BILL ANALYSIS
AB 5 X1
Page A
Without Reference to File
ASSEMBLY THIRD READING
AB 5 X1 (Keeley)
As Introduced January 9, 2001
2/3 vote. Urgency
ENERGY 17-1 APPROPRIATIONS 17-2
-----------------------------------------------------------------
|Ayes:|Wright, Pescetti, Briggs, |Ayes:|Migden, Bates, Alquist, |
| |Canciamilla, Diaz, | |Aroner, Cedillo, Corbett, |
| |Dickerson, Dutra, | |Correa, Goldberg, |
| |Jackson, Kelley, Leonard, | |Maldonado, Romero, |
| |Migden, Oropeza, Reyes, | |Shelley, Simitian, |
| |Richman Steinberg, | |Thomson, Wesson, Wiggins, |
| |Vargas, Zettel | |Wright, Zettel |
|-----+--------------------------+-----+--------------------------|
|Nays:|Campbell |Nays:|Daucher, Robert Pacheco |
| | | | |
-----------------------------------------------------------------
SUMMARY : Revises specific provisions relating to the governance
structures and authority of the California Independent System
Operator (ISO); the Power Exchange (PX) and Electricity
Oversight Board (EOB). Specifically, this bill :
1)Repeals existing law directing EOB to determine the
composition and terms of service for governing boards of ISO
and PX.
2)Repeals existing law which specifies an EOB member's right to
decline or confirm representative groups on governing boards.
3)Repeals EOB'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 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 EOB revise ISO/PX articles of incorporation and
bylaws to reflect the aforementioned changes and make
AB 5 X1
Page B
necessary filings with the Federal Energy Regulatory
Commission (FERC) necessary to implement this act.
6)Removes the existing authority of EOB 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 EOB.
EXISTING LAW provides for the creation of EOB and describes its
functions, which includes oversight of ISO and PX, its board's
composition and terms of service and appeals processes.
FISCAL EFFECT : Unknown
COMMENTS :
1)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 ISO's participation in any multistate entity or
regional transmission organization.
2)The restructuring of California's electric industry came in
the form of comprehensive electric restructuring legislation,
AB 1890. Additionally, because ISO and PX are non-public
entities engaged in the interstate transmission and wholesale
power markets, their operations are subject to FERC
jurisdiction under the Federal Power Act.
3)On December 15, 2000, FERC issued an Order Proposing Remedies
for California Wholesale Electric Markets (Order), 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, ISO and PX are governed by what FERC calls
stakeholder boards (i.e., those who have business in the
AB 5 X1
Page C
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.
4)Generally, the FERC order requests state action in the
following areas:
a) PX Must Buy: FERC eliminates the requirement that the
three investor-owned utilities<1> sell into and buy from
the PX. This would free up IOUs to search for better deals
through bilateral contracts.
b) Real-Time Penalty: In order to discourage generators
from selling into the day ahead/hour ahead market, FERC
proposed the assessment of a $100 per mega-watt hour (MWh)
penalty for generators that schedule 95% of their
electricity in those markets.
c) Soft Cap: FERC imposed a $150/MWh "soft cap" on 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
d) Governance: FERC proposes to replace the existing
stakeholder boards with independent boards.
e) 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.
5)This bill speaks to the ISO/PX governance issue only and
proposes a governance structure for EOB 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 ISO and PX.
6)The following technical amendment was suggested in the policy
---------------------------
<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
Page D
committee: Replace existing PU Code Section 337 (b) with the
following language: " 337 (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. "
7)This technical amendment will appear in Section 337 (b)
(regarding PX) and Section 338 (b) (regarding ISO) would
remove the inability of the Governor to appoint some or all of
the same people to both ISO and PX governing boards.
8)The author has indicated that he intends to work with parties
to address the amendments described above.
Analysis prepared by : Roderick A. Campbell / E.C. & A. /
(916) 319-2083
FN: 0000057