Early on in the debate, the legislature had signaled the commission that it would need the blessing of lawmakers to pursue its agenda.This past August, during the waning days of a two-year session, the California Legislature unanimously passed a landmark bill to deregulate the state's $23-billion electric utility industry.
The new law, known as "Assembly Bill (AB) 1890, largely reaffirms the broad outlines of the December 1995 Final Policy Decision issued by the California Public Utilities Commission (CPUC). It ratifies the CPUC's plan for a Power Exchange to create a wholesale electricity market, and an independent system operator (ISO) to manage operation of the transmission grid. It also calls for state-backed bonds to "securitize" stranded costs and secure a promise for a 10-percent rate reduction for residential and other small customers.
Overall, AB 1890 covers an enormous range of issues (em from market structure to direct access (em with special incentives for various players:
s Utilities (em receive strong assurances of their ability to recover $20 to $30 billion in stranded
costs over a four-year period
(municipals must play in the new market to get this authority).
s Large Customers (em get direct access in the near term, a shorter stranded-cost recovery period, and an exemption from paying stranded costs in certain areas.
s Labor unions (em are guaranteed that worker retraining and severance will be included in stranded costs, and benefit from a provision that requires buyers of divested plants to maintain labor agreements for two years.
s IPPs (em receive assurances that existing contracts will be respected, some certainty as to the method of calculating avoided cost, and utility financial support of both new and existing projects.