2010 California Code
Public Utilities Code
Article 13. Fuel Price Volatility

397.  (a) Notwithstanding subdivision (a) of Section 368, to ensure
the continued safe and reliable provision of electric service during
the transition to competition, and to limit the effect of fuel price
volatility in electric rates paid by California consumers, it is in
the public interest to allow an electrical corporation which is also
a gas corporation and served fewer than four million customers as of
December 20, 1995, to file with the commission a rate cap mechanism
which shall include a Fuel Price Index Mechanism requiring limited
adjustments in an electrical corporation's authorized System Average
Rate in effect on June 10, 1996, to reflect price changes in the fuel
market. The commission shall authorize an electrical corporation to
implement a rate cap mechanism which includes a Fuel Price Index
Mechanism provided the following criteria are met:
   (1) The Fuel Price Index Mechanism shall be based on the Southern
California Border Index price for natural gas as published
periodically in Natural Gas Intelligence Magazine. The "Starting
Point" of the Fuel Price Index Mechanism shall be defined as the
California Border Index price as published in Natural Gas
Intelligence for January 1, 1996.
   (2) The Fuel Price Index Mechanism shall include a "deadband"
defined as a price range for natural gas that is any price up to 10
percent higher, or lower, than the Starting Point.
   (3) The electrical corporation shall not file for a change in its
authorized System Average Rate unless the California Border Index
price, on a 12-month, rolling average basis, is outside the deadband.
If the published California Border Index is outside of the deadband,
the electrical corporation shall increase, or decrease, its
authorized System Average Rate by an amount equal to the product of
25 percent multiplied by the percentage by which the 12-month rolling
average natural gas price is higher, or lower, than the deadband.
   (4) In no case shall an electrical corporation's authorized System
Average Rate under the Fuel Price Index Mechanism exceed the average
of the authorized system average rates for the two largest
electrical corporations as of June 10, 1996.
   (5) This section shall become inoperative on December 31, 2001.