Legislative Weekly 
July 26, 2001 
Issue 30, Volume 3 
A weekly publication from the 
California Manufacturers & Technology Association 
detailing legislative and regulatory developments in Sacramento

GOVERNOR SIGNS BUDGET 
The 2001-02 Budget passed by the Legislature was signed by the Governor this afternoon, July 26.  The amount of the total Budget is approximately $102 billion, of which, about $79 billion is the general fund, the balance is special funds. 
The bulk of General Fund spending is allocated approximately as follows: 
$33 billion K-12 Education
$22 billion Health and Human Services
$10 billion Higher Education
$5 billion Youth and Adult Correctional

The balance is spent on expenses attributable to programs relating to business, transportation and housing, state and consumer services, environmental protection, to the courts and to tax relief. 
In addition, Health and Human Services receive the largest portion of special funds. 
Tax relief, in the version passed by the Legislature, was very insignificant, the lion's share was $75 million for assistance to low income seniors and disabled persons.   A total of about $39 million was to go to sales/use tax exemptions for purchases of: 
liquefied petroleum used for residential or harvesting use (6.9 million)
diesel fuel used for agriculture or food processing (11.4 million)
farming equipment (18.4 million)
timber equipment (1.7 million)
racehorse breeding stock (1.3 million)

In order to pass the budget legislation, the Legislature also made a deal whereby a Constitutional amendment will be sent to the voters regarding permanent allocation of a portion of gasoline sales tax revenues to transportation purposes.  They also agreed to suspend a ?% of the general sales tax in any year (as of 2002) in which the General Fund reserve is determined to exceed 3% (existing law sets 4% as the trigger). 
See CMTA's Press Release on the Budget: http://www.cmta.net/press/072601budget.shtml  
  
SCE BAIL-OUT UPDATE 
The latest Assembly version of the proposed Southern California Edison (SCE) bail-out legislation was revealed this week in proposed amendments to ABX2 82 (Keeley D-Boulder Creek) and SBX2 78 (Sher D-Stanford). 
CMTA opposes this package as unfairly shifting the cost of SCE debt onto business.  In addition, direct access options may be severely limited as the Department of Water Resources (DWR) continues to enter into long term contracts for supply and the utilities may construct new generation.  The bills may be heard after August 20, or earlier on the call of the Speaker. CMTA urges you to contact legislators about the impact of high energy prices on your business and concern about taking on any more costs. 
Elements of the package: 
SCE Debt Payment:  Total $3.9 billion debt allocated as follows:
$2.5 billion to be collected, 20% from small and 80% from large customers.  (The demand level division between small and large is yet to be determined.)
$1 billion is left for SCE to recover from large generators.
$400 million tax refund from SCE parent.
No transmission system purchase or option.
Direct Access:  Allowed without payment of exit fees after January 1, 2002 so long as there is more demand for power than can be served by SCE native generation and DWR contracts. Green power deals allowed for small residential and commercial customers immediately.
Ratepayer Benefit Account:  Positive balances in the account that includes refunds ordered by FERC, litigation proceeds, and DWR Power fund revenues would go to customers in refunds in proportion to the March, 2001 CPUC rate increase.
Renewable Portfolio Standard:  Sets a target of 20% renewable power in 2010 through requirements to purchase renewable power for resale.
SCE Financials:  CPUC cannot lower SCE rate of return before 2006. SCE may be required by the CPUC to construct new generation under cost-based ratemaking.

CRIMINAL PENALTIES ON ENERGY PRODUCERS 
CMTA and other interested parties met with staff from the offices of Assemblymember Dennis Cardoza and Lieutenant Governor Cruz Bustamante to discuss onerous provisions in ABX2 65 (Cardoza D-Merced) that would impose severe criminal penalties on energy producers. 
Amendments taken in the Assembly Appropriations Committee on July 19 delete references to petroleum products, coal and coal products, and limit the bill to apply to electricity and natural gas.  While no specific agreement was reached, the staff indicated that the author would consider amending the measure to more narrowly focus the penalty provisions of the bill. 
ABX2 65 passed (11-5) from the Assembly Appropriations Committee on July 11, and will be taken up on the Assembly Floor when the Legislature reconvenes from its Summer Recess. 
  
OVERPAYMENT REFUNDS TO PAY FOR TRANSMISSION LINE UPGRADES 
Assemblymember Sarah Reyes (D-Fresno) has amended her ABX2 78 to use any overpayment refunds ordered by the Federal Energy Regulatory Commission (FERC) for payment of principal and interest on bonds, to upgrade electricity transmission lines and to reimburse ratepayers. 
CMTA and the California Chamber of Commerce opposed the measure in the Assembly Energy, Costs and Availability Committee on July 17, asserting that 100 percent of the refunds should proportionately be returned to the ratepayers who have shouldered the burden of elevated energy prices. 
As introduced, ABX2 78 required 50 percent of the overpayment to be returned to ratepayers, and 50 percent to be deposited into the General Fund.  ABX2 78 passed (15-1) to the Assembly Appropriations Committee. 
  
EXIT FEES ON NONCORE GAS CUSTOMERS 
CMTA and other business groups are working with Assemblymember Pescetti (R-Rancho Cordova) during the Legislature's Summer Recess to amend his ABX2 23 which imposes exit fees on noncore gas customers. 
The measure also expedites the review process for approval of gas facilities, and requires pipelines within the state to meet the test that every customer would expect to be curtailed not more than once every ten years, which increases the current standard of once every five years. 
  
INITIATIVE TO LOWER NATURAL GAS PRICES CLEARED FOR SIGNATURE GATHERING 
A ballot initiative to expand the entities that can buy and sell natural gas has been approved for signature gathering by the Secretary of State. The measure would allow cities, counties, municipal utilities and irrigation districts to buy and sell natural gas and be exempt from the oversight of the California Public Utilities Commission. 
Assemblyman Dennis Cardoza (D-Merced) is the sponsor of the initiative. Supporters expect that if passed, the measure would increase competition and lower gas and electricity prices for consumers. The sponsors need to collect the signatures of 670,816 registered voters by October 26, 2001 to qualify for the March 2002 ballot. 
This may be the first of several initiatives for the 2002 election seeking to address the state's energy crisis. According to a public opinion poll recently released by the Public Policy Institute of California, residents by a two-to-one margin (65%) say questions of how to address the electricity crisis should be decided, not by the legislature and governor, but by voters through state ballot initiatives in 2002. 
  
FED-OSHA HOLDS PUBLIC FORUM ON ERGONOMICS AT STANFORD UNIVERSITY 
The Department of Labor held the third and final public forum on ergonomics at Stanford University in Palo Alto on July 24.  Following the repeal of the federal Occupational Safety and Health Act (OSHA) ergonomic rule by Congress, Secretary of Labor, Elaine Chao promised that public forums would be held in several locations to explore the issue of developing an ergonomic standard.  The forum follows a major victory for California employers when on July 19 the California Occupational Safety and Health Standards Board unanimously rejected a petition from organized labor to adopt the overturned federal Occupational Safety and Health Act (OSHA) ergonomic rule. 
The forum began with opening remarks by Assistant Secretary of Labor, Chris Spear who explained the purpose of the meeting and Secretary Chao expressed interest in trying to obtain the best information and ideas available.  Federal OSHA requested that comments be focused on three questions: 1) What is an ergonomic injury? 2) How can the Occupational Safety and Health Administration, employers and employees determine whether an ergonomic injury was caused by work-related activities or non-work-related activities; and, if the ergonomics injury was caused by a combination of the two, what is the appropriate response? and 3) What are the most useful and cost-effective types of government involvement to address workplace ergonomics injuries (e.g., rulemaking, guidelines, best practices, publications/conferences, technical assistance, consultation, partnerships or combinations of such approaches)? 
Panels began with organized labor representatives who criticized the repeal of the ergonomic rule and urged the Secretary to quickly adopt new rules to protect workers.  The second panel was made up largely of educators and scientists who have studied the ergonomics issue extensively and believe that the science does not justify an ergonomic standard such as the federal OSHA rule.  The third and final panel was a mixture of employers, employer associations, medical professionals, organized labor, university representatives, professional safety organizations, and individuals, which provided vastly contrasting views on the merits of ergonomics rules in the workplace. 
Employers resisted the federal rule stating that it was based on dubious science that cannot accurately identify the cause of repetitive motion injuries attributable to work.  Further, employers stressed that California already has the only ergonomic regulation (Title 8, CCR 5110) and the only illness and injury prevention program (Title 8, CCR 3203) in the nation, already protecting California workers. Hopefully, Secretary Chao will take a closer look at employers' concerns and the lack of credible science before deciding what, if any, new federal rules or guidance is needed in the workplace. 
  
ENVIRONMENTAL LEGISLATION AT THE BREAK 
The week of August 20 promises to be a busy one, with several measures scheduled for late policy committee hearings.  Among them, SB 72, Senator Sheila Kuehl's (D-Santa Monica) stormwater monitoring bill, which was put over in Assembly Environmental Safety following a last-minute push for major amendments by bill sponsor Heal the Bay.  It is unclear at this time what form the bill will take for the August 21 hearing. AB 1390, a controversial environmental justice measure by Assemblymember Marco Firebaugh (D-East Los Angeles), will be heard in Senate Environmental Quality.  AB 1390 is pre-determinative of the state-level program reviews required by SB 115 (Solis, 1999) and SB 89 (Escutia, 2000). 
Cleanup language on the state's greenhouse gas registry program, established last year by SB 1771 (Sher), is now in limbo following Senator Sher's (D-Stanford) decision to use SB 532 for a renewable energy initiative.  The cleanup language may resurface toward the end of session, not unlike the SB 1771 registry program language. 
Among significant late entries in the environmental arena include: 
SB 471 (Sher), discussed in last week's Legislative Weekly, amended on July 5 with Proposition 65 language and passed out of Assembly Environmental Safety on July 10.  The bill contains language that invites multiple lawsuits for the same alleged violation, even in the face of a court-approved settlement.
AB 1329 (Lowenthal D-Long Beach) last amended on June 26 and again on July 9 to place further restrictions on handling and treatment of oily wastewater.  To quote the Senate Environmental Quality Committee analysis, the sponsors (hazardous waste treatment facility operators) "have not provided any information that demonstrates they are solving an environmental protection problem."  Moreover, their proposal has the effect of "reserving the market for offsite oil/wastewater treatment to themselves."
ABX2 60 (Daucher R-Brea & Hollingsworth R-Murrieta), last amended on July 14, creates a voluntary environmental dispatch program for backup generators.  The intent of the bill is to help stabilize the grid when a rotating outage is imminent by deploying the cleanest backup units first.  Interestingly, despite the lack of outages during the critical months of May and June, this bill is getting political traction, passing out of Assembly Energy Costs and Availability on July 17 on a 17-0 vote.

Of course, there is still plenty of opportunity for last-minute mischief, perhaps more so this year than in past years if the energy crisis continues to dissipate and attention turns to other matters. 
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