BILL ANALYSIS
AB 5 X1
Page A
Date of Hearing: January 10, 2001
ASSEMBLY COMMITTEE ON ENERGY COSTS AND AVAILABILITY
Roderick D. Wright, Chair
AB 5 X1 (Keeley) - As Introduced: January 9, 2001
SUBJECT : Electrical restructuring: Independent System Operator:
Power Exchange Governance.
SUMMARY : This bill revises specific provisions relating to both
the Governance structures and authority of the California
Independent System Operator (CAISO) and the Power Exchange (PX)
and the duties and authority of the Electricity Oversight Board
(EOB). Specifically, this bill :
1)Repeals existing law directing the EOB to determine the
composition and terms of service for governing boards of the
ISO and PX.
2)Repeals existing law which specifies EOB member right to
decline or confirm representative groups on the governing
boards;
3)Repeals the Oversight Board's responsibility for approval of
election and qualifications of ISO/PX governing board members.
4)Requires that in 90 days of the effective date of this bill,
that the ISO and PX governing boards be composed of an
unlimited term, three member, annually and Governor appointed,
independent governing board of directors composed of
individuals not affiliated with any actual or potential
ISO-related market participant.
5)Requires that the Oversight Board revise the CAISO/PX articles
of incorporation and bylaws to reflect the aforementioned
changes and make necessary filings with the Federal Energy
Regulatory Commission necessary to implement this act.
6)Removes the existing authority of the Oversight Board to hold
a closed session to consider matters involving the removal of
an ISO or PX Governing Board member. All such issues must now
be voted on in open session.
7)Prohibits ISO participation in any multi-state entity or
regional organization unless approved by the Oversight Board.
AB 5 X1
Page B
EXISTING LAW provides for the creation of the Oversight Board
and describes its functions, which includes oversight of the
Independent System Operator and the Power Exchange, its board's
composition and terms of service and appeals processes.
FISCAL EFFECT : Unknown.
COMMENTS :
AB 1890, (Brulte) [Chapter 854, Statutes of 1996], contained
intent language that established the process for California's
entry into an interstate compact with other western states to
require utilities selling energy into the California markets to
adhere to standards and protocols to protect the reliability of
regional transmission and distribution systems. This bill
repeals those provisions and requires EOB approval prior to the
CAISO's participation in any multistate entity or regional
transmission organization.
The restructuring of California's electric industry came in the
form of comprehensive electric restructuring legislation, AB
1890. Additionally, because the ISO and PX are non-public
entities engaged in the interstate transmission and wholesale
power markets, their operations are subject to Federal Energy
Regulation Commission (FERC) jurisdiction under the Federal
Power Act.
On December 15, 2000, FERC issued an Order Proposing Remedies
for California Wholesale Electric Markets, which outlined its
desire to establish procedures to discuss with state
representatives the process for selection of the independent ISO
Board members that will replace the current stakeholder board.
The FERC decision proposes to replace the existing stakeholder
boards with independent boards. Presently, the ISO and the PX
are governed by what the FERC calls stakeholder boards - i.e.
those who have business in the market/market participants.
Under the FERC order, the new board would be made up of
non-market participants. The order sets out FERC's desire to
discuss the process for selection of the new board structure
with state representatives.
Generally, the FERC order requests State action in the following
areas:
AB 5 X1
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PX Must Buy: FERC eliminates the requirement that the three
investor-owned utilities<1> sell into and buy from the Power
Exchange. This would free up the IOUs to search for better
deals through bilateral contracts.
Real-Time Penalty: In order to discourage generators from
selling into the day ahead/hour ahead market, FERC proposed
the assessment of a $100/MWh penalty for generators that
schedule 95% of their electricity in those markets.
Soft cap: FERC imposed a $150/MWh 'soft cap' on the PX and ISO
markets. All bids submitted that are below $150 will receive
the market-clearing price, whereas all bids above the $150
receive the bid amount. FERC required all bids above $150 to
justify why the bid exceeded the cap of $150. A hard cap
would have prohibited bids above $150
Governance: FERC proposes to replace the existing stakeholder
boards with independent boards.
Refunds: For 24 months after the date of the Order,
generators are potentially subject to refunds of excessive
costs if FERC determines there is a need based on information
it asked the generators to submit.
This bill speaks to the ISO/PX governance issue only and
proposes a governance structure for the Electricity Oversight
Board to communicate the State's intent to FERC. This bill
makes modifications to existing law that affect the appointment,
governance structure, member affiliation limitation and terms of
ISO/PX board members to effectuate a four member,
Governor-appointed governance structure for both the ISO and the
PX.
Suggested technical amendment: The author may wish to address
the ambiguity created by the language in this bill which
replaces existing PU Code Section 337 (b) with the following
language:
377 (b) A member of the independent governing board appointed
under subdivision (a) may not be affiliated with any actual or
potential participant in any market administered by the
Independent System Operator. A member of the independent
governing board of the Independent System Operator shall not be
deemed to be affiliated with any actual or potential market
participant for purposes of this section.
---------------------------
<1> IOUs are Pacific Gas and Electric Company (PG&E), Southern
California Edison (SCE) and San Diego gas and Electric (SDG&E))
AB 5 X1
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This technical amendment, should be addressed in Section 377 (b)
regarding the Power Exchange and Section 338 (b) regarding the
Independent System Operator would remove the inability of the
Governor to appoint some or all of the same people to both the
ISO and PX governing boards.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file in the Committee.
Opposition
None on file in the Committee.
Analysis Prepared by : Roderick A. Campbell / E. C. & A. /
(916) 319-2083