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
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                                                                        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 require  a court to provide  
            injunctive relief to compel  compliance 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 matter  and otherwise acting consistent with  
            the electrical restructuring statutes  related 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