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Today's order represents a major first step in our transition to competitive markets. While the decision provides necessary policy guidance, the task of working to craft the necessary details and the pursuit of these objectives will be complicated and draw on the talents and cooperation of all stakeholders. This section outlines the implementation process which must now begin. This process is described below. We identify those activities that will be undertaken by stakeholders, and those activities that we will undertake ourselves.

As we explained in Section II, this decision is effective today, but, as provided for in D.94-12-027 and D.95-05-045, we will not take steps to carry out our policies for 100 days. During this period, we expect the Legislature will have an opportunity to examine our policy choices. We also will be developing a consolidated procedural approach, described below, so that we may accommodate any necessary modifications to smooth our transition to a competitive framework. It is essential, however, that we move forward expeditiously on preliminary implementation details, so that all required components are in place by the anticipated beginning of the transition period, no later than January 1, 1998.

A. A Consolidated Approach for Implementation

There are many procedural steps that must be completed over the next two years as we prepare to implement the reforms in this decision. We need a well-organized process that will allow us to achieve these milestones along the way. We intend to develop a roadmap process similar to the one we are employing in our proceedings to open local telephone markets to competition. (Fn. 1) We anticipate that in the next 45 days, we will issue for comment an outline of this roadmap process for electric industry restructuring.

The roadmap structure allows involvement from decision makers early in the process, and maximizes the resources of both parties and staff. While we are still developing the details of this plan, the management structure will have a role for each Commissioner. Issues will be broadly grouped into four subject areas (these areas are one of the things that will be developed more fully in the draft management plan we will issue for comment in 45 days). For each broad subject area, there will be an assigned commissioner. The assigned commissioner will work with a staff team that includes an assigned Administrative Law Judge for that particular subject area, and representatives from all relevant areas of our staff.

This process will be facilitated by a managing commissioner. Like the commissioners working in specific areas, the managing commissioner will work with a staff team from various divisions. This team's responsibilities will be to keep the overall process moving forward and on schedule, coordinate the different phases and subject areas, and ensure consistency across policies and subject areas. This team will focus on process as opposed to content, with a goal of keeping the various proceedings on track so we can meet our implementation date of no later than January 1, 1998. Moreover, this team will serve as a focal point for reports to the Legislature and communication with the Legislature on electric restructuring, coordinating requests for information and making sure Legislators are receiving the right information from the right proceeding. This process will be maintained as an agenda item at each Commission meeting to provide the opportunity to discuss any coordination issues that may arise.

1. The Working Group

In D.95-05-045, we called for the Working Group to reconvene two weeks after the issuance of our policy decision to address implementation issues. We reaffirm today that the Working Group will be integral to the roadmap we adopt. However, we will not formally order the Working Group to reconvene until we have had ample opportunity to identify what we expect the Working Group to accomplish. This does not mean that the Working Group may not commence its efforts now, concurrent with our development of a procedural roadmap, in order to jump start the process.

2. Activities that Must be Initiated Within Next 100 Days

The following chart lists those actions whose commencement cannot await the adoption of a roadmap, even though they will be part of whatever roadmap we eventually adopt:

Advice letter: CTC notice to customers added to Preliminary Statements PG&E, SCE and SDG&E 30 days after effective date
Proposals to establish initial phase of Direct Access and eligibility PG&E, SCE and SDG&E 30 days after effective date
Comments on proposals to establish Direct Access Any interested party 60 days after effective date
Reply comments on direct access Utilities 75 days after effective date
Implementation Roadmap Commission 45 days after effective date
Applications for ratemaking treatment of Diablo Canyon and Palo Verde PG&E, SCE 100 days after effective date
Comments on separation of distribution, transmission, and generation PG&E, SCE and SDG&E 90 days after effective date
Application for voluntary divestiture of up to 50% fossil generation PG&E, SCE 90 days after effective date
Reply comments on separation Any interested party 150 days after effective date
Responses to applications for voluntary divestiture of up to 50% fossil generation Any interested party 135 days after effective date
Notice of preparation of EIR Commission 100 days after effective date
Applications to identify and value undepreciated sunk costs of nonnuclear generation assets PG&E, SCE and SDG&E April 1, 1996
Proposals to establish ISO filed simultaneously with CPUC and FERC; Proposals to establish Power Exchange filed simultaneously with CPUC and FERC PG&E, SCE and SDG&E 130 days after effective date
Comments on proposals to establish ISO; comments on proposals to establish Power Exchange Parties 160 days after effective date
Reply comments on proposals to establish ISO; reply comments on proposals to establish Power Exchange PG&E, SCE and SDG&E 175 days after effective date
Applications for first CTC proceeding PG&E, SCE and SDG&E September 1, 1996

3. Issues the Roadmap will Likely Address

Almost every topic addressed in this decision will need to be developed more fully as we move to implementation. At this time, we anticipate that the roadmap will, at a minimum, include the following:

  • Proceeding to unbundle transmission and distribution functions
  • Obligations of the utility distribution company
  • Real-time pricing and metering issues
  • PBR mechanisms
  • Market power
  • Transition costs
  • Public purpose programs and enabling legislation

(Fn. 2)

B. The Commission's Role During Transition and Beyond

As we enter the transition to the restructured industry, we foresee a significant shift in the role of this Commission. As regulators of monopoly utilities, we served in part as a surrogate for the pressures of a competitive market; with the arrival of competition in the generation function of the vertical utility, the need for regulation will evaporate. As this market evolves, so will our roles. We expect to continue to pursue the public interest by monitoring the transition to the restructured industry and taking any steps necessary to react to undesirable developments. We also will continue and expand our role of providing protection, safety and information to consumers, and to provide a forum for resolution of customers' complaints about all aspects of electric service. We will also act to see that fairness prevails in the competitive industries established by this decision and that the conditions necessary for fair competition are present. Below, we elaborate on some of these roles.

1. Safeguards

Today we take steps to restructure the electric industry in ways that have not been fully tried or tested before. We know that we cannot anticipate every problem or prevent every adverse outcome that may occur, but it is only prudent to think about how we should react to unforeseen developments.

We can think of two situations in which we might be called on to take corrective action. First, parties might seek a mid-course correction to refine and adjust the market mechanisms instigated today. Second, a need could arise for more substantial action to counter significant adverse developments that threaten to negate the benefits of our reforms.

In either situation, we must be able to monitor the market and detect if and when the restructured industry deviates significantly from our goals of maintaining a robust and fair market, effectively controlling market power, and ensuring a fair distribution of the benefits of competition. We need to retain the ability to intervene and counter significant adverse developments in order to preserve and promote the reforms we institute today. Intervention in the market to make such adjustments should not be taken lightly or initiated too quickly: a lesser level of competition than expected or lower than expected benefits are not necessarily the sort of significant adverse consequences that need correction if the market is otherwise functioning reasonably well.

Before we would make any corrective interventions, we would need an ability to recognize and distinguish between a minor problem or merely disappointing results and significant adverse consequences that require our intervention. This is another area where the active participation and cooperation of the affected parties will help us recognize significant problems as they arise and to craft appropriate solutions.

In addition, we will devise measurement criteria to help us detect and correct any emerging problems in the new industry structure. In our restructuring of the telecommunications industry, we established regulatory goals and a system to evaluate and respond to signals promptly. (See D.89-10-031, 33 CPUC 2d 43, 194-200.) We will need similar monitoring criteria that are appropriate for the electric industry. Our criteria should be consistent with any criteria FERC may impose. We propose to monitor developments using these criteria, and we will not undertake any intervention unless it is shown to be absolutely necessary. Our proposed roadmap will establish the procedure for parties to help us develop these criteria.

Even before the transition to competition begins, the CEQA review and market power analyses may present us with identifiable adverse impacts. We will act on the results of those studies after we have received and reviewed them.

2. Consumer Protection

UCAN and the Greenlining Institute point out that neither of the May 1995 proposals addressed the increased need for education of consumers, particularly small consumers, under the new market structure. They note that consumers have been particularly vulnerable to fraud in other newly deregulated industries and propose that the Commission address this concern by establishing an independent education trust modeled after the Telecommunications Education Trust. The purpose of this proposed trust is to ensure independent, multicultural education, advocacy, and research for small business and residential customers. According to the Greenlining Institute, many parties, including PG&E and Edison, have supported the principle of an independent education trust. The Framework Parties echo this suggestion and propose to augment the Commission's consumer affairs staff to improve the Commission's ability to resolve consumer complaints and enforce rules for market conduct. We would like to explore further these general principles during the implementation phase.

Based on our experience in the telecommunications industry, we realize that consumers will need information about the changes occurring the electric services industry and how rates are affected. From our ongoing efforts to internally reorganize the Commission, we know that we will be redesigning this component of the Commission to strengthen and provide greater service. In the short run, we expect to conduct customer education, with special attention to ensuring that customers, especially those with limited English-speaking ability or other disadvantages when dealing with sophisticated marketers, receive correct, reliable and easily understood information to help them make informed choices. We will develop this approach more fully in our procedural roadmap.

3. Registration

Our consumer protection role may be enhanced if we retain the ability to require energy service providers, including marketers, brokers and aggregators, to register with or obtain a license from this Commission. Before imposing even a minimal requirement, we will carefully consider whether existing commercial safeguards embodied in the California Department of Consumer Affairs or the Federal Trade Commission are sufficient to protect consumers in the restructured electric services industry. We intend to pursue this issue of registration or licensing during our roadmap implementation phase.


1. See D.94-12-053 which established procedures and a workplan to manage the transition to competition by January 1, 1997.

2. We expect to work closely with the Legislature on public purpose programs to ensure that the programs continue to meet Legislative goals. It is possible that some public purpose programs will not be effective or will need to be revamped in a competitive marketplace. Recognizing the Legislature's role as crafter of these policies, we will work closely with the Legislature and interested parties to refine the programs that implement these policies.


Last Modified: 10/17/2007

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