2. Background

In California's restructured electricity market, customers may subscribe to "bundled service" from the utility distribution company or "direct access" service from an electric service provider (ESP). Customers who purchase bundled service from the utility pay an energy charge to cover the utility's power supply costs. For these bundled service customers, the customer's total bundled bill includes charges for all utility services, including distribution and transmission as well as energy. A direct access customer receives distribution and transmission service from the utility, but purchases its electric energy from its ESP.

A utility's bundled customer can choose to become a direct access customer and later revert to bundled customer status. The utility is the electricity provider of last resort. The ability to leave the utility system and return may cause substantial fluctuations in the amount of energy the utility must purchase (or has purchased) on its behalf.

Recent events in the California electric market have caused a radical change in the area of direct access. First, the Governor's Proclamation of January 17, 2001, found that an emergency exists in the electricity market in California threatening "the solvency of California's major public utilities, ...." Second, on February 1, 2001, Assembly Bill No. 1 from the First Extraordinary Session (Ch. 4, First Extraordinary Session 2001) (AB 1X) was signed into law which, among other things, requires that the Department of Water Resources (DWR) procure electricity on behalf of the customers of the California utilities. In regard to direct access, AB 1X adds Section 80110 to the Water Code:

"After the passage or such period of time after the effective date of this section as shall be determined by the commission, the right of retail end use customers pursuant to Article 6 (commencing with Section 360) of Chapter 2.3 of Part 1 of Division 1 of the Public Utilities Code to acquire service from other providers shall be suspended until the department [the Department of Water Resources] no longer supplies power hereunder."

The section was effective February 1, 2001.

AB 1X, Section 7 states:

"This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are:
In order to address the rapid, unforeseen shortage of electric power and energy available in the state and rapid and substantial increases in wholesale energy costs and retail energy rates, that endanger the health, welfare, and safety of the people of this state, it is necessary for this act to take effect immediately."