BILL ANALYSIS
AB 8 X1
Page 1
Date of Hearing: February 28, 2001
ASSEMBLY COMMITTEE ON ENERGY COSTS AND AVAILABILITY
Roderick D. Wright, Chair
AB 8 X1 (Migden) - As Proposed to be Amended: February 28,
2001
SUBJECT : Electrical restructuring: Oversight Board:
Independent System Operator.
SUMMARY : Expands the authority of the Electricity Oversight
Board (The Board) by amending Section 335 of the Public
Utilities Code to allow the Board to act on any matters made
subject to the approval or determination by the Board, and to
investigate any matter to ensure that the interests of
California's citizens and consumers are served, protected, and
represented in relation to the electric transmission grid and
generation and related costs. Specifically, this bill :
1)Subjects electric generation and transmission facilities to
availability standards, by adding Section 342 to the Public
Utilities Code to:
a) Requires owners or operators of generating facilities in
California to comply with all standards approved or
established pursuant to the measure.
b) Requires the ISO to prepare and submit a proposed
protocol for scheduling of transmission and generation
equipment outages for the purposes of maintenance, repair
or upgrade to the Board and resubmit the protocol at least
annually.
c) Authorizes the Board to review and approve or direct
revision of the proposed protocol as it deems appropriate
or necessary to protect the public interest after notice
and public hearing.
d) Requires the ISO to use an approved protocol for
scheduling maintenance or other planned outages of
equipment, including preparation of a coordinated outage
plan to be submitted to the Board at least quarterly.
e) Requires the ISO to develop and submit proposed
generation facility maintenance criteria to the Oversight
AB 8 X1
Page 2
Board and to maintain records of generation facility
outages to provide to the Board daily.
f) Requires generating facilities with 50 megawatt (MW) or
greater capacity to provide a monthly report to the ISO and
Oversight Board, identifying any times during the month
when the facility was unavailable to produce electricity or
had a reduced capacity, including the reasons for such
unavailability or reduced capacity.
g) Allows the ISO and Oversight Board to engage in audits
or inspections of facilities that fail to comply with
procedures, criteria or standards established in this
measure.
h) Requires generators to provide access to facilities and
records to the ISO and Oversight Board to reasonably
perform such audits.
i) Authorizes the Oversight Board, after public notice and
hearing, to assess a monetary penalty against owners or
operators found to have failed to comply with criteria,
standards or procedures pursuant to this measure.
2)Appropriates $575,000 from the General Fund to the Oversight
Board for purposes described in Section 342 of the Public
Utilities Code that electric generation and transmission
facilities be subject to various prescribed availability
standards.
EXISTING LAW: Establishes an Electricity Oversight Board to
oversee the Independent System Operator and the Power Exchange
in California. The purpose of the Board is to ensure the
success of electricity industry restructuring and ensure a
reliable supply of electricity. The Board is granted various
powers in order to carry out these purposes.
FISCAL EFFECT : Appropriates $575,000 from the General Fund.
COMMENTS : There is a high probability of electricity supply
shortages continuing to cause rolling blackouts throughout
California, as declared in the January 17, 2001 Executive Order
D-23-01 issued by Governor Davis. Conservation and service
restriction measures are insufficient to alleviate the supply
problem and the supply problem poses a threat to public health,
AB 8 X1
Page 3
safety and welfare. The need to ensure that generating
facilities in California are effectively and appropriately
maintained and operated is critical.
This bill addresses the need to maintain a reliable, stable
supply of energy through expansion of authority of the Energy
Oversight Board and the ISO. The bill allows the Board to have
full knowledge of operational conditions throughout the state,
and to approve protocols for scheduling generation facility
maintenance. Finally, this bill allows the Board to assess
monetary penalties on generation facilities for failure to
comply with criteria and procedures established under its
authority.
The current electricity supply situation suggests a need to
maintain records of outages, scheduled maintenance, load
reduction, etc. of generation facilities to assess supply
capacity and to address supply proactively. This bill does
these things by vested more oversight power with the Energy
Oversight Board and the ISO than is currently provided for in
statute. SBX1 39 (Speier) also addresses these issues but vests
authority for oversight of the generating facilities with the
Public Utilities Commission. SBX1 39 expands the statutory
definition of "public utility" to include wholesale energy
suppliers, to put these entities within the jurisdiction of the
commission, except with regard to rates. SBX1 39 has broader
provisions for oversight more appropriate to a state agency,
such as prevention of exercise of market power, however both
bills may have problems with enforceability.
It does not appear that provisions of ABX1 8 conflict with the
terms of SBX1 39, because the authority vested in the commission
with regard to inspection of facilities, ensuring reliability,
etc. is discretionary.
While the intent of this bill is to ensure the reliability and
availability of electricity in California, and it does take
steps to insure against unnecessary generating facility outages,
it imposes numerous additional procedures to those already
undertaken by generators. This bill vests the Electricity
Oversight Board with determining what appropriate procedures to
scheduling maintenance, reducing load, etc. are, and it vests
the Board with authority to audit and to exact monetary
penalties for failure to comply with procedures. Essentially,
this bills allows for control of how and when generating
AB 8 X1
Page 4
facilities may shut down for maintenance or repairs or for other
specified purposes in an attempt to deal with California's
energy supply problems.
This can be viewed as punitive to generating facilities
currently in operation, including those under the control of
municipal utilities, which operate responsibly and provide
electricity capacity as needed and as safe and practical for
their operating purposes. The Federal Energy Regulatory
Commission's (FERC's) Report on California's generation facility
operation in response to allegations of gaming by generators to
raise prices and shutting down when there was no operational
need to do so, indicated that these situations were not taking
place. Oversight of available capacity by monitoring scheduled
maintenance, outages, load reduction, etc., is laudable and
provides the Board with critical information about native
generation capacity. Fining native generators or taking
punitive monetary action against them for failing to comply with
newly instituted procedures and protocols not applied to other
generators also providing capacity and selling into the grid
seems at counter purposes with a spot market. This can send the
essential message to native generators that they will be unable
to accommodate their own operational needs when the supply needs
of California contradict with them.
The California Municipal Utilities Association (CMUA), in its
opposition letter, points out its generating facilities operate
for the benefit of their customer-owners. They coordinate
maintenance scheduling through Pacific Gas & Electric (PG&E) and
Southern California Edison (SCE) pursuant to existing contracts.
CMUA believes imposition of integrated maintenance scheduling
with other generators not under control of a municipal utility
imposes conditions of a dysfunctional market upon them and their
customers.
PRO: Uniform standards for scheduling of maintenance and repair
of generating facilities and establishment of protocols for
these procedures can aid in ensuring reliability and
availability of native electric supply in California. Reporting
of outages and operational data to the ISO and to the Board for
review is a good measure to ascertain system reliability and to
allow for review of outages. The bill's provisions, with
suggested amendments, can effectively address reliability and
availability of native electric supply for California.
AB 8 X1
Page 5
CON: Imposition of protocols and standards across the board to
all generation facilities in California, including those under
the control of municipal utilities can disadvantage these
generators both with respect to operational imperatives of
customer-owners and in comparison to other generators selling
into California's Power Exchange.
Suggested Amendments:
The author may wish to amend the bill to indicate that the
oversight procedures put in place by ABX1 8 apply to generating
facilities that are involved in contractual arrangements to
provide specified capacity to electric utilities in the state
and exclude those under control of municipal utilities. The
author may also wish to remove provisions for imposition of
monetary penalty for failure to comply with Board imposed
protocols.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file.
Opposition
California Municipal Utilities Association
Analysis Prepared by : Kelly Boyd / E. C. & A. / (916)
319-2083