CMTA Summer Tax and Energy Conferences 
Energy Keynote Speakers 
FERC Commissioners Nora Brownell and William Massey 
August 1-3, 2001 at South Lake Tahoe 
For registration and program information, go to CMTA's website: 
http://www.cmta.net/archive/2001_tahoe_conference.shtml 


Legislative Weekly 
July 13, 2001 
Issue 28, Volume 3 

A weekly publication from the 
California Manufacturers & Technology Association 
detailing legislative and regulatory developments in Sacramento









FRIDAY THE 13TH SURPRISE FOR CALIFORNIA BUSINESSES 

The budget impasse will keep lawmakers working over the weekend. In addition, 
a deadline looms for a vote on the Governor,s Memorandum of Understanding 
(MOU) to keep Southern California Edison (SCE) out of bankruptcy. The 
Assembly and Senate Democrats are making a final run at their own versions of 
the plan. A Senate version is still in the works, while the Assembly Energy 
Costs and Availability will hold an informational hearing Saturday afternoon 
on ABX2 82 (Keeley D-Boulder Creek). ABX2 82 currently allocates the SCE 
undercollection almost entirely to noncore customers (above 20kw), pays SCE 
two times net book value for transmission, and leaves open the possibility of 
a contribution from SCE above the $400 million tax refund provided in the 
Governors MOU. The sketchy outline of a Senate plan would impose all 
undercollections to noncore customers, impose a $300 million haircut to 
generators and an additional $800 million from SCE. 
Direct access rights would be suspended under ABX2 82 until 2003 and a study 
would be authorized by March 31, 2002, on how to expeditiously phase in 
direct access for customers over 20kw (and green direct access under 20kw). 

Some of California's largest businesses have already been hit with rate 
increases over 100%.? CMTA supports an equitable sharing of the costs of the 
SCE undercollection (as well as DWR contract costs) among all customer 
groups, and will oppose a solution to the SCE problem that unfairly shifts 
these costs to California businesses. 
? 

MORE OR LESS ENERGY

There seems to be no shortage of bad business bills making their way through 
the Legislature.? Issues range from imposing strict liability on generators 
that reduce or discontinue electricity generation, to subjecting generators 
to felony criminal penalties for making basic cost/benefit business 
decisions. 

Generator Liability
A measure, ABX2 51 (Reyes D-Fresno), that makes an electricity generator 
strictly liable for any damages that are proximately caused when the 
generator reduces or stops generating electricity for economic reasons, 
passed (7-0) from the Assembly Judiciary Committee on July 3, 2001. 

Since negligence and intent need not be proven in order to establish strict 
liability, under ABX2 51, a generator could be held strictly liable for 
damages that resulted if electricity supplies were curtailed when the 
generator was temporarily shut down to perform routine maintenance, 
unscheduled maintenance or due to other external business factors.? ABX2 51 
also would make it difficult for a generator to permanently close a facility, 
even if the facility was not operating profitably. 

Despite the fact that electricity shortages are driven by any number of 
factors within and beyond their control, ABX2 51 would result in generators 
shouldering all liability and responsibility for electricity shortages. 

CMTA will be actively advocating against this measure before it is heard on 
the Assembly Floor. 

Felony Fuel Shortages 
ABX2 65 (Cardoza D-Merced) is a vaguely worded measure that does not 
explicitly identify what types of activities would be considered felonious.? 
The measure allows an individual or entity to be prosecuted for &creating a 
fuel shortage8 defined as:(1) The diminution by contrivance or artificial 
means of any of the supply of fuel to a point below that needed to meet 
consumer demand; 
(2) Restricting output or withholding capacity from bidding into the market; 
and,
(3) Economic withholding by submitting bids at prices above the producers, 
marginal cost.Fluctuations of in-state and out-of-state generation; 
maintenance of facilities; weather; customer demand; and drought are just a 
few of the many components that converge to impact day-to-day energy 
supplies. ABX2 65 does not allow for the natural swings in supply and demand 
which are common in a market economy, and add one more unpredictable 
component to the market, thus further complicating price and supply 
fluctuations.

In addition, the bill provides that producers only should receive marginal 
costs for their products.? This precept flies in the face of a free market 
economy.? Businesses should be able to receive a reasonable return on the 
products they produce and supply.? Limiting a business, profits to marginal 
costs only further discourages investment in the State,s energy 
infrastructure.

Second, entities already may be prosecuted for illegal business practices, 
conspiracy, collusion and intentional market manipulation under the State,s 
Cartwright Act and the Federal Sherman Anti-Trust Act, among others.? 
Enforcement of existing state and federal laws is sufficient to address the 
alleged illegal business practices the bill purports to remedy. 

Third, the measure establishes that a person or entity who violates 
provisions of the bill is &guilty of a felony and may be punished in state 
prison and a fine not to exceed 10 percent of the corporation,s gross 
corporate assets.8? These fines and penalties are excessively punitive. 

Fourth, the bounty-hunter provisions of the bill provide an incentive for 
employees and interest groups to investigate businesses for profit.? Other 
bounty-hunter legislation passed by the Legislature has resulted in many 
frivolous lawsuits.? Some of the costs associated with these suits are 
absorbed by businesses and some of the costs are passed on to consumers in 
the form of higher prices.? In any event, the bounty-hunter provisions have 
the potential to unnecessarily increase energy costs.? The regulatory branch 
of our government already has the authority to investigate alleged unfair 
business practices.? This authority should not be passed on to employees and 
interest groups. 

ABX2 65 establishes a terrible precedent and has the very real potential to 
reduce existing energy supplies and to discourage future energy 
infrastructure investment within the State. 

Office of Ratepayer Advocate 
Following the charge of Pacific Bell, CMTA and other business lobby groups 
have successfully slowed the progress of SB 201 (Speier D-Hillsborough) which 
repeals the sunset of the Office of Ratepayer Advocate (ORA).? CMTA does not 
oppose the continued existence of the ORA, but is advocating against language 
inserted into the measure that significantly expands the ORA's authority. 

The ORA has exercised broad authority to supervise and regulate utilities, 
arguably beyond the authority it was granted when it became a stand-alone 
office. While there is ample legislative history in Public Utilities Code 
Section 309.5 indicating that the ORA should be independent of the 
Commission, the PUC,s full authority was not automatically extended to the 
ORA. 

CMTA joined Pacific Bell in proposing amendments to limit the ORA,s authority 
and to require the PUC to issue written orders when ruling on the ORA's 
discovery requests.? Written rulings by an Administrative Law Judge or 
Commissioner would provide additional information to the ORA, utilities and 
the public explaining the basis for decisions. 

In addition, CMTA supports requiring the ORA to pursue alternative dispute 
resolution prior to filing a complaint.? Many courts today utilize 
alternative dispute resolution because it often leads to a more efficient 
disposition of cases. 

CMTA also is supportive of extending, for five more years, the sunset in the 
bill that the author seeks? to repeal.? Extending the sunset will allow the 
Legislature to assess whether or not the original intent of the legislation 
has achieved its purpose. 

SB 201 failed passage in Utilities and Commerce on July 9, 2001 when the 
author resisted? amendments to narrow and clarify provisions in the bill.? 
Reconsideration was granted and the measure received a necessary rule waiver 
to allow the bill to be heard, again, by the Utilities and Commerce Committee 
on July 16, 2001. 
? 

ASSEMBLY INSURANCE COMMITTEE PASSES UI BENEFITS BILL 

SB 40 by Senator Richard Alarcon (D-Sylmar) passed out of the Assembly 
Insurance Committee on July 11 on a 10-5 partisan vote.? The bill would 
increase the cost of unemployment insurance (UI) to employers by more than 
$3.2 billion over four years and provides no systemic changes to help offset 
the cost.? CMTA and other employer representatives opposed the bill. 

An increase in unemployment benefits is a direct payroll tax that would be 
funded entirely by employers.? According to the Employment Development 
Department's (EDD) projections, SB 40 as proposed would raise employer 
contributions over and above the existing rates by $160 million by 2004, 
given there are no changes in the unemployment rate.? Further, it is 
estimated that by 2005, the total employer UI tax increase would jump to $782 
million, a 32 percent tax increase.? SB 40 would increase the maximum weekly 
benefit from the current level of $230 to $325 in 2002, to $373 in 2003, to 
$384 in 2004 based on state average weekly wage estimates. 

The bill contains several other provisions that add costs to employers such 
as an alternate base period using the most recent 52 weeks of the benefit 
year that will allow six to eight percent more applicants to qualify for UI 
benefits.? This would be a new system in addition to the current quarterly 
reporting system and would impose a new burden on employers who would have to 
manually report alternate base period wage information to EDD within ten days 
or pay a $250 civil penalty.? It would also entitle employees who leave their 
job during a trade dispute caused by a reduction in wages and employees 
locked-out of work by the employer during a collective bargaining dispute to 
receive UI benefits anyway. 

The federal Worker Adjustment and Renotification and Training Act (WARN) 
requires an employer of 100 or more employees to give at least a 60-day 
notice in plant closings or mass layoffs affecting 50 or more employees.? If 
the employer fails to provide a WARN notice, they are liable for civil 
damages in the amount of 60 days of back pay and benefits to each affected 
worker.? Some employers elect to not give the advance notice and pay the 60 
days and benefits in order to avoid possible problems with product quality, 
equipment sabotage, poor attendance, injuries and etc.? However, the upside 
to this decision is that employees get 60 days in which to look for work full 
time with full pay and benefits.? SB 40 would allow these employees to 
collect UI benefits during the same 60 days. 

California,s UI maximum weekly benefit of $230 is the fifth lowest in the 
nation and has not been increased since 1992.? However, California has the 
most liberal eligibility requirement of any state by almost any measure and 
in order to maintain any reasonable control on UI cost, the historical 
trade-off has been workers receiving lower benefits. The above provisions are 
good examples of how the system can be abused and must be resisted by 
employers. 

CMTA along with other employer representatives are in serious discussion with 
the proponents of SB 40 to determine how to increase the benefit level and 
make some modest systemic changes that will help avoid placing an undue 
hardship on employers.? Further discussions are being scheduled. 
? 

STORMWATER BILL PUT OVER 

Late last week, Senator Kuehl,s office circulated a negotiated compromise on 
the stormwater monitoring bill, SB 72 (Kuehl D-Santa Monica).? Based on that 
version, the business community and the municipalities were prepared to 
remove their opposition earlier this week in the Assembly Environmental 
Safety and Toxic Materials Committee.? However, the evening before the 
hearing, the bill,s sponsor, Heal the Bay, circulated a new set of amendments 
to Committee members.? Their version deletes several sections of the bill, 
including carefully crafted language intended to preserve and strengthen 
group monitoring programs.? It also creates the potential for expanded 
monitoring requirements for industrial facilities. 

Heal the Bay,s action created an atmosphere of confusion and frustration that 
lead Senator Kuehl and Committee Chair Hannah-Beth Jackson to hold the bill 
in committee.? In all probability, a rule waiver will be secured for an 
August hearing in Assembly Toxics.? In the meantime, discussions will resume 
on Heal the Bay,s proposed changes.? CMTA remains hopeful that the 
outstanding issues mentioned above can be resolved without sacrificing the 
progress achieved over several weeks of negotiation. 
? 

CMTA ADVOCATES FOR CAREER AND TECHNICAL EDUCATION FUNDING 

CMTA has formally urged that $100 million dollars be allocated in the State 
Budget for Career and Technical Education (CTE, also known as vocational 
education). At the outset of this session, legislative leaders stated that 
CTE was one of the highest education priorities for the year.? Unfortunately, 
the Governor eliminated funding for CTE in the May Revise and the Budget 
Subcommittees subsequently funded only $10 million for an unallocated fund. 

In the past decade, more than half of the career technical education programs 
faced closure in the Los Angeles Unified School District because of lack of 
funding and support; statewide, the trend has been the same.? Without new 
funding this year, more programs will close.?? The acquisition of marketable 
skills in high school offers students, both those who are college bound and 
those who will immediately enter the workforce, the opportunity to earn high 
salaries and engage in meaningful careers.? CMTA continues to support 
legislation designed to rebuild California,s CTE/vocational education system. 
? 

UPDATE ON THE CALIFORNIA ECONOMY

A recent report from the California Department of Finance confirms that the 
state,s economy does not seem destined to repeat its extraordinary 2000 
performance this year.? Employment growth slowed significantly during the 
first five months of 2001.? The slowdown is principally centered in the San 
Francisco Bay Area due to the dramatic contraction in internet-related 
service industries. Below are data supporting the report,s conclusions: 

California,s employment picture has changed notably since the end of 2000.? 
In May, industry employment grew by 3,200 following gains of 19,400 in April 
and nearly 58,000 in March.? Thus far in 2001, industry employment has 
expanded by an average of 12,500 jobs each month compared to an average of 
49,000 jobs each month in 2000.
Despite decelerating job growth, California is still the nation,s growth 
leader.? While the state added over 3,000 jobs in May, nationally nonfarm 
employment fell by 19,000.? Since the beginning of the year, California has 
accounted for 73 percent of the nation,s new nonfarm jobs.
California's unemployment rate was unchanged in May at 4.9 percent.? The rate 
a year ago was 5.0 percent.? While still low by state and national standards, 
the unemployment rate of all San Francisco Bay Area counties rose in May.
Computer services*heavily concentrated in the San Francisco Bay Area*are 
bearing the brunt of the employment slowdown.? Business service employment*
which includes computer programming and personnel supply services*grew by 
nearly 13,000 jobs per month in 2000 but has averaged only 800 a month thus 
far in 2001.? Within business services, the growth rate of computer services 
employment has been cut in half.? Year-over-year industry employment growth 
in the San Jose Metropolitan Area*the Silicon Valley*has dropped from 5.9 
percent in December 2000 to 1.3 percent in May 2001.? Growth in the San 
Francisco Metropolitan Area over the same period dropped from 4.7 percent to 
2.6 percent.
California,s real estate market is also cooling.? Home sales have moderated 
and prices in the state,s costliest region, Santa Clara County, have 
softened.? Statewide sales of single-family homes in May were off nearly 13 
percent from one year ago.? However, the median price of a single-family home 
in May was still up 10.7 percent from a year-ago.
Preliminary General Fund agency cash for June was $432 million below the 
2001-02 May Revision forecast of $7.926 billion. Year-to-date, revenues are 
$389 million lower than the $78.781 billion that was expected.


www.cmta.net 
California Manufacturers & Technology Association 
980 9th Street, Suite 2200 
Sacramento, CA? 95814 
(916) 441-5420 phone 
(916) 447-9401 fax 
?