SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
Date of Report
(Date of earliest event reported): October 15, 1998
-----------------
California Infrastructure and Economic Development Bank
Special Purpose Trust SDG&E-1
Rate Reduction Certificates, Series 1997-1
SDG&E FUNDING LLC
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(Exact name of registrant as specified in its charter)
DELAWARE 333-30761 95-1184800
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(State of incorporation (Commission (I.R.S. Employer
or organization) File Number) Identification No.
101 ASH STREET, ROOM 111, SAN DIEGO, CALIFORNIA 92101
- -------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(619) 696-2328
Registrant's telephone number, including area code-----------------
- -------------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE>
FORM 8-K
Item 5. Other Events
On October 15, 1998 Registrant received notification that Bankers Trust
Company of California, N.A. , the Certificate Trustee for holders of the
Rate Reduction Certificates issued by the California Infrastructure and
Economic Development Bank Special Purpose Trust SDG&E-1, has advised the
Certificate holders concerning Proposition 9 which will be voted on by
California voters on November 3, 1998, and actions related thereto (see
attached exhibit).
Item 7. Financial Statements And Exhibits.
(c)Exhibits
99.1 Trustee's letter to Certificate holders and enclosures
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
SDG&E FUNDING LLC
(Registrant)
Date: October 15, 1998 By: /s/ James P. Trent
---------------- ---------------------------
James P. Trent
Chief Financial Officer and
Chief Accounting Officer
<PAGE>
Exhibit 99.1
October 14, 1998
To Certificate holders
Re: Amended and Restated Declaration and
Agreement of Trust dated as of
December 16, 1997
Ladies and Gentlemen:
Reference is made to that certain (i) Amended and Restated
Declaration and Agreement of Trust dated as of December 16, 1997 (the
"Trust Agreement") among the California Infrastructure and Economic
Development Bank (the "Originator"), Bankers Trust Delaware (the "Delaware
Trustee"), and Bankers Trust Company of California, N.A. ("BT California"),
as certificate trustee (the "Certificate Trustee"), (ii) First Supplemental
Agreement of Trust dated as of December 16, 1997 (the "First Supplemental
Agreement") among the Originator, the Delaware Trustee and the Certificate
Trustee, (iii) Indenture dated as of December 16, 1997 (the "Indenture")
between SDG&E Funding LLC (the "Issuer") and BT California, as note trustee
(the "Note Trustee"), (iv) Series Supplement dated as of December 16, 1997
(the "Series Supplement") between the Issuer and the Note Trustee, and (v)
Transition Property Servicing Agreement, dated as of December 16, 1997 (the
"Servicing Agreement") between the Issuer and San Diego Gas & Electric
Company (the "Servicer"). The Trust Agreement, First Supplemental
Agreement, Indenture, Series Supplement and Servicing Agreement are
collectively referred to herein as the "Agreements." Capitalized terms
used but not defined herein shall have the meanings assigned to such terms
in the Agreements.
Purpose Of This Letter
The purpose of this letter is to notify Certificateholders that, on
November 3, 1998, the electorate of the State of California will vote on a
Proposed Act (as defined below), which, if passed and upheld by the courts,
would impair rights of Certificateholders and would lead to a default in
the payment of principal and interest on approximately $6 billion of
certificates, including the Certificates. A majority of the electorate
voting "yes" would pass the Proposed Act. The certificates that would be
impaired are those issued pursuant to (i) the Trust Agreement and the First
Supplemental Agreement, (ii) the Amended and Restated Declaration and
Agreement of Trust dated as of December 8, 1997, and the First Supplemental
Agreement of Trust dated as of December 8, 1997 (the "PG&E Trust
Agreement"), and (iii) the Amended and Restated Declaration and Agreement
of Trust dated as of December 11, 1997, and the First Supplemental
Agreement of Trust dated as of December 11, 1997 (the "SCE Trust
Agreement").
Because the Proposed Act, if passed and upheld by the courts, would
adversely affect Certificateholders, the Certificate Trustee is requesting,
pursuant to Section 5.03(b) of the Trust Agreement, authorization and
direction from Certificateholders to commence suit to enforce the State
Pledge, to enjoin the implementation of Section 840.1 of the Proposed Act,
to collect monetary damages as a result of any breach of the State Pledge,
and to provide other appropriate relief. Under Section 8.02(d)(i) of the
Indenture, these costs should be payable quarterly from amounts held in the
Collection Account. Moreover, Sections 5.06 and 5.04 of the Servicing
Agreement obligate the Servicer to indemnify the Certificate Trustee for
"all liabilities, obligations, losses, damages, payments, claims, costs or
expenses of any kind whatsoever" incurred in connection with the
Certificates, other than such expenses incurred as a result of gross
negligence or willful misconduct. Pursuant to Section 6.02(e) of the Trust
Agreement, the Certificate Trustee requires indemnification by
Certificateholders to the extent these other amounts are not payable for
such purposes, as described more fully in the enclosed authorization and
direction letter (the "Authorization Letter").
<PAGE>
The Proposed Act And
Consequences Of Its Passage
Under California law, the electorate has the right, through its
initiative powers, to propose statutes. The Utility Rate Reduction and
Reform Act (the "Proposed Act") has qualified for the ballot ("Initiative
SA 97RF0064") and will be voted upon by the electorate on November 3, 1998
("Proposition 9"). A copy of the Proposed Act is enclosed. If passed, the
Proposed Act could be construed to be effective on November 4, 1998 unless
stayed by a court.
The Proposed Act would add Section 840.1(a) to the California Public
Utilities Code, prohibiting utility taxes, bond payments, surcharges or any
other assessments to pay for securitization bonds. Specifically, Section
840.1 provides:
"Section 840.1
Notwithstanding current Sections 840 through 847 of the Public Utilities
Code:
(a) No electric corporation, affiliate of an electric corporation or any
other financing entity shall assess or collect any utility tax, bond
payment, surcharge or any other assessment authorized by a Public Utilities
Commission financing order issued pursuant to Sections 840 through 847 of
the Public Utilities Code for the purpose of paying principle [sic],
interest or any other costs of any bonds authorized by those sections.
(c) Any electric corporation, affiliate of an electric corporation or
any other financing entity which is subject to a financing order issued
under Section 841 that is determined by a court of competent jurisdiction
to be enforceable despite subsection (a) of this section, shall offset any
utility tax, bond payment, surcharge, or other assessment described in
subsection (a) collected from any customer with an equal credit to be
applied concurrently with the collection of the utility tax, bond payment
surcharge or other assessment."
Therefore, if passed by the electorate on November 3, 1998, the
Proposed Act breaches the State Pledge by the State of California.
The State Pledge is set forth in Section 11.01 of the Trust
Agreement and in Section 841(c) of the California Public Utilities Code.
Section 841(c) provides:
" . . . the State of California does hereby pledge and agree with the
owners of transition property and holders of rate reduction bonds that the
state shall neither limit nor alter the fixed transition amounts,
transition property, financing orders, and all rights thereunder until the
obligations, together with the interest thereon, are fully met and
discharged, provided nothing contained in this section shall preclude the
limitation or alteration if and when adequate provision shall be made by
law for the protection of the owners and holders. The bank as agent for
the state is authorized to include this pledge and undertaking for the
state in these obligations."
<PAGE>
Thus, Section 841(c) provides that the State of California will not
limit or alter the revenue stream that was created to pay principal and
interest in respect of the Certificates without making "adequate
provision." The Proposed Act would eliminate the revenue streams, but by
its terms does not make "adequate provision" for payment of principal or
interest on the Certificates.
If passed by the electorate on November 3, 1998, the Proposed Act
would breach the State Pledge. A breach by the State of California of the
State Pledge is included in the definition of and constitutes an "Event of
Default" in the Trust Agreement. When there is an "Event of Default," the
Certificate Trustee can take all prudent actions, including instituting
suits at law to enforce the State Pledge and to obtain appropriate relief.
Further, unless the State of California provides sufficient revenues, a
default in payment of principal and interest to Certificateholders
eventually would occur.
The Trust Agreement
Under Section 5.03(a) of the Trust Agreement, if there is a failure
to make payment of the principal of or interest on any Note, then the
Certificate Trustee, if directed in writing by the Holders of a majority of
the Outstanding Amount of the Certificates of all Series, shall be entitled
and empowered to institute any suits, actions or proceedings at law, in
equity or otherwise, for the collection of the sums so due and unpaid on
such Note.
Similarly, under Section 5.03(b) of the Trust Agreement, if there is
a breach of the State Pledge by the State of California, then the
Certificate Trustee, if directed in writing by the Holders of a majority of
the Outstanding Amount of the Certificates of all Series, shall be entitled
and empowered to institute any suits, actions or proceedings at law, in
equity or otherwise, to enforce the State Pledge and to collect any
monetary damages as a result of a breach thereof.
Pursuant to Section 6.02(e) of the Trust Agreement, the Certificate
Trustee is under no obligation to exercise any of the rights or powers
vested in it by the Trust Agreement at the request or direction of any of
the Certificateholders, unless such Certificateholders shall have offered
to the Certificate Trustee reasonable security or indemnity satisfactory to
it against the cost, expenses (including reasonable legal fees and
expenses) and liabilities that might be incurred by it in compliance with
such request or direction.
As noted above, when there is an "Event of Default" under the terms
of the Trust Agreement, the Certificate Trustee can take all prudent
actions, including instituting suits at law to enforce the State Pledge and
to obtain appropriate relief.
The Servicers
Counsel for the Certificate Trustee has been informed by counsel for
each of Southern California Edison Company ("SCE"), Pacific Gas and
Electric Company ("PG&E") and San Diego Gas and Electric Company ("SDG&E"),
that, in their respective capacities as Servicers, they intend immediately
to commence litigation to have the Proposed Act declared unconstitutional
under the constitutions of both the State of California and the United
States, if it should be passed by the electorate on November 3, 1998.
Copies of letters from SCE, PG&E and SDG&E to their respective Note Issuers
are enclosed.
<PAGE>
The Authorization Letter
In order to protect the interests of the Certificateholders in the
event the Proposed Act is passed on November 3, 1998, counsel for the
Certificate Trustee, on behalf of the Certificateholders, must commence
(and have commenced) preparations immediately to challenge the
constitutionality of the Proposed Act. Counsel for the Certificate
Trustee, on behalf of the Certificateholders, wants to be prepared, on
November 4, 1998, to challenge the constitutionality of the Proposed Act,
to seek an injunction against its enforcement while the legal challenge is
pursued in the courts and to seek other appropriate relief.
Enclosed is an Authorization Letter from each Certificateholder
authorizing and directing BT California in its capacity as Certificate
Trustee, pursuant to Section 5.03(b) of the Trust Agreement, to institute
any suit to enforce the State Pledge and to collect monetary damages as a
result of any breach thereof. As a condition to such direction, pursuant
to Section 6.02(e) of the Trust Agreement, Certificateholders must agree to
indemnify BT California, Bankers Trust Delaware, their respective officers,
directors, agents and employees and their affiliates and hold them harmless
against any loss, liability, cost or expense (including reasonable legal
fees and expenses) arising out of such suit to the extent amounts in the
Collection Account may be insufficient, and if indemnification from the
Servicer is unavailing for that purpose.
Please review the Authorization Letter and if you decide to
authorize and direct the Certificate Trustee to take action, please sign
and return it immediately, and not later than 5:00 p.m. Eastern Standard
Time on November 2, 1998.
If you have any questions with respect to the matters described
above, please contact the Information Agent, Morrow & Co., Inc. at 1 (800)
662-5200, fax (212) 754-8300.
By: BANKERS TRUST COMPANY OF CALIFORNIA, N.A., as Certificate Trustee
Enclosures: Authorization Letter
Letters from Servicers
Proposed Act
<PAGE>
Authorization Letter:
Bankers Trust Company of California, N.A.
c/o Bankers Trust Company
Four Albany Street
New York, New York 10006
Bankers Trust (Delaware)
E.A. Delle Donne, Corporate Center
Montgomery Building
1011 Centre Road, Suite 200
Wilmington, Delaware 19805-1266
Re: Amended and Restated Declaration and
Agreement of Trust dated
as of December 16, 1997
Ladies and Gentlemen:
Reference is made to that certain (i) Amended and Restated Declaration and
Agreement of Trust dated as of December 16, 1997 (the "Trust Agreement")
among the California Infrastructure and Economic Development Bank (the
"Originator"), Bankers Trust Delaware (the "Delaware Trustee"), and Bankers
Trust Company of California, N.A. ("BT California"), as certificate trustee
(the "Certificate Trustee"), (ii) First Supplemental Agreement of Trust
dated as of December 16, 1997 (the "First Supplemental Agreement") among
the Originator, the Delaware Trustee and the Certificate Trustee, (iii)
Indenture dated as of December 16, 1997 (the "Indenture") between SDG&E
Funding LLC (the "Issuer") and BT California, as note trustee (the "Note
Trustee"), (iv) the Series Supplement dated as of December 16, 1997 (the
"Series Supplement") between the Issuer and the Note Trustee, and (v) the
Transition Property Servicing Agreement, dated as of December 16, 1997 (the
"Servicing Agreement") between the Issuer and San Diego Gas & Electric
Company (the "Servicer"). The Trust Agreement, First Supplemental
Agreement, Indenture, Series Supplement and Servicing Agreement are
collectively referred to herein as the "Agreements." Capitalized terms
used but not defined herein shall have the meanings assigned to such terms
in the Agreements.
Each of the undersigned Certificateholders (the "Certificateholders")
hereby authorizes and directs BT California in its capacity as Certificate
Trustee, pursuant to Section 5.03(b) of the Trust Agreement, to institute
any suits, actions or proceedings at law, in equity or otherwise, to
enforce the State Pledge and to collect monetary damages as a result of any
breach thereof and to prosecute any such suit, action or proceeding to
judgment or final decree and to take any and all actions consistent with
the foregoing including the retention of counsel or counsels as may be
appropriate or necessary in connection therewith. An "Event of Default" is
defined in the Trust Agreement to include a breach by the State of
California of the State Pledge. Independent of any authorization and
direction by Certificateholders, the Certificate Trustee can take all
prudent actions, including instituting suits at law to enforce the State
Pledge and to obtain appropriate relief when there is an "Event of Default"
as defined in the Trust Agreement.
Under Section 8.02(d)(i) of the Indenture, the costs associated with the
implementation of the directions described herein should be payable
quarterly from amounts held in the Collection Account. Moreover, Sections
5.06 and 5.04 of the Servicing Agreement obligate the Servicer to indemnify
the Certificate Trustee for "all liabilities, obligations, losses, damages,
payments, claims, costs or expenses of any kind whatsoever" incurred in
connection with the Certificates, other than such expenses incurred as a
result of gross negligence or willful misconduct. Pursuant to Section
6.02(e) of the Trust Agreement, the Certificate Trustee requires
indemnification by Certificateholders to the extent these other amounts are
not payable for such purposes.
In connection with the foregoing, by its execution hereof, each of the
Certificateholders hereto severally, and not jointly, in proportion to its
percentage interest of the aggregate principal amount of Certificates
outstanding, hereby agrees to indemnify BT California, Bankers Trust
Delaware, their respective officers, directors, agents and employees and
their affiliates (the "Indemnified Parties") and hold them harmless against
any loss, liability, cost or expense (including reasonable legal fees and
expenses) arising out of or in connection with the implementation of the
directions described herein to the extent amounts in the Collection Account
may be insufficient, and if indemnification from the Servicer is unavailing
for that purpose, provided however, that the foregoing indemnity shall not
extend to any loss, liability, costs or expenses incurred by the
Indemnified Parties arising out of or in connection with the gross
negligence or willful misconduct of the Indemnified Parties. The
Indemnified Parties, at the expense of the Certificateholders, retain the
right to representation by counsel or multiple counsel of its own choosing
in any action, suit or any other proceeding brought against it in relation
to its execution of the directions set forth herein without affecting the
Indemnified Parties' right to indemnification hereunder or waiving any
rights afforded to it under the Agreements, any related agreement or
applicable law.
The provisions of this indemnity shall survive (i) the resignation or
removal of BT California, as Certificate Trustee, (ii) the resignation or
removal of BT California, as Note Trustee, (iii) the resignation or removal
of Bankers Trust Delaware, as Delaware Trustee, (iv) the execution or
termination of these instructions, and (v) the termination of any of the
Agreements or any related agreement or agreements. The Indemnified Parties
shall promptly provide the Certificateholders written notice of any such
loss, liability, cost or expense, or any pending or threatened claim or
litigation of which the Indemnified Parties has actual knowledge, provided,
however, failure to provide such notice shall in no way waive or limit the
Certificateholders' duties or obligations hereunder. The indemnity set
forth herein or the Indemnified Parties' election to seek relief hereunder
does not constitute a waiver of any rights, privileges, immunities and/or
indemnities as provided to it pursuant to the terms of the Agreements, and
any related agreement or under applicable law.
The terms and provisions of this letter shall be governed by and construed
in accordance with the internal laws of the State of New York without
regard to its conflict of laws provisions. This letter may be
countersigned in any number of counterparts, each executed counterpart
constituting an original, but together only one instrument. Facsimile
signatures shall be deemed to be original signatures for all purposes
hereunder.
Please return by not later than 5:00 p.m. Eastern Standard Time on November
2, 1998 to:
Morrow & Co., Inc.
445 Park Avenue, Fifth Floor
New York, New York 10022
Phone: 1 (800) 662-5200
Facsimile: (212) 754-8300
__________________________
NAME OF BENEFICIAL OWNER
BY __________________________
Name:
Title:
Phone No.:
Fax No.:
Date:
___________________________
NOMINEE NAME
Please enter dollar amount of consent next to each class.
California Infrastructure and Economic Development Bank Special Purpose
Trust SDG&E-1, Series 1997-1 Rate Reduction Certificates
Class Cusip # Consented Amount
A-1 130335AR3 ________________
A-2 130335AS1 ________________
A-3 130335AT9 ________________
A-4 130335AU6 ________________
A-5 130335AV4 ________________
A-6 130335AW2 ________________
A-7 130335AX0 ________________
<PAGE>
Letters from Servicers:
October 6, 1998
SDG&E Funding LLC
101 Ash Street
Room 111
San Diego, CA 92101
Re: Proposition 9
Ladies and Gentlemen:
On June 24, 1998, the California Secretary of State announced that
Proposition 9 had qualified for the November 3, 1998 ballot. At least one
portion of Proposition 9, proposed section 840.1 of the California Public
Utilities Code, could have serious adverse consequences for SDG&E Funding
LLC (the "Note Issuer") and for holders of Rate Reduction Certificates
issued by the California Infrastructure and Economic Development Bank
Special Purpose Trust SDG&E-1 (the "Certificates"). Proposed section 840.1
would prohibit the assessment or collection of fixed transition amounts for
the purpose of paying principal or interest on the Certificates. If
Proposition 9 is approved by the voters, proposed section 840.1 could be
construed to take effect on November 4, 1998, unless it is stayed by a
court.
If Proposition 9 is approved by the voters, San Diego Gas and Electric
Company ("SDG&E) intends to comply with its obligations under section
5.02(d) of the Transition Property Servicing Agreement by "tak[ing] such
legal or administrative actions . . . as may be reasonably necessary to
block or overturn any attempts to cause a repeal of, modification of or
supplement to the Statute or the Financing Order or the rights of holders
of Transition Property by legislative enactment, voter initiative or
constitutional amendment that would be adverse to Certificateholders."
Accordingly, if proposition 9 is approved by the voters, SDG&E intends to
commence litigation immediately to cause section 840.1 declared
unconstitutional.
As with any litigation, the ultimate result of any such litigation is
uncertain. SDG&E believes that the chance of a successful outcome will be
maximized if Bankers Trust Company of California, N.A., immediately appears
in the litigation in its capacity as Certificate Trustee on behalf of
Certificateholders, the parties most directly and immediately impacted by
proposed section 840.1
Sincerely yours,
Edwin L. Guiles
cc: Bankers Trust Company of California, N.A.
c/o Bankers Trust Company
Corporate Trust and Agency Services
Four Albany Street
New York, NY 10006
Attention: Structured Finance Group
<PAGE>
October 5, 1998
PG&E Funding LLC
245 Market Street
Room 424
San Francisco, CA 94105
Re: Proposition 9
Ladies and Gentlemen:
On June 24, 1998, the California Secretary of State announced that
Proposition 9 had qualified for the November 3, 1998 ballot. At least one
portion of Proposition 9, proposed section 840.1 of the California Public
Utilities Code, could have serious adverse consequences for PG&E Funding
LLC (the "Note Issuer") and for holders of Rate Reduction Certificates
issued by the California Infrastructure and Economic Development Bank
Special Purpose Trust PG&E-1 (the "Certificates"). Proposed section 840.1
would prohibit the assessment or collection of fixed transition amounts for
the purpose of paying principal or interest on the Certificates. If
Proposition 9 is approved by the voters, proposed section 840.1 could be
construed to take effect on November 4, 1998, unless it is stayed by a
court.
If Proposition 9 is approved by the voters, Pacific Gas and Electric
Company ("PG&E") intends to comply with its obligations under section
5.02(d) of the Transition Property Servicing Agreement by "tak[ing] such
legal or administrative actions . . . as may be reasonably necessary to
block or overturn any attempts to cause a repeal of, modification of or
supplement to the Statute or the Financing Order or the rights of holders
of Transition Property by legislative enactment, voter initiative or
constitutional amendment that would be adverse to Certificateholders."
Accordingly, if Proposition 9 is approved by the voters, PG&E intends to
commence litigation immediately to cause section 840.1 declared
unconstitutional.
As with any litigation, the ultimate result of any such litigation is
uncertain. PG&E believes that the chance of a successful outcome will be
maximized if Bankers Trust Company of California, N.A., immediately appears
in the litigation in its capacity as Certificate Trustee on behalf of
Certificateholders, the parties most directly and immediately impacted by
proposed section 840.1.
Very truly yours,
cc: Bankers Trust Company of California, N.A.
c/o Bankers Trust Company
Corporate Trust and Agency Services
Four Albany Street
New York, NY 10006
Attention: Structured Finance Group
PG&E Funding LLC
<PAGE>
October 6, 1998
SCE Funding LLC
2244 Walnut Grove Ave., Room 180
Rosemead, CA 91770
Ladies and Gentlemen:
On June 24, 1998, the California Secretary of State announced that
Proposition 9 had qualified for the November 3, 1998 ballot. At least one
portion of Proposition 9, proposed Section 840.1 of the California Public
Utilities Code, could have serious adverse consequences for SCE Funding
LLC (the "Note Issuer") and for holders of Rate Reduction Certificates
issued by the California Infrastructure and Economic Development Bank
Special Purpose Trust SCE-1 (the "Certificates"). Proposed Section 840.1
would prohibit the assessment or collection of fixed transition amounts for
the purpose of paying principal or interest on the Certificates. If
Proposition 9 is approved by the voters, proposed Section 840.1 could be
construed to take effect on November 4, 1998, unless it is stayed by a
court.
If Proposition 9 is approved by the voters, Southern California Edison
Company ("SCE") intends to comply with its obligations under Section
5.02(d) of the Transition Property Servicing Agreement by "tak[ing] such
legal or administrative actions as may be reasonably necessary to block or
overturn any attempts to cause a repeal of, modification of or supplement
to the Statute or the Financing Order or the rights of holders of
Transition Property by legislative enactment, voter initiative or
constitutional amendment that would be adverse to Certificateholders."
Accordingly, if Proposition 9 is approved by the voters, SCE intends to
commence litigation immediately to cause Section 840.1 to be declared
unconstitutional.
As with any litigation, the ultimate result of any such litigation is
uncertain. SCE believes that the chance of a successful outcome will be
maximized if Bankers Trust Company of California, N.A. immediately appears
in the litigation in its capacity as Certificate Trustee on behalf of
Certificateholders, the parties most directly and immediately impacted by
proposed Section 840.1.
Very truly yours,
/s/ Theodore F. Craver, Jr.
Theodore F. Craver, Jr.
Senior Vice President and Treasurer
cc: Bankers Trust Company of California, N.A.
c/o Bankers Trust Company
Corporate Trust and Agency Services
Four Albany Street
New York, NY 10006
Attention: Structured Finance Group
<PAGE>
Proposed Act:
PROPOSED INITIATIVE NO. SA 97 RF 0064
THE UTILITY RATE REDUCTION AND REFORM ACT
SECTION I. Findings and Declarations
The People of California find and declare as follows:
The cost and dependability of California's electric utility service
are threatened by a new law that was intended to reduce regulation
of electric utility companies in this state.
Any change in the way electricity is sold should benefit all
electric utility customers, including residential and small
business customers, and should result in a fair and competitive
marketplace.
Instead of creating a fully competitive market for electricity, the
new law unfairly favors existing electric utility monopolies by
forcing customers to pay rates more than 40 percent higher than the
market price in order to bail out utilities for their past bad
investments.
As a result of this $28 billion bailout for electric utility
companies, the average California household will pay more than $250
more per year for electricity than they would in a fully
competitive market.
Residential and small business customers should not be required to
bear the costs of bonds used by utility companies to pay for past
bad investments.
It is against public policy for residential and small business
customers to be required to pay for the imprudent and uneconomic
decisions of electric utility companies to invest in nuclear power
plants which the public did not want and which threaten the health
and safety of this state.
Under the new law, deregulation of electric utility companies may
result in marketing abuses that harm residential and small business
customers. Such abuses may include the selling of information about
these customers to other companies for profit.
Therefore, the People of California declare that it is necessary to
protect residential and small business customers from unfair and
unjustified taxes and surcharges that will force them to subsidize
electric utility companies. It is also necessary to ensure that
residential and small business customers directly benefit from
deregulation of electric utility companies.
SECTION 2. Purpose
The purpose of this chapter it to:
1. Reduce residential and small commercial electricity rates by
20 percent to assure that these customers receive a direct benefit
from the transition to the competitive marketplace for electricity.
2. Prohibit taxes, surcharges, bond payments or any other
assessment from being added to electricity bills to pay off utility
companies' past bad investments in nuclear power plants and other
generation related costs.
3. Prohibit bonds from being used to force residential and small
business customers to pay for past bad investments by electric
utility companies.
4. Provide for fair and public review of California Public
Utilities Commission decisions related to electricity price and
services.
5. Protect the privacy of utility customers and provide the
information consumers need to obtain low cost and high quality
electric service.
1
<PAGE>
SECTION 3. The following Sections are added to the Public
Utilities Code:
Electric Utility Rate Reduction
Section 368.1
(a) No later than January 1, 1999, electricity rates for
residential and small commercial customers shall be reduced so that
these customers receive rate reductions of at least 20 percent on
their total electricity bill as compared to the rate schedules in
effect for these customers on June 10, 1996.
(b) The rate reductions described in subsection (a) shall be
achieved through cutting payments to electric corporations for
their nuclear and other uneconomic generation costs as described in
Sections 367.1 and 367.2.
(c) No utility tax, bond payment, surcharge, or any other
assessment in any form shall be levied against any electric utility
customer to pay for the rate reductions described in subsections
(a) and (b).
Prohibition Against Utility Taxes, Bond Payments, Surcharges or Any
Other Assessments To Pay For Nuclear Power Plants
Section 367.1
(a) Effective immediately, costs for nuclear generation plants and
related assets and obligations shall not be paid for by electric
utility customers, except to the extent that such costs are
recovered by the sale of electricity at competitive market prices
as reflected in independent Power Exchange revenues or in contracts
with the Independent System Operator.
(b) No utility tax, bond payment, surcharge or other assessment in
any form shall be levied against any electric utility customer for
the recovery of nuclear costs described in subsection (a).
(c) This section shall not apply to reasonable nuclear
decommissioning costs as referenced in Section 379 of the Public
Utilities Code.
2
<PAGE>
LIMITATION ON UTILITY TAXES, BOND PAYMENTS, SURCHARGES, AND ANY
OTHER ASSESSMENTS TO PAY FOR ELECTRIC UTILITY COMPANY INVESTMENTS
IN NON-NUCLEAR GENERATION ASSETS
SECTION 367.2
(a) Effective immediately, costs for non-nuclear generation plants
and related assets and obligations shall not be recovered from
electric utility customers under the cost recovery mechanism
provided for by sections 367 through 376 of the Public Utilities
Code except to the extent that such costs are recovered by the sale
of electricity at competitive market rates from independent Power
Exchange revenues or from contracts with the Independent System
Operator, unless the electric utility first demonstrates to the
satisfaction of the Commission at a public hearing that failure to
recover such costs would deprive it of the opportunity to earn a
fair rate of return.
(b) This section shall not apply to costs associated with renewable
non-nuclear electricity generation facilities described in Section
381(c)(3), or to costs associated with power purchases from
qualifying facilities pursuant to the Public Utility Regulatory
Policies Act of 1978 and related commission decisions.
PROHIBITION AGAINST UTILITY TAXES, BOND PAYMENTS, SURCHARGES AND
ANY OTHER ASSESSMENT TO PAY FOR SECURITIZATION BONDS.
SECTION 840.1
Notwithstanding current Sections 840 through 847 of the Public
Utilities Code:
(a) No electric corporation, affiliate of an electric corporation
or any other financing entity shall assess or collect any utility
tax, bond payment, surcharge or any other assessment authorized by
a Public Utilities Commission financing order issued pursuant to
Sections 840 through 847 of the Public Utilities Code for the
purpose of paying principle, interest or any other costs of any
bonds authorized by those sections.
(b) The Public Utilities Commission shall not issue any financing
order pursuant to Sections 840 through 847 after the effective date
of this measure.
(c) Any electric corporation, affiliate of an electric corporation
or any other financing entity which is subject to a financing order
issued under Section 841 that is determined by a court of competent
jurisdiction to be enforceable despite subsection (a) of this
section, shall offset any utility tax, bond payment, surcharge, or
other assessment described in subsection (a) collected from any
customer with an equal credit to be applied concurrently with the
collection of the utility tax, bond payment, surcharge or other
assessment.
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Section 841.1
Any underwriter or bond purchaser who purchases rate reduction
bonds after November 24, 1997 issued pursuant to current Sections
840 through 847 shall be deemed to have notice of the provisions of
Sections 367.1, 367.2, 368.1, and 840.1
Public Participation and Judicial Review For Consumer Protection
and Electric Company Accountability
Section 1170.5
(a) Any action or proceeding of the Public Utilities commission
pursuant to Section 367.1, 367.2, 368.1 and 840.1 of the Public
Utilities Code shall require a public hearing where evidence is
taken by and discretion is vested in the Public Utilities
Commission.
(b) Any change to the amount of above-market costs for non-nuclear
generation plants and related assets and obligations being
recovered from utility customers shall only be made after the
electrical corporation has provided notice to the public pursuant
to Section 454 of the Public Utilities Code.
(c) Any action or proceeding to attack, review, set aside, void or
annul a determination, finding, or decision of the Public Utilities
Commission relating to electric restructuring under Chapter 2.3 of
Part I of Division 1 of the Public Utilities Code and financing of
transition costs as described in Article 5.5 of Chapter 4 of Part 1
of Division 1 of the Public Utilities Code shall be in accordance
with the provisions of Section 1094.5 of the Code of Civil
Procedure. In any such action the writ of mandate shall lie from
the court of appeals to the Public Utilities Commission. The court
shall not exercise its independent judgment but shall only
determine whether the determination, finding or decision of the
Public Utilities Commission is supported by substantial evidence in
light of the whole record.
Electric Utility Customer Privacy Protection
Section 394.1
The confidentiality of residential and small commercial customer
information shall be fully protected as provided by law. No entity
providing electricity services including an electric corporation
shall provide information about a residential or small commercial
customer to any third party without the express written consent of
the customer.
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Electric Utility Customer Information
Section 393
The Public Utilities Commission shall require each electric utility
or electric service provider to provide such information or
materials with each utility bill issued to residential and small
commercial customers as the Commission determines to be necessary
to assist consumers in obtaining low costs, high quality electric
service options, including electric service options that reduce
environmental impacts such as those that rely on renewable energy
sources and to protect consumers' interest in all matters
concerning safe and dependable delivery of electric service.
Definitions
Section 330.1 Definitions of Charges
(a) "Utility tax" "bond payments" "surcharge", "assessment" or
"involuntary payment" mean any charge that serves to permit an
electric corporation to recover the value of uneconomic assets from
ratepayers, and includes but is not limited to a "fixed transition
amount" as defined by Section 840(d), and the "competition
transition charge" that the nonbypassable charge referred to in
Sections 367 and 376, inclusive.
(b) For purposes of Sections 330.1, 367.1, 367.2, 368.1, 393, and
840.1, the terms "electric utility", "electric utility company",
and "electric corporation" have the same meaning as the term
"electrical corporation" as defined in Section 218 of the Public
Utilities Code.
Repeal of Existing Law
Sections 367(a), 368(d), 368(h) of the Public Utilities Code are
repealed
SECTION 4. Initiative Integrity
(a) This act shall be broadly construed and applied in order to
fully promote its underlying purposes, and to be consistent with
the United States Constitution and the Constitution of the State of
California. If any provision of this initiative conflicts directly
or indirectly with any other provisions of law, including but not
limited to the cost recovery mechanism provided for by Sections 367
through 376 of the Public Utilities Code, or any other statute
previously enacted by the Legislature, it is the intent of the
voters that those other provisions shall be null and void to the
extent that they are inconsistent with this initiative and are
hereby repealed.
(b) No provision of this act may be amended by the Legislature
except to further the purpose of that provision by a statute passed
in each house by roll call vote entered in the journal, two thirds
of the membership concurring, or by a statute that becomes
effective only when approved by the electorate. No amendment by
the Legislature shall be deemed to further the purposes of this act
unless it furthers the purpose of the specific provision of this
act that is being amended. In any judicial action with respect to
any legislative amendment, the court shall exercise its independent
judgment as to whether or not the amendment satisfies the
requirements of this subsection.
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(c) If any provision of this act or the application thereof to any
person or circumstances is held invalid, that invalidity shall not
effect other provisions or applications of the act that can be
given effect in the absence of the invalid provision or
application. To this end, the provisions of this act are
severable.
(d) It is the will of the People that any legal challenges to the
validity of any provision of this act be acted upon by the courts
upon an expedited basis.
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