BILL ANALYSIS
------------------------------------------------------------
|SENATE RULES COMMITTEE | AB 5X|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 445-6614 Fax: (916) | |
|327-4478 | |
------------------------------------------------------------
THIRD READING
Bill No: AB 5X
Author: Keeley (D)
Amended: 1/16/01 in Senate
Vote: 27 - Urgency
SENATE ENERGY, UTIL. AND COMM. COMMITTEE : Not available at
time of writing
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 60-9, 1/12/01 - See last page for vote
SUBJECT : Public Utilities: electrical restructuring
SOURCE : Author
DIGEST : This bill requires the replacement of the
existing governing board of the Independent System Operator
(ISO), composed of 26 "stakeholders," with a governing
board composed of five members appointed by the Governor
who must be independent of any ISO market participant.
The bill prohibits the ISO from entering into a multi-state
entity or regional organization unless such a move is
approved by the Electricity Oversight Board (EOB).
The bill requires the ISO to publish a list of California
power plants that are out of service due to either a
planned or unplanned outage.
ANALYSIS : Existing law provides for the creation of EOB
CONTINUED
AB 5X
Page
2
and describes its functions, which includes oversight of
ISO and Power Exchange (PX), its board's composition and
terms of service and appeals processes.
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.
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.
Generally, the FERC order requests state action in the
following areas:
1.PX Must Buy : FERC eliminates the requirement that the
three investor-owned utilities (IOUs) (IOUs are Pacific
Gas and Electric Company, Southern California Edison and
San Diego Gas and Electric) sell into and buy from the
PX. This would free up IOUs to search for better deals
through bilateral contracts.
2.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.
3.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
AB 5X
Page
3
4.Governance : FERC proposes to replace the existing
stakeholder boards with independent boards.
5.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 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.
According to the Senate Energy, Utilities and
Communications Committee analysis, AB 1890 transferred
responsibility for transmission reliability from electric
utilities regulated by the California Public Utilities
Commission to the ISO and market-based mechanisms.
The ISO functions as a quasi-utility, performing exclusive
duties delegated by the state, that are vital to California
residents in the deregulated generation market. As such,
the state has a compelling interest in the operation of
these institutions. AB 1890 recognized this and
established the EOB "to ensure that the interests of the
people of California are served." Federal Energy
Regulatory Commission (FERC's) orders have steadily
decreased the state's role by diminishing state
representation on the governing board and limiting the
accountability of ISO actions to the Governor, the
Legislature and their constituents.
The state has made compromises with FERC in 1999 with the
passage of SB 96 (Peace), which revised the governance
structure of the ISO as well as the authority of the EOB.
Companion bill
SB 47 (Bowen), currently pending in Senate Energy,
Utilities and Communications Committee, would enact a
AB 5X
Page
4
permanent procedure for the appointment of ISO board
members that includes confirmation by the Senate and
three-year, rather than one-year terms.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
ASSEMBLY FLOOR :
AYES: Strom-Martin, Dickerson, Cox, Nation, Wiggins,
Thomson, Steinberg, Pescetti, Canciamilla, Shelley,
Migden, Aroner, Chan, Matthews, Corbett, Dutra, Simitian,
Alquist, Diaz, Cohn, Cardoza, Keeley, Salinas, Florez,
Reyes, Ashburn, Maldonado, Jackson, Richman, Hertzberg,
Pavley, Koretz, Frommer, Liu, Goldberg, Cedillo, Wesson,
Wright, Romero, Firebaugh, Horton, Washington, Nakano,
Lowenthal, Oropeza, Havice, Chavez, Calderon, Negrete
McLeod, Longville, Leonard, Correa, John Campbell, Bill
Campbell, Bates, Wyland, Zettel, Kehoe, Wayne, Vargas
NOES: Aanestad, Cogdill, Wyman, Mountjoy, Robert Pacheco,
Hollingsworth, Maddox, Daucher, La Suer
DLW:sl 1/17/01 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
**** END ****