2005 California Public Utilities Code Sections 399-399.9.duplicate 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.
399.25.  (a) Notwithstanding any other provision in Sections 1001 to
1013, inclusive, an application of an electrical corporation for a
certificate authorizing the construction of new transmission
facilities shall be deemed to be necessary to the provision of
electric service for purposes of any determination made under Section
1003 if the commission finds that the new facility is necessary to
facilitate achievement of the renewable power goals established in
Article 16 (commencing with Section 399.11).
   (b) With respect to a transmission facility described in
subdivision (a), the commission shall take all feasible actions to
ensure that the transmission rates established by the Federal Energy
Regulatory Commission are fully reflected in any retail rates
established by the commission.  These actions shall include, but are
not limited to:
   (1) Making findings, where supported by an evidentiary record,
that those transmission facilities provide benefit to the
transmission network and are necessary to facilitate the achievement
of the renewables portfolio standard established in Article 16
(commencing with Section 399.11).
   (2) Directing the utility to which the generator will be
interconnected, where the direction is not preempted by federal law,
to seek the recovery through general transmission rates of the  costs
associated with the transmission facilities.
   (3) Asserting the positions described in paragraphs (1) and (2) to
the Federal Energy Regulatory Commission in appropriate proceedings.
   (4) Allowing recovery in retail rates of any increase in
transmission costs incurred by an electrical corporation resulting
from the construction of the transmission facilities that are not
approved for recovery in transmission rates by the Federal Energy
Regulatory Commission after the commission determines that the costs
were prudently incurred in accordance with subdivision (a) of Section
454.
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 electrical 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 reliable 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) The commission shall establish a cap on the aggregate amount
of funds that may be awarded to public entities from the program that
provides customer credits for renewables.  The intent of the cap is
to assure adequate funding of credits for residential and small
commercial customers.
   (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.
   (c) In lieu of the commission retaining funds authorized pursuant
to Section 381 for investments made by electrical corporations in
public interest research, development, and demonstration projects for
transmission and distribution functions, up to 10 percent of the
funds transferred to the Energy Commission pursuant to subdivision
(b) shall be awarded to electrical corporations for public interest
research, development, and demonstration projects for transmission
and distribution functions consistent with the policies and subject
to the requirements of Chapter 7.1 (commencing with Section 25620) of
Division 15 of the Public Resources Code.
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 and 383, and Chapter 7.1 (commencing with Section 25620) and
Chapter 8.6 (commencing with Section 25740) of Division 15 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 tradable
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.
   (h) An applicant for the Large Nonresidential Standard Performance
Contract Program funded pursuant to paragraph (1) of subdivision (b)
and an electrical corporation shall promptly attempt to resolve
disputes that arise related to the program's guidelines and
parameters prior to entering into a program agreement.  The applicant
shall provide the electrical corporation with written notice of any
dispute.  Within 10 business days after receipt of the notice, the
parties shall meet to resolve the dispute.  If the dispute is not
resolved within 10 business days after the date of the meeting, the
electrical corporation shall notify the applicant of his or her right
to file a complaint with the commission, which complaint shall
describe the grounds for the complaint, injury, and relief sought.
The commission shall issue its findings in response to a filed
complaint within 30 business days of the date of receipt of the
complaint.  Prior to issuance of its findings, the commission shall
provide a copy of the complaint to the electrical corporation, which
shall provide a response to the complaint to the commission within
five business days of the date of receipt.  During the dispute
period, the amount of estimated financial incentives shall be held in
reserve until the dispute is resolved.
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.