
   (Coauthors:  Senators Alarcon, Morrow, Murray, O'Connell, Perata,
and Solis)
   (Coauthors:  Assembly Members Battin, Calderon, Cardenas, Davis,
Dickerson, Jackson, Lempert, Maldonado, Mazzoni, Robert Pacheco,
Papan, Shelley, Strickland, Thomson, Vincent, Wesson, and Zettel)

                        FEBRUARY 26, 1999

   An act to amend Sections 381, 383.5, and 394.25 of, and to add
Article 15 (commencing with Section 399) to Chapter 2.3 of Part 1 of
Division 1 of, the Public Utilities Code, relating to public
utilities, and making an appropriation therefor.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 1194, Sher.  Electrical restructuring:  public benefit
programs.
   (1) Under the Public Utilities Act, the Public Utilities
Commission, until December 31, 2001, and in certain instances until
March 31, 2002, requires electrical corporations to identify a
separate rate component to fund cost-effective energy efficiency and
conservation activities, public interest research and development,
and development of renewable resources technology.  This rate
component is a nonbypassable element of local distribution and
collected on the basis of usage.  Existing law requires specified
electrical corporations to collect specific amounts to support each
of these programs.  Existing law also requires the State Energy
Resources Conservation and Development Commission (Energy Commission)
to transfer funds collected for these programs to specified funds.
Existing law also provides that funds expended for production
incentives for new in-state renewable electricity generation
technology facilities are limited to facilities that are operational
prior to January 1, 2002.
   This bill would extend the production incentives for renewable
electricity to January 1, 2007, if the Energy Commission makes
specified findings.  This bill would restate the policy of the state
that each electrical corporation operate its electric distribution
grid in a safe, reliable, efficient, and cost-effective manner and
that electric corporations continue to make prudent investments in
their distribution grids.  The bill would also require the Public
Utilities Commission and the Energy Commission to continue to
administer energy efficiency programs, as defined, following
prescribed guidelines.
   The bill would extend the collection of this nonbypassable system
benefit charge to support these programs through January 1, 2012, and
would require the funds to be deposited in specified accounts until
appropriation by the Legislature.  The bill would require named
electrical corporations to collect specific dollar amounts for each
of the programs beginning on January 1, 2002.  The bill would also
require the Governor, on or before January 1, 2004, to appoint an
independent review panel that, on or before January 1, 2005, would be
required to report to the Legislature and the Energy Commission on,
among other things, the benefits secured for residential customers.
The bill would also require the Energy Commission to report to the
Legislature on renewable energy and research and development, develop
and submit to the Legislature certain investment plans, and
recommend allocations among specified projects. The bill would make
related findings and declarations.  Because a violation of the act is
a crime, this bill would impose a state-mandated local program by
expanding an existing crime.
   This bill would result in a change in state taxes for the purpose
of increasing state revenues within the meaning of Section 3 of
Article XIIIA of the California Constitution, and thus would require
for passage the approval of 2/3 of the membership of each house of
the Legislature.
  (2) Existing law authorizes the Public Utilities Commission to
utilize enforcement provisions against electric service providers as
if those providers were public utilities, including having their
registration suspended or revoked for specified acts of misconduct.
   This bill would include in those acts of misconduct the
misrepresentation of a material fact by an applicant in obtaining a
registration as an electric service provider.
   The bill would require the commission to require any electric
service provider whose registration is revoked pursuant to the above
misrepresentation provision to refund all of the customer credit
funds that the electric service provider received from the Energy
Commission.  The bill would require all customer credit funds
refunded to be deposited in the Renewable Resource Trust Fund, a
continuously appropriated fund, for redistribution by the Energy
Commission pursuant to existing law, thereby making an appropriation
by depositing funds in a continuously appropriated fund.
   (3) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state.  Statutory provisions establish procedures for making that
reimbursement.
   This bill would provide that no reimbursement is required by this
act for a specified reason.
   Appropriation:  yes.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 381 of the Public Utilities Code is amended to
read:
   381.  (a) To ensure that the funding for the programs described in
subdivision (b) and Section 382 are not commingled with other
revenues, the commission shall require each electrical corporation to
identify a separate rate component to collect the revenues used to
fund these programs.  The rate component shall be a nonbypassable
element of the local distribution service and collected on the basis
of usage.  This rate component shall fall within the rate levels
identified in subdivision (a) of Section 368.
   (b) The commission shall allocate funds collected pursuant to
subdivision (a), and any interest earned on collected funds, to
programs which enhance system reliability and provide in-state
benefits as follows:
   (1) Cost-effective energy efficiency and conservation activities.

   (2) Public interest research and development not adequately
provided by competitive and regulated markets.
   (3) In-state operation and development of existing and new and
emerging renewable resource technologies defined as electricity
produced from other than a conventional power source within the
meaning of Section 2805, provided that a power source utilizing more
than 25 percent fossil fuel may not be included.
   (c) The Public Utilities Commission shall order the respective
electrical corporations to collect and spend these funds, as follows:

   (1) Cost-effective energy efficiency and conservation activities
shall be funded at not less than the following levels commencing
January 1, 1998, through December 31, 2001:  for San Diego Gas and
Electric Company a level of thirty-two million dollars ($32,000,000)
per year; for Southern California Edison Company a level of ninety
million dollars ($90,000,000) for each of the years l998, 1999, and
2000; fifty million dollars ($50,000,000) for the year 2001; and for
Pacific Gas and Electric Company a level of one hundred six million
dollars ($106,000,000) per year.
   (2) Research, development, and demonstration programs to advance
science or technology that are not adequately provided by competitive
and regulated markets shall be funded at not less than the following
levels commencing January 1, 1998, through December 31, 2001:  for
San Diego Gas and Electric Company a level of four million dollars
($4,000,000) per year; for Southern California Edison Company a level
of twenty-eight million five hundred thousand dollars ($28,500,000)
per year; and for Pacific Gas and Electric Company a level of thirty
million dollars ($30,000,000) per year.
   (3) In-state operation and development of existing and new and
emerging renewable resource technologies shall be funded at not less
than the following levels on a statewide basis:  one hundred nine
million five hundred thousand dollars ($109,500,000) per year for
each of the years 1998, 1999, and 2000, and one hundred thirty-six
million five hundred thousand dollars ($136,500,000) for the year
2001.  To accomplish these funding levels over the period described
herein the San Diego Gas and Electric Company shall spend twelve
million dollars ($12,000,000) per year, the Southern California
Edison Company shall expend no less than forty-nine million five
hundred thousand dollars ($49,500,000) for the years 1998, 1999, and
2000, and no less than seventy-six million five hundred thousand
dollars ($76,500,000) for the year 2001, and the Pacific Gas and
Electric Company shall expend no less than forty-eight million
dollars ($48,000,000) per year through the year 2001.  Additional
funding not to exceed seventy-five million dollars ($75,000,000)
shall be allocated from moneys collected pursuant to subdivision (d)
in order to provide a level of funding totaling five hundred forty
million dollars ($540,000,000).
   (4) Up to fifty million dollars ($50,000,000) of the amount
collected pursuant to subdivision (d) may be used to resolve
outstanding issues related to implementation of subdivision (a) of
Section 374.  Moneys remaining after fully funding the provisions of
this paragraph shall be reallocated for purposes of paragraph (3).
   (5) Up to ninety million dollars ($90,000,000) of the amount
collected pursuant to subdivision (d) may be used to resolve
outstanding issues related to contractual arrangements in the
Southern California Edison service territory stemming from the
Biennial Resource Planning Update auction.  Moneys remaining after
fully funding the provisions of this paragraph shall be reallocated
for purposes of paragraph (3).
   (d) Notwithstanding any other provisions of this chapter, entities
subject to the jurisdiction of the Public Utilities Commission shall
extend the period for competition transition charge collection up to
three months beyond its otherwise applicable termination of December
31, 2001, so as to ensure that the aggregate portion of the
research, environmental, and low-income funds allocated to renewable
resources shall equal five hundred forty million dollars
($540,000,000) and that the costs specified in paragraphs (3), (4),
and (5) of subdivision (c) are collected.
   (e) Each electrical corporation shall allow customers to make
voluntary contributions through their utility bill payments as either
a fixed amount or a variable amount to support programs established
pursuant to paragraph (3) of subdivision (b).  Funds collected by
electrical corporations for these purposes shall be forwarded in a
timely manner to the appropriate fund as specified by the commission.

   (f) The commission's authority to collect funds pursuant to this
section for purposes of paragraph (3) of subdivision (b) shall become
inoperative on March 31, 2002.
   (g) For purposes of this article, "emerging renewable technology"
means a new renewable technology, including, but not limited to,
photovoltaic technology, that is determined by the California Energy
Resources Conservation and Development Commission to be emerging from
research and development and that has significant commercial
potential.
  SEC. 2.  Section 383.5 of the Public Utilities Code is amended to
read:
   383.5.  (a) As used in this section, the following terms have the
following meaning:
   (1) "In-state renewable electricity generation technology" means
biomass, solar thermal, photovoltaic, wind, geothermal, small
hydropower of 30 megawatts or less, waste tire, digester gas,
landfill gas, and municipal solid waste generation technologies, as
described in the report, defined in paragraph (2), including any
additions or enhancements thereto, that are produced in facilities
located in this state and placed in operation after September 26,
1996, or that were operational prior to that date, and that are also
certified under Section 292.2904 of Title 18 of the Code of Federal
Regulations as a qualifying small power production facility either
located in California, or that began selling electricity to a
California electrical corporation prior to September 26, 1996, under
a Standard Offer Power Purchase Agreement authorized by the
California Public Utilities Commission.
   (2) "Report" means the Policy Report on AB 1890 Renewables Funding
(March 1997, Publication Number P500-97-002) submitted to the
Legislature by the State Energy Resources Conservation and
Development Commission.
   (b) (1) Forty-five percent of the money collected pursuant to
paragraph (3) of subdivision (c) of Section 381, up to two hundred
forty-three million dollars ($243,000,000), shall be used for
programs that are designed to improve the competitiveness of existing
in-state renewable electricity generation technology facilities, and
to secure for the state the environmental, economic, and reliability
benefits that continued operation of those facilities will provide.

   (2) Any funds used to support in-state renewable electricity
generation technology facilities pursuant to this subdivision shall
be expended in accordance with the provisions of the report, subject
to all of the following requirements:
   (A) Funding for existing renewable electricity generation
technologies shall be grouped into three technology tiers, as
follows:
   (i) Twenty-five percent of the money, up to one hundred
thirty-five million dollars ($135,000,000), shall be used to fund
first tier technologies, including biomass, solar thermal, and whole
waste tire technologies.
   (ii) Thirteen percent of the money, up to seventy million two
hundred thousand dollars ($70,200,000) shall be used to fund second
tier wind technologies.
   (iii) Seven percent of the money, up to thirty-seven million eight
hundred thousand dollars ($37,800,000), shall be used to fund third
tier technologies, including geothermal, small hydropower, digester
gas, landfill gas, and municipal solid waste technologies.
   (B) The State Energy Resources Conservation and Development
Commission shall establish a cents per kilowatt hour production
incentive, not to exceed the payment caps per kilowatthour
established in the report representing the difference between target
prices and the market clearing price for electricity, if sufficient
funds are available.  If there are insufficient funds in any payment
period to pay either the difference between the target and market
price or the payment caps, production incentives shall be based on
the amount determined by dividing available funds by eligible
generation.  The target price for Tier 1 technologies shall not be
based on less than four cents ($0.04) per kilowatthour.  The market
clearing price for electricity shall be the energy prices paid to
nonutility power generators as provided in Section 390.
   (C) Funding for each type of existing in-state renewable
electricity generation technology shall be reduced each year during
the period from January 1, 1998, to January 1, 2002, to encourage the
development of increasingly competitive technologies.
   (D) Facilities that are eligible to receive funding pursuant to
this section shall be certified in accordance with the requirements
set forth in the report and may not receive payments for any
electricity produced that has any of the following characteristics:
   (i) Is sold under a fixed energy price payment under a long-term
contract with an existing in-state electrical corporation.
   (ii) Derives from utility-owned facility that is receiving, or is
eligible to receive, recovery of above-market facility costs through
a competitive transition charge.
   (iii) Is used onsite, sold to customers in a manner that excludes
competitive transition charge payments, or is otherwise excluded from
competitive transition charge payments.
   (c) (1) Thirty percent of the money, up to one hundred sixty-two
million dollars ($162,000,000), collected pursuant to paragraph (3)
of subdivision (c) of Section 381, shall be used for programs
designed to foster the development of new in-state renewable
electricity generation technology facilities, and to secure for the
state the environmental, economic, and reliability benefits that
continued operation of those facilities will provide.  Funds to
further the purposes of this subdivision may be committed for
multiple years.
   (2) Any funds used for new in-state renewable electricity
generation technology facilities pursuant to this subdivision shall
be expended in accordance with the report, subject to all of the
following requirements:
   (A) Funds shall be allocated for proposed projects based on a
competitive solicitation process whereby production incentives, not
to exceed one and one-half cents ($.015) per kilowatthour, are
awarded to the lowest bidders, provided that not more than 25 percent
of the funds allocated pursuant to paragraph (1) may be awarded to a
single project.
   (B) Funds expended for production incentives shall be paid over a
five-year period commencing on the date that a project begins
electricity production, provided that the project shall be
operational prior to January 1, 2002, unless the State Energy
Resources Conservation and Development Commission finds that the
project will not be operational prior to January 1, 2002, due to
circumstances beyond the control of the developer.  Upon making this
finding, the State Energy Resources Conservation and Development
Commission shall pay production incentives over a five-year period,
commencing on the date of operation, provided that the date that a
project begins electricity production may not extend beyond January
1, 2007.
   (C) The amount of funds expended shall be increased for each
successive year during the period from January 1, 1998, to January 1,
2002, as fewer projects are expected to be funded during the first
few years after funding becomes available.
   (D) Facilities that are eligible to receive payments from the New
Renewable Resources Account created pursuant to paragraph (2) of
subdivision (a) of Section 445 of the Public Utilities Code shall be
certified as specified in the report and may not receive payments for
any electricity produced that has any of the following
characteristics:
   (i) Is sold under an existing long-term contract with an existing
in-state electrical corporation if the contract includes fixed energy
or capacity payments.
   (ii) Is used onsite and is sold to customers in a manner that
excludes competitive transition charge payments, or is otherwise
excluded from competitive transition charge payments.
   (iii) Is produced by a facility that is owned by customer-owned
electricity generating systems.
   (E) Eligibility to compete for funds or to receive funds shall not
be contingent upon the location or nature of the power purchaser.
   (3) Repowered wind projects shall be eligible for funding under
this subdivision if the new investment is at least 80 percent of the
value of the repowered facility.
   (d) (1) Ten percent of the money collected pursuant to paragraph
(3) of subdivision (c) of  Section 381, up to fifty-four million
dollars ($54,000,000), shall be used for a multiyear, consumer-based
program to foster the development of emerging renewable technologies
in distributed generation applications.  Funds to further the
purposes of this subdivision may be committed for multiple years.
   (2) Any funds used for emerging technologies pursuant to this
subdivision shall be expended in accordance with all of the following
requirements:
   (A) Funding for emerging technologies shall be provided through a
competitive, market-based process that shall be in place for a period
of not less than four years, and shall be structured so as to allow
eligible emerging technology manufacturers and suppliers to
anticipate and plan for increased sale and installation volumes over
the life of the program.
   (B) The program shall provide monetary rebates, buydowns, or
equivalent incentives, subject to subparagraph (C) of paragraph (2)
of subdivision (d), to purchasers, lessees, lessors, or sellers of
eligible electricity generating systems.  Incentives shall benefit
the end-use consumer of renewable generation by directly and
exclusively reducing the cost of the eligible system, or the cost of
electricity produced by the eligible system.  Incentives shall be
issued on the basis of the rated electrical capacity of the system
measured in watts.  The amount of the per-watt incentive shall
decline over the term of the program, with a corresponding increase
in the amount of total electrical capacity eligible for the
incentive, thereby encouraging the manufacturers and suppliers of
eligible systems to reduce system costs.  Incentives shall be limited
to a maximum percentage of the system price, as defined by the State
Energy Resources Conservation and Development Commission, and the
maximum incentive percentage shall decline over the term of the
program, as shall the per-watt incentive, in amounts to be determined
by the State Energy Resources Conservation and Development
Commission.
   (C) Eligible distributed emerging technologies are photovoltaic,
solar thermal electric, fuel cell technologies that utilize renewable
fuels, and wind turbines of not more than ten kilowatts rated
electrical capacity per customer site, provided that the technologies
meet the emerging technology eligibility criteria contained in the
report prepared by State Energy Resources Conservation and
Development Commission.  Eligible electricity generating systems are
intended primarily to offset part or all of the consumer's own
electrical energy demand, and shall not be owned by electrical
corporations or publicly owned utilities, be located at a customer
site that is not receiving distribution service from existing
in-state electrical corporations.  Not less than 60 percent of the
available incentive funds shall be reserved for systems of 10
kilowatts rated electrical capacity or smaller, and not less than 15
percent of the funds shall be reserved for systems of 100 kilowatts
rated electrical capacity or smaller.  All eligible electricity
generating system components shall be new and unused, and shall not
have been previously placed in service in any other location or for
any other application.  Systems and their fuel resource shall be
located on the premises of the end-use consumer of the electricity
produced, and all eligible electricity generating systems shall be
connected to the utility grid in California.
   (D) The State Energy Resources Conservation and Development
Commission shall also determine, in collaboration with industry and
consumer interests, if a program provision limiting the amount of
funds available for any single project is warranted, and determine
how federal, state, or other funds or incentives not related to this
section that are already available, or that may become available for
eligible electricity generating systems, may impact the availability
of funds allocated under this section, if at all.  The emerging
renewable technologies program shall be implemented not later than
March 31, 1998, and incentives shall be available for eligible
electricity generating systems that are placed in service after
January 1, 1998, in accordance with the program provisions developed
by the State Energy Resources Conservation and Development
Commission.  However, projects placed in service after January 1,
1998, and prior to September 1, 1998, shall not be subject to limits,
if any, that may be determined by the commission, pursuant to this
subparagraph.
   (e) Fifteen percent of the money collected pursuant to paragraph
(3) of subdivision (c) of Section 381, up to eighty-one million
dollars ($81,000,000), shall be used for programs designed to provide
customer credits for purchases of renewable energy produced by
certified energy providers, to disseminate information regarding
renewable energy technologies, to promote purchases of renewable
energy, to help develop a consumer market for renewable energy, and
to help develop a consumer market for renewable energy technologies,
as provided in the report, subject to the following requirements:
   (1) (A) Fourteen percent of the money, up to seventy-five million
six hundred thousand dollars ($75,600,000), shall be expended to
provide customer credits for purchases of renewable energy produced
by certified energy providers.  Customer credits shall be awarded to
California retail customers located in the service territory of an
investor-owned utility that is subject to Section 381 who purchase
qualifying renewable electric power through transactions traceable to
specific generation sources by any auditable contract trail or
equivalent that provides commercial verification that the electricity
source claimed has been sold not more than once to a retail
customer.  Credits may be given without regard to whether the power
supplier is also receiving funds under any other subdivision of this
section.
   (B) Credits awarded pursuant to this paragraph may be paid
directly to energy marketers, aggregators, or generators if those
persons or entities account for the credits on the recipient customer'
s utility bills.  Credits shall not exceed one and one-half cents
($.015) per kilowatthour.  Credits awarded to members of the combined
class of customers, other than residential and small commercial
customers, shall not exceed one thousand dollars ($1,000) per
customer in 1998 and 1999.  Thereafter, the State Energy Resources
Conservation and Development Commission shall determine by January 10
of each year the average customer incentive rebate level paid over
the preceding calendar year.  In the event that the payments have
remained at the one and one-half cents ($.015) per kilowatthour cap
over the preceding calendar year, the one thousand dollars ($1,000)
per customer cap shall be removed for that calendar year, except that
in no event shall more than fifteen million dollars ($15,000,000) of
the total customer incentive funds be awarded to members of the
combined class of customers other than residential and small
commercial customers.
   (C) Funding for credits pursuant to this paragraph shall be
increased for each successive year during the period from January 1,
1998, to January 1, 2002, to encourage the increasing use of those
credits.
   (D) The State Energy Resources Conservation and Development
Commission shall develop interim criteria and procedures for the
certification of energy providers and for the identification of
energy purchasers who are eligible to receive funds pursuant to this
paragraph through a process consistent with this paragraph.  Such
criteria and procedures shall apply only to funding eligibility and
shall not extend to other renewable marketing claims.
   (E) The Public Utilities Commission shall notify the State Energy
Resources Conservation and Development Commission in writing within
10 days of revoking or suspending the registration of any electric
service provider pursuant to Paragraph (4) of Subdivision (b) of
Section 394.25.
   (2) One percent of the money, up to five million four hundred
thousand dollars ($5,400,000), shall be expended to promote renewable
energy and to disseminate information on renewable energy
technologies, including emerging renewable technologies, and to help
develop a consumer market for renewable energy and for small-scale
emerging renewable energy technologies.
   (f) (1) The State Energy Resources Conservation and Development
Commission shall adopt guidelines governing the funding programs
authorized under this section, at a publicly noticed meeting offering
all interested parties an opportunity to comment.  Substantive
changes to the guidelines shall not be adopted without at least 10
days' written notice to the public.  The public notice of meetings
required by this paragraph shall not be less than 30 days.
Notwithstanding any other provision of law, any guidelines adopted
pursuant to this section shall be deemed to satisfy the requirements
of Chapter 3.5 (commencing with Section 11340) of Division 3 of Title
2 of the Government Code.
   (2) The State Energy Resources Conservation and Development
Commission shall, in collaboration with eligible emerging technology
industry stakeholders and consumer interests, complete the emerging
technology program design, as outlined in subdivision (d), and
implement its provisions.
   (3) Awards made pursuant to this section are grants, subject to
appeal to the State Energy Resources Conservation and Development
Commission upon a showing that factors other than those described in
the guidelines adopted by the State Energy Resources Conservation and
Development Commission were applied in making the awards and
payments.  Any actions taken by an applicant to apply for, or become
or remain eligible and certified to receive, payments or awards,
including satisfying conditions specified by the State Energy
Resources Conservation and Development Commission, shall not
constitute the rendering of goods, services, or a direct benefit to
the State Energy Resources Conservation and Development Commission.
   (g) The State Energy Resources Conservation and Development
Commission shall report to the Legislature on or before May 31, 2000,
and on or before May 31 of every second year thereafter, regarding
the results of the mechanisms funded pursuant to this section.
Reports prepared pursuant to this section shall include a description
of the allocation of funds among existing, new and emerging
technologies; the allocation of funds among programs, including
consumer-side incentives; and the need for the reallocation of money
among those technologies.  The reports shall also address the
allocation of funds from interest on the accounts described in this
section, money in the accounts described in subdivision (e) of
Section 381, and money included in the accounts pursuant to Section
385.  Notwithstanding paragraph (4) of subdivision (b) of Section 383
or subdivisions (b), (c), (d), and (e) of  this section, money may
be reallocated without further legislative action among existing,
new, and emerging technologies and consumer-side programs in a manner
consistent with the report.
  SEC. 3.  Section 394.25 of the Public Utilities Code is amended to
read:
   394.25.  (a) The commission may enforce the provisions of Sections
2102, 2103, 2104, 2105, 2107, 2108, and 2114 against electric
service providers as if those electric service providers were public
utilities as defined in these code sections.  Notwithstanding the
above, nothing in this section grants the commission jurisdiction to
regulate electric service providers other than as specifically set
forth in this part.  Electric service providers shall continue to be
subject to the provisions of Sections 2111 and 2112.  Upon a finding
by the commission's executive director that there is evidence to
support a finding that the electric service provider has committed an
act constituting grounds for suspension or revocation of
registration as set forth in subdivision (b) of Section 394.25, the
commission shall notify the electric service provider in writing and
notice an expedited hearing on the suspension or revocation of the
electric service provider's registration to be held within 30 days of
the notification to the electric service provider of the executive
director's finding of evidence to support suspension or revocation of
registration.  The commission shall, within 45 days after holding
the hearing, issue a decision on the suspension or revocation of
registration, which shall be based on findings of fact and
conclusions of law based on the evidence presented at the hearing.
The decision shall include the findings of fact and the conclusions
of law relied upon.
   (b) An electric service provider may have its registration
suspended or revoked, immediately or prospectively, in whole or in
part, for any of the following acts:
         (1) Making material misrepresentations in the course of
soliciting customers, entering into service agreements with those
customers, or administering those service agreements.
   (2) Dishonesty, fraud, or deceit with the intent to substantially
benefit the electric service provider or its employees, agents, or
representatives, or to disadvantage retail electric customers.
   (3) Where the commission finds that there is evidence that the
electric service provider is not financially or operationally capable
of providing the offered electric service.
   (4) The misrepresentation of a material fact by an applicant in
obtaining a registration pursuant to Section 394.
   (c) Pursuant to its authority to revoke or suspend registration,
the commission may suspend a registration for a specified period or
revoke the registration, or in lieu of suspension or revocation,
impose a moratorium on adding or soliciting additional customers.
Any suspension or revocation of a registration shall require the
electric service provider to cease serving customers within the
boundaries of investor-owned electric corporations, and the affected
customers shall be served by the electrical corporation until the
time when they may select service from another service provider.
Customers shall not be liable for the payment of any early
termination fees or other penalties to any electric service provider
under the service agreement if the serving electric service provider'
s registration is suspended or revoked.
   (d) The commission shall require any electric service provider
whose registration is revoked pursuant to paragraph (4) of
subdivision (b) to refund all of the customer credit funds that the
electric service provider received from the State Energy Resources
Conservation and Development Commission pursuant to paragraph (1) of
subdivision (e) of Section 383.5.  The repayment of these funds shall
be in addition to all other penalties and fines appropriately
assessed the electric service provider for committing those acts
under other provisions of law.  All customer credit funds refunded
under this subdivision shall be deposited in the Renewable Resource
Trust Fund for redistribution by the State Energy Resources
Conservation and Development Commission pursuant to Section 383.5.
This section may not be construed to apply retroactively.
  SEC. 4.  Article 15 (commencing with Section 399) is added to
Chapter 2.3 of Part 1 of Division 1 of the Public Utilities Code, to
read:

      Article 15.  Reliable Electric Service Investments Act

   399.  (a) This article shall be known, and may be cited, as the
Reliable Electric Service Investments Act.
   (b) The Legislature finds and declares that safe, reliable
electric service is of utmost importance to the citizens of this
state, and its economy.
   (c) The Legislature further finds and declares that in order to
ensure that the citizens of this state continue to receive safe,
reliable, affordable, and environmentally sustainable electric
service, it is essential that prudent investments continue to be made
in all of the following areas:
   (1) To protect the integrity of the electric distribution grid.
   (2) To ensure an adequately sized and trained utility workforce.
   (3) To ensure cost-effective energy efficiency improvements.
   (4) To achieve a sustainable supply of renewable energy.
   (5) To advance public interest research, development and
demonstration programs not adequately provided by competitive and
regulated markets.
   (d) It is the intent of the Legislature to reaffirm, without
requiring revision, California's doctrine, as reflected in regulatory
and judicial decisions, regarding electrical corporations'
reasonable opportunity to recover costs and investments associated
with their electric distribution grid and the reasonable opportunity
to attract capital for investment on reasonable terms.
   (e) The Legislature further finds and declares all of the
following:
   (1) Acting under applicable constitutional and statutory
authorities, the Public Utilities Commission and the boards of local
publicly owned electric utilities have included in regulated
electricity prices, investments that are essential to maintaining
system reliability, reducing California electricity users' bills, and
mitigating environmental costs of California users' electricity
consumption.
   (2) Among the most important of these "system benefits"
investments categories are energy efficiency, renewable energy, and
public interest research, development and demonstration (RD&D).
   (3) Energy efficiency investments funded from California's
usage-based charges on electricity distribution help improve
systemwide reliability by reducing demand in times and areas of
system congestion, and at the same time reduce all California
electricity users' costs.  These investments also significantly
reduce environmental costs associated with California's electricity
consumption, including, but not limited to, degradation of the state'
s air, water, and land resources.
   (4) California's in-state renewable energy resources help
alleviate supply deficits that could threaten electric system
reliability, reduce environmental costs associated with California's
electricity consumption, and increase the diversity of the
electricity system's fuel mix, reducing electricity users' exposure
to fossil-fuel price volatility.
   (5) California's public-interest research, development and
demonstration (RD&D) investments enhance private and regulated sector
investment in electricity system technologies, and are designed
specifically to help ensure sustained improvement in the economic and
environmental performance of the distribution, transmission, and
generation and end-use systems that serve California electricity
users.
   (6) California has established a long tradition of recovering
system benefits investments through usage-based electricity charges,
which is reflected in at least two decades of electricity price
regulation by the commission, the boards of local publicly owned
electric utilities, and the mandate of the Legislature in Chapter 854
of the Statutes of 1996 (Assembly Bill 1890 of the 1995-96 Regular
Session of the Legislature) and Chapter 905 of the Statutes of 1997
(Senate Bill 90 of the 1995-96 Regular Session of the Legislature).
   (7) Unless the Legislature acts to extend the mandate of Chapter
854 of the Statutes of 1996 for minimum levels of usage based system
benefits charges, California electricity users are at substantial
risk of higher economic and environmental costs and degraded
reliability.
   399.1.  (a) As used in this article, the term "Energy Commission"
means the State Energy Resources Conservation and Development
Commission.
   (b) As used in this article, the term "local publicly owned
electric utility" has the same meaning as set forth in subdivision
(d) of Section 9604.
   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 territory
consistent with Section 330.
   (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.

   399.3.  Nothing in Section 399.2 shall be construed to preclude
any of California's local publicly owned electric utilities from
exercising authority to operate their electric distribution grid as
provided under law.
   399.4.  (a) (1) In order to ensure that prudent investments in
energy efficiency continue to be made that produce cost-effective
energy savings, reduce customer demand, and contribute to the safe
and reliable operation of the electric distribution grid, it is the
policy of this state and the intent of the Legislature that the
commission shall continue to administer cost-effective energy
efficiency programs authorized pursuant to existing statutory
authority.
   (2) As used in this section, the term "energy efficiency"
includes, but is not limited to, cost-effective activities to achieve
peak load reduction that improve end-use efficiency, lower customers'
bills, and reduce system needs.
   (b) The commission, in evaluating energy efficiency investments
under its existing statutory authorities, shall also ensure both of
the following:
   (1) That local and regional interests, multifamily dwellings, and
energy service industry capabilities are incorporated into program
portfolio design and that local governments, community-based
organizations, and energy efficiency service providers are encouraged
to participate in program implementation where appropriate.
   (2) That no energy efficiency funds are used to provide incentives
for the purchase of new energy-efficient refrigerators.
   399.6.  (a) In order to optimize public investment and ensure that
the most cost-effective and efficient investments in renewable
resources are vigorously pursued, the Energy Commission shall create
an investment plan as set forth in paragraphs (1) to (3), inclusive,
to govern the allocation of funds provided pursuant to this article.
The Energy Commission's long-term goal shall be a fully competitive
and self-sustaining California renewable energy supply.  The
investment plan shall be in accordance with all of the following:
   (1) The investment plan's objective shall be to increase, in the
near term, the quantity of California's electricity generated by
in-state renewable energy resources, while protecting system
reliability, fostering resource diversity, and obtaining the greatest
environmental benefits for California residents.
   (2) An additional objective of the plan shall be to identify and
support emerging renewable energy technologies that have the greatest
near-term commercial promise and that merit targeted assistance.
   (3) The investment plan shall contain specific numerical targets,
reflecting the projected impact of the plan, for both of the
following:
   (A) Increased quantity of California electrical generation
produced from emerging technologies and from overall renewable
resources.
   (B) Increased supply of renewable generation available from
facilities other than those selling to investor-owned utilities under
contracts entered into prior to 1996 under the federal Public
Utilities Regulatory Policies Act of 1978 (P.L. 95-617).
   (b) The Energy Commission shall, on an annual basis, evaluate
progress on meeting the targets set forth in subparagraphs (A) and
(B) of paragraph (3) of subdivision (a), or any substitute provisions
adopted by the Legislature upon review of the investment plan, and
assess the impact of the investment plan on reducing the cost to
Californians of renewable energy generation.
   (c) In preparing these investment plans, the Energy Commission
shall recommend allocations among all of the following:
   (1) (A) Except as provided in subparagraph (B), production
incentives for new renewable energy, including repowered or
refurbished renewable energy.
   (B) Allocations may not be made for renewable energy that is
generated by a project that remains under a power purchase contract
with an electrical corporation originally entered into prior to
September 24, 1996, whether amended or restated thereafter.
   (C) Notwithstanding subparagraph (B), production incentives for
incremental new, repowered or refurbished renewable energy from
existing projects under a power purchase contract with an electrical
corporation originally entered into prior to September 24, 1996,
whether amended or restated thereafter, may be allowed in any month,
if all of the following occur:
   (i) The project's power purchase contract provides that all energy
delivered and sold under the contract is paid at a price that does
not exceed commission approved short-run avoided cost of energy.
   (ii) Either of the following:
   (I) The power purchase contract is amended to provide that the
kilowatthours used to determine the capacity payment in any
time-of-delivery period in any month under the contract shall be
equal to the actual kilowatthour production, but no greater than the
five-year average of the kilowatthours delivered for the
corresponding time-of-delivery period and month, in the years 1994 to
1998, inclusive.
   (II) If a project's installed capacity as of December 31, 1998, is
less than 75 percent of the nameplate capacity as stated in the
power purchase contract, the power purchase contract is amended to
provide that the kilowatthours used to determine the capacity payment
in any time-of-delivery period in any month under the contract shall
be equal to the actual kilowatthour production, but no greater than
the product of the five-year average of the kilowatthours delivered
for the corresponding time-of-delivery period and month, in the years
1994 to 1998, inclusive, and the ratio of installed capacity as of
December 31 of the previous year, but not to exceed contract
nameplate capacity, to the installed capacity as of December 31,
1998.
   (iii) The production incentive is payable only with respect to the
kilowatthours delivered in a particular month that exceeds the
corresponding five-year average calculated pursuant to clause (ii).
   (2) Rebates, buydowns, or equivalent incentives for emerging
renewable technologies.
   (3) Customer credits for renewables not under contract with a
utility.
   (4) Customer education.
   (5) Incentives for reducing fuel costs that are confirmed to the
satisfaction of the Energy Commission at solid fuel biomass energy
facilities in order to provide demonstrable environmental and public
benefits, including but not limited to, air quality.
   (6) Solar thermal generating resources that enhance the
environmental value or reliability of the electricity system and that
require financial assistance to remain economically viable, as
determined by the Energy Commission.  The Energy Commission may
require financial disclosure from applicants for purposes of this
paragraph.
   (7) Specified fuel cell technologies, if the Energy Commission
makes all of the following findings:
   (A) The specified technologies have similar or better air
pollutant characteristics than renewable technologies in the
investment plan.
   (B) The specified technologies require financial assistance to
become commercially viable by reference to wholesale generation
prices.
   (C) The specified technologies could contribute significantly to
the infrastructure development or other innovation required to meet
the long-term objective of a self-sustaining, competitive supply of
renewable energy.
   (8) Existing wind-generating resources, if the Energy Commission
finds that the existing wind-generating resources are a
cost-effective source of reliability and environmental benefits
compared with other eligible sources, and that the existing
wind-generating resources require financial assistance to remain
economically viable, as determined by the Energy Commission.  The
Energy Commission may require financial disclosure from applicants
for the purposes of this paragraph.
   (d) Commencing on January 1, 2002, public entities are not
eligible to receive customer credits for renewables.
   (e) Notwithstanding any other provision of law, moneys collected
for renewable energy pursuant to this article shall be transferred to
the Renewable Resource Trust Fund of the Energy Commission, to be
held until further action by the Legislature.  The Energy Commission
shall prepare and submit to the Legislature, on or before March 31,
2001, an initial investment plan for these moneys, addressing the
application of moneys collected between January 1, 2002, and January
1, 2007.  The initial investment plan shall also include an
evaluation of and report to the Legislature regarding the
appropriateness and structure of a mandatory state purchase of
renewable energy.  On or before March 31, 2006, the Energy Commission
shall prepare an investment plan proposing the application of moneys
collected between January 1, 2007, and January 1, 2012.  No moneys
may be expended in the years covered by these plans without further
legislative action.
   399.7.  (a) In order to ensure that prudent investments in
research, development and demonstration of energy efficient
technologies continue to produce substantial economic, environmental,
public health, and reliability benefits, it is the policy of this
state and the intent of the Legislature that funds made available,
upon appropriation, for energy-related public interest research,
development and demonstration programs shall be used to advance
science or technology that are not adequately provided by competitive
and regulated markets.
   (b) Notwithstanding any other provision of law, moneys collected
for public-interest research, development and demonstration pursuant
to this section shall be transferred to the Public Interest Research,
Development, and Demonstration Fund of the Energy Commission to be
held until further action by the Legislature.  The Energy Commission
shall prepare and submit to the Legislature, on or before March 1,
2001, an initial investment plan for these moneys, addressing the
application of moneys collected between January 1, 2002, and January
1, 2007.  The initial investment plan shall address the
recommendations of the PIER Independent Review Panel Report, dated
March 2000, to either transform the RD&D program within the Energy
Commission, or to administer it through, or in cooperation with, an
external organization.  The initial investment plan shall include
criteria that will be used to determine that a project provides
public benefits to California that are not adequately provided by
competitive and regulated markets.  On or before March 31, 2006, the
Energy Commission shall prepare an investment plan addressing the
application of moneys collected between January 1, 2007, and January
1, 2012.  No moneys may be expended in the years covered by these
plans without further legislative action.
   399.8.  (a) In order to ensure that the citizens of this state
continue to receive safe, reliable, affordable, and environmentally
sustainable electric service, it is the policy of this state and the
intent of the Legislature that prudent investments in energy
efficiency, renewable energy, and research, development and
demonstration shall continue to be made.
   (b) (1) Every customer of an electrical corporation, shall pay a
nonbypassable system benefits charge authorized pursuant to this
article.  The system benefits charge shall fund energy efficiency,
renewable energy, and research, development and demonstration.
   (2) Local publicly owned electric utilities shall continue to
collect and administer system benefits charges pursuant to Section
385.
   (c) (1) The commission shall require each electrical corporation
to identify a separate rate component to collect revenues to fund
energy efficiency, renewable energy, and research, development and
demonstration programs authorized pursuant to this section beginning
January 1, 2002, through January 1, 2012.  The rate component shall
be a nonbypassable element of the local distribution service and
collected on the basis of usage.
   (2) This rate component may not exceed, for any tariff schedule,
the level of the rate component that was used to recover funds
authorized pursuant to Section 381 on January 1, 2000.  If the
amounts specified in paragraph (1) of subdivision (d) are not
recovered fully in any year, the commission shall reset the rate
component to restore the unrecovered balance, provided that the rate
component may not exceed, for any tariff schedule, the level of the
rate component that was used to recover funds authorized pursuant to
Section 381 on January 1, 2000.  Pending restoration, any annual
shortfalls shall be allocated pro rata among the three funding
categories in the proportions established in paragraph (1) of
subdivision (d).
   (d) The commission shall order San Diego Gas and Electric Company,
Southern California Edison Company, and Pacific Gas and Electric
Company to collect these funds commencing on January 1, 2002, as
follows:
   (1) Two hundred twenty-eight million dollars ($228,000,000) per
year in total for energy efficiency and conservation activities, one
hundred thirty-five million dollars ($135,000,000) in total per year
for renewable energy, and sixty-two million five hundred thousand
dollars ($62,500,000) in total per year for research, development and
demonstration.  The funds for energy efficiency and conservation
activities shall continue to be allocated in proportions established
for the year 2000 as set forth in paragraph (1) of subdivision (c) of
Section 381.
   (2) The amounts shall be adjusted annually at a rate equal to the
lesser of the annual growth in electric commodity sales or inflation,
as defined by the gross domestic product deflator.
   (e) The commission and the Energy Commission shall retain and
continue their oversight responsibilities as set forth in Sections
381, 383, 383.5, and 445, and Chapter 7.1 (commencing with Section
25620) of the Public Resources Code.
   (f) (1) On or before January 1, 2004, the Governor shall appoint
an independent review panel including, but not limited to, members
with expertise on the energy service needs of large and small
electricity consumers, system reliability issues, and energy-related
public policy.  On or before January 1, 2005, the panel shall prepare
and submit to the Legislature and the Energy Commission a report
evaluating the energy efficiency, renewable energy, and research,
development and demonstration programs funded under this section.
Reasonable costs associated with the review in each of the three
program categories, including technical assistance, may be charged to
the relevant program category under procedures to be developed by
the commission for energy efficiency and by the Energy Commission for
renewable energy and research, development and demonstration.
   (2) The report shall also assess all of the following:
   (A) Whether ongoing programs are consistent with the statutory
goals.
   (B) Whether potential synergies among the program categories
described in paragraph (1) that could provide enhanced public value
have been identified and incorporated in the programs.
   (C) If established targets for increased renewable generation are
likely to be achieved.
   (D) What changes should be made to result in a more efficient use
of public resources.
   (3) The report shall also compare the Energy Commission's programs
with efforts undertaken by other states and assess, as an
alternative, the relative costs and benefits of adopting a tradeable
minimum renewable energy requirement in California.  The evaluation
shall include recommendations intended to optimize renewable resource
development at the least cost.
   (4) For energy efficiency programs, the report shall include an
evaluation of all of the following:
   (A) The net benefits secured for residential customers, taking
into account both public and private costs, including improvements in
that customer group's ability to avoid or reduce consumption of
relatively costly peak electricity.
   (B) Whether the programs provide a balance of benefits to all
sectors that contribute to the funding.
   (C) The extent to which competition in energy markets including,
but not limited to, load participation in ancillary services markets,
and improvements in technology affect the continuing need for such
programs.
   (D) The status and growth of the private, competitive energy
services industry that provides energy efficiency services and other
energy                                               products to
customers.
   (E) The commercial availability of any new technologies that
reduce electricity demands during high-priced periods.
   (F) Customers' willingness and ability to reduce consumption or
adopt energy efficiency measures without program support.
   (G) The extent to which the programs have delivered cost-effective
energy efficiency not adequately provided by markets and as a result
have reduced energy demand and consumption.
   (H) The relative cost-effectiveness of program expenditures
compared to other current or potential expenditures to enhance system
reliability.
   (5) The report shall include specific recommendations aimed at
assisting the Legislature in determining whether to change or
eliminate the collection of the system benefits charge on or after
January 1, 2007.
   (6) The panel may update and revise the report as needed.
   (g) Promptly after receiving the panel's report, the commission
shall convene a proceeding to address implementation of the panel's
energy efficiency recommendations.
   399.9.  (a) No part of this article shall be construed to alter or
affect the low-income funding provisions set forth in Section 382.
Programs provided to low-income electricity customers, including but
not limited to, targeted energy efficiency services and the
California Alternative Rates for Energy Program shall continue to be
funded as set forth in Section 382.
   (b) Nothing in this article shall be construed to affect the
jurisdiction of the commission over electric distribution service.
  SEC. 5.  No reimbursement is required by this act pursuant to
Section 6 of Article XIIIB of the California Constitution because the
only costs that may be incurred by a local agency or school district
will be incurred because this act creates a new crime or infraction,
eliminates a crime or infraction, or changes the penalty for a crime
or infraction, within the meaning of Section 17556 of the Government
Code, or changes the definition of a crime within the meaning of
Section 6 of Article XIIIB of the California Constitution.