BILL ANALYSIS 1 1 SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE DEBRA BOWEN, CHAIRWOMAN AB 28XX - Migden Hearing Date: July 17, 2001 A As Amended: July 12, 2001 FISCAL B X 2 2 8 DESCRIPTION (Strikeouts and italics indicate changes from June 21 version) This bill establishes procedures governing the operating availability of power plants and transmission facilities. Specifically, this bill: 1.Requires the Electricity Oversight Board (EOB), in consultation with the California Public Utilities Commission (CPUC) and the Independent System Operator (ISO), to adopt protocols for scheduling of transmission and generation equipment outages for maintenance, repair or upgrade; 2.Requires the EOB, in consultation with the CPUC and the ISO, to schedule such outages according to the protocols; 3.Requires the EOB to direct the ISO to prepare, and the EOB to adopt, generation maintenance, operation and availability standards for units 10 megawatts or larger; 4.Authorizes the CPUC to adopt and enforce such standards for facilities under its jurisdiction; 5.Prohibits this bill from resulting in any modification, delay or abrogation of any environmental standard. 6.Requires the ISO to maintain records of power plant outages and provide them to the EOB and the CPUC each day; 7.Requires owners or operators of power plants over 10 megawatts to report any periods of unavailability each month to the ISO, and requires the ISO to immediately transmit this information to the EOB and the CPUC; 8.Requires the CPUC, in consultation with the EOB, to adopt a penalty schedule for violations of this bill and the rest of the article governing the EOB; 9.Authorizes the CPUC to assess monetary penalties for non-compliance upon request of the EOB; 10. Authorizes the EOB, in consultation with the CPUC, to seek an injunction from a court to requirea court to provide injunctive relief to compelcompliance with outage plans, standards or protocols; 11. Exempts local, publicly-owned (municipal) electric utilities, public water or water treatment agencies that generate electricity, nuclear generating facilities and qualifying facilities (QFs) from the foregoing provisions and requires these entities instead to file with the EOB: a. An annual maintenance schedule. b. A report of any significant deviations from the schedule. c. A monthly report of actual planned and unplanned outages. d. A daily report of operational status. Municipal utilities are further required to adopt, and file with the EOB, maintenance standards for transmission and generation facilities. 12. Exempts generation units installed, operated and maintained at a customer site, exclusively serving that customer's load, from the foregoing provisions. This bill also authorizes the EOB to obtain specified records of the ISO,and the Power Exchange (PX),and owners of generation and transmission facilities,and maintain the confidentiality of the records pursuant to a process analogous to the one currently applicable to the California Energy Commission (CEC). The EOB is required to share information with the CPUC at the CPUC's request . This bill provides for repeal of the above provisions upon a determination of the Attorney General that the EOB has been abolished, merged, replaced or duplicated by statute, executive order or otherwise. In addition, this bill gives the EOB the following general powers:1.Acting on any matter made subject to its approval or determination under law.2.Investigating any matterand otherwise acting consistent with the electrical restructuring statutesrelated to the wholesale electricity market to serve, protect and represent the interest of consumers in relation to the availability of generation and transmission and related costs during periods of peak demand. 3.Directing the ISO to report to the EOB as it determines necessary and appropriate to the exercise of its public oversight duties. This bill requires the EOB to provide a quarterly report of its progress implementing this act to the Legislature's appropriate policy committees. BACKGROUND In recent months, California has been plagued by unprecedented generator outages which have increased the price of electricity, undermined service reliability, and threatened public health and safety. The factors contributing to the high level of generator outages include ordinary seasonal maintenance, mechanical failure of aging equipment, installation of air pollution control devices, refusal to operate for financial reasons, as well as a failure to adequately apportion foreseeable outages through a rational and enforceable scheduling mechanism. Currently, the ISO maintains a schedule of generation and transmission outages for planned maintenance. Participating generators and transmission owners in the ISO control area are required to submit notice of their planned outages to ISO. This allows the ISO to be informed of unit outages, but there is no mechanism for the ISO to proactively plan outages on a system-wide basis and the ISO has limited authority to prevent or reschedule a proposed outage in advance. Further, while the ISO has a unique ability to monitor unscheduled outages, it's not a public agency and doesn't have independent enforcement authority. Among the allegations of the current energy market crisis is that generators have engaged in physical withholding of electricity to increase prices. Physical withholding is when a generator deliberately stops generating power in order to increase the price for a later sale, or for another generator's sale. These allegations have been the subject of investigations and inquiries conducted by the Federal Energy Regulatory Commission (FERC), the ISO, the EOB, the CPUC, the California Attorney General, and the State Senate. Investigations are ongoing, although at least one case of physical withholding has been documented and sanctioned by FERC. On February 8, Governor Davis issued Executive Order D-23-01 relating to generator outages. The Order requires the ISO to: 1.Obtain planned outage schedules from generators. 2.Prepare a coordinated outage plan. 3.Identify maintenance criteria. 4.Provide records of unplanned outages to the EOB daily. 5.Establish performance benchmarks for generators. 6.Audit generators that fail to meet ISO benchmarks. 7.Consider seeking state or federal authority to impose fines for such failures. The ISO has interpreted the Order to apply to all generators in the state, including those outside its control area. Some of its elements have been implemented, although, according to the ISO, a stakeholder committee formed to implement the Order has not reached consensus on the issues of outage coordination and sanctions. The mechanism for enforcement of the order is still in question. This bill attempts to establish a mechanism for the rational scheduling of planned outages, as well as monitoring, investigation and enforcement related to unplanned outages. It essentially codifies certain elements of the Order, with the notable difference that requirements related to ISO functions are assigned to the EOB in the bill, rather than directly to the ISO, as in the Order. The bill also establishes other related powers for the EOB. COMMENTS 1.The Evolution of the EOB. The EOB was originally established in AB 1890 (Brulte), Chapter 854, Statutes of 1996, to oversee the ISO and the PX. Its main duties were to appoint the stakeholder boards, approve bylaws, and hear appeals of stakeholder board decisions. FERC actions, the demise of the PX and recent legislation to replace the ISO's stakeholder governing board with a board appointed by the Governor have diminished the powers of the EOB significantly. Of the statutory powers originally conferred by AB 1890, the EOB maintains general, largely unenforceable, oversight of the ISO and the ability to decline to confirm the Governor's appointments to the ISO board, a power it is unlikely to meaningfully exercise. Under SB 47 (Bowen), pending on the Assembly Floor, the latter power would be removed and replaced with Senate confirmation. According to the EOB's web site, "(t)he demands of the new market structure expanded the responsibilities of the board to include operational oversight, continuous monitoring of the market, and representation of the state in litigation with the (FERC). The board has earned a reputation for its high-level advisory capabilities in serving the governor, the legislature, and the people of California." This bill revises the statutory duties of the EOB to specifically include adoption of outage protocols and schedules, as well as auditing the records of the ISO and the PX. 2.EOB Today, Power Authority Tomorrow? As part of an energy agency reorganization plan, the Davis Administration has informally proposed transferring EOB functions and staff to the recently-created California Consumer Power and Conservation Financing Authority (SB 6X (Burton), Chapter 10, Statutes of 2001). As established by SB 6X, the Power Authority is likely to have significant financial interests, if not outright ownership, of electricity generation facilities in California. The proposed reorganization plan also contemplates the Power Authority assuming the power purchase duties of the Department of Water Resources and potentially managing any state-owned transmission facilities. If the Power Authority also assumed the duties related to oversight of generation and transmission facilities proposed in this bill, it would be regulating itself, as well as its competitors. 3.July 12 Amendments. When this bill was heard in this committee on June 26, a series of issues was discussed and the bill was put over. A summary of each issue and its disposition follows: Sunset - conditional and date certain. To address the concern described in Comment 2 and discussed in the last hearing, this bill now contains a conditional sunset which is triggered by the abolition, merger, replacement or duplication of the EOB by statute, executive order or otherwise. Because these criteria are subjective, the sunset is not self-executing. Instead, the Attorney General is empowered to determine whether such a condition has been met. In the hearing, the Chair also asked for a date certain sunset of the end of summer 2002. The date certain sunset is not in the bill. Scope and purpose of EOB audit authority. Concerns were raised that the scope of the EOB's audit authority in Section 2 of this bill was overly broad and that its purpose was uncertain. The amendments narrow the bill's scope to records of the ISO and PX - the entities the EOB is currently charged with "overseeing." EOB authority to directly compel generation and transmission owners to produce records has been deleted. The need for a "statement of purpose" for the audit authority is apparently addressed in the revised function added to Section 1 of the bill, which authorizes the EOB to investigate matters related to the availability of generation and transmission and related costs during periods of peak demand. Treatment of confidential documents. Concerns were raised about appropriate treatment of documents obtained pursuant to confidentiality agreements, both regarding the degree of consistency with the Public Records Act and the EOB's ability to maintain the confidentiality of documents. The amendments establish a process for disclosure of confidential documents which uses an existing statute governing treatment of confidential documents by the CEC as a model. The CEC model has been proven and provides a more definitive process for treatment of confidential documents than the prior version of this bill. As amended, the bill provides a process for public release of data in which the obligation to justify confidential treatment is on the source of the data, rather than the agency. However, it also effectively prevents the EOB from releasing any information deemed confidential by the FERC. Coordination with CPUC. A concern was raised that the audit provision of this bill may duplicate a similar duty specifically delegated to the CPUC under the Federal Power Act (FPA). Under Section 201 (g) of the FPA, state utility commissions are authorized to issue orders to examine "books, accounts, memoranda, contracts, and records" of regulated utilities, exempt wholesale generators, and affiliates that sell electricity to regulated utilities. The amendments intend to reduce any duplication with existing CPUC functions by limiting the EOB's authority to audit records of the ISO and PX, and not the utilities, generators and affiliates which the CPUC is currently authorized to audit. A second concern was raised that the EOB's activities be coordinated with the CPUC. The amendments require the EOB to share confidential information requested by the CPUC and require consultation with the CPUC in the development of outage protocols and schedules. Conformity with environmental laws. A concern was raised that the adoption of availability standards for generators may interfere with standards adopted by air quality agencies governing installation of air pollution control equipment. In response, existing language in the bill was strengthened and broadened to generally prevent any action that conflicts with any environmental or public health protection regulation. Exemptions. Publicly-owned electric utilities had already been exempted from the enforceable requirements of this bill and instead required to report applicable information to the EOB. Public water and sewer agencies that own electrical generation incidental to their operations argued they too should be exempt. The amendments provide such an exemption for these agencies. In addition, the amendments exempt generation units located on a customer's site that exclusively serve that customer's load. These units are not subject to any reporting requirements. 4.Related Legislation. SB 39XX (Speier) authorizes the CPUC, in consultation with the ISO, to prescribe inspection, maintenance and operating procedures for generators to ensure public health and safety and reliability. SB 39XX is pending in the Assembly Energy Costs and Availability Committee. 5.Technical Amendments. On page 7, line 13, page 11, line 26 and page 12, line 31 "chairperson of the commission" should be replaced with "Attorney General". In addition, this bill has a technical conflict with SB 47. Both bills amend Section 335 of the Public Utilities Code. SB 47 repeals an existing subdivision of Section 335 and this bill adds a new subdivision. The author and committee may wish to consider adopting "chaptering out" amendments to resolve this conflict. ASSEMBLY VOTES Assembly Floor (63-6) POSITIONS (Prior Version) Sponsor: Author Support: Pacific Gas and Electric Company Oppose: California Manufacturers and Technology Association City of Alameda City of Burbank City of Glendale City of Los Angeles Department of Water and Power City of Palo Alto Utilities Department City of Pasadena City of Roseville City of San Marcos County Sanitation District of Los Angeles County Imperial Irrigation District Modesto Irrigation District Plumas-Sierra Rural Electric Cooperative Sacramento Municipal Utility District Silicon Valley Power Lawrence Lingbloom AB 28XX Analysis Hearing Date: July 17, 2001