(a) It is the intent of the Legislature that California’s local publicly owned electric utilities and electric corporations should commit control of their transmission facilities to the Independent System Operator as described in Chapter 2.3 (commencing with Section 330) of Part 1 of Division 1. These utilities should jointly advocate to the Federal Energy Regulatory Commission a pricing methodology for the Independent System Operator that results in an equitable return on capital investment in transmission facilities for all Independent System Operator participants and is based on the following principles:

(1) Utility specific access charge rates as proposed in Docket No. EC96-19-000 as finally approved by the Federal Energy Regulatory Commission reflecting the costs of that utility’s transmission facilities shall go into effect on the first day of the Independent System Operator operation. The utility specific rates shall honor all of the terms and conditions of existing transmission service contracts and shall recognize any wheeling revenues of existing transmission service arrangements to the transmission owner.

(2) (A) No later than two years after the initial operation of the Independent System Operator, the Independent System Operator shall recommend for adoption by the Federal Energy Regulatory Commission a rate methodology determined by a decision of the Independent System Operator governing board, provided that the decision shall be based on principles approved by the governing board including, but not limited to, an equitable balance of costs and benefits, and shall define the transmission facility costs, if any, which shall be rolled in to the transmission service rate and spread equally among all Independent System Operator transmission users, and those transmission facility costs, if any, which should be specifically assigned to a specific utility’s service area.

(B) If there is no governing board decision, the rate methodology shall be determined following a decision by the alternative dispute resolution method set forth in the Independent System Operator bylaws.

(C) If no alternative dispute resolution decision is rendered, then a default rate methodology shall be a uniform regional transmission access charge and a utility specific local transmission access charge, provided that the default rate methodology shall be recommended for implementation upon termination of the cost recovery plan set forth in Section 368 or no later than two years after the initial operation of the Independent System Operator, whichever is later. For purposes of this paragraph, regional transmission facilities are defined to be transmission facilities operating at or above 230 kilovolts plus an appropriate percentage of transmission facilities operating below 230 kilovolts; all other transmission facilities shall be considered local. The appropriate percentage of transmission facilities described above shall be consistent with the guidelines in Federal Energy Regulatory Commission Order No. 888 and any exception approved by that commission.

(3) If the rate methodology implemented as a result of a decision by the Independent System Operator governing board or resulting from the independent system operator alternative dispute resolution process results in rates different than those in effect prior to the decision for any transmission facility owner, the amount of any differences between the new rates and the prior rates shall be recorded in a tracking account to be recovered from customers and paid to the appropriate transmission owners by the transmission facility owner after termination of the cost recovery plan set forth in Section 368. The recovery and payments shall be based on an amortization period not to exceed three years in the case of the electrical corporations or five years in the case of the local publicly owned electric utilities.

(4) The costs of transmission facilities placed in service after the date of initial implementation of the Independent System Operator shall be recovered using the rate methodology in effect at the time the facilities go into operation.

(5) The electrical corporations and the local publicly owned electric utilities shall jointly develop language for implementation proposals to the Federal Energy Regulatory Commission based on these principles.

(6) Nothing in this section shall compel any party to violate restrictions applicable to facilities financed with tax-exempt bonds or contractual restrictions and covenants regarding use of transmission facilities existing as of December 20, 1995.

(b) Following a final Federal Energy Regulatory Commission decision approving the Independent System Operator, no California electrical corporation or local publicly owned electric utility shall be authorized to collect any competition transition charge authorized pursuant to this division and Chapter 2.3 (commencing with Section 330) of Part 1 of Division 1 unless it commits control of its transmission facilities to the Independent System Operator.

(Added by Stats. 1996, Ch. 854, Sec. 12. Effective September 24, 1996.)