BILL ANALYSIS
SB 47
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Date of Hearing: June 11, 2001
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Roderick D. Wright, Chair
SB 47 (Bowen) - As Amended: April 18, 2001
SENATE VOTE : 32-2
SUBJECT : Electrical restructuring: Oversight Board:
Independent System Operator.
SUMMARY : This bill requires Senate confirmation of members of
the governing board of the Independent System Operator (ISO).
This measure extends the terms of the ISO governing board
members from one to three years and staggers them.
EXISTING LAW provides that the Electricity Oversight Board (EOB)
oversees ISO and has the exclusive right to decline to confirm
the appointments of members of the governing board of ISO.
FISCAL EFFECT : Unknown
COMMENTS : ISO was established by AB 1890 (Brulte), Chapter 854,
Statutes of 1996, as a separately incorporated public benefit,
nonprofit corporation. ISO's purpose is to ensure efficient use
and reliable operation of the state's electricity transmission
system. Originally, the governing board of ISO was appointed by
EOB, according to classes of stakeholders. Because ISO is a
non-public entity involved in interstate transmission and
wholesale power markets, its operations are subject to Federal
Energy Regulatory Commission (FERC) jurisdiction, and FERC
rejected the portions of initial ISO tariffs requiring EOB
appointment of the governing board. FERC ordered ISO to
eliminate a bylaw requiring California residency as a
requirement for governing board members, EOB's appointment
function and EOB's authority to approve ISO bylaws and hear
appeals of ISO board decisions.
SB 96 (Peace), Chapter 510, Statutes of 1999 revised the
governance structure of ISO as well as EOB's authority. That
bill limited EOB's confirmation powers to customer
representatives to the ISO board and its authority to serve as
an appellate board only to matters exclusively within the
state's jurisdiction. FERC's declaratory order approving the
changes to the governance structure of ISO asserted SB 96
SB 47
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changes outlined "an interim role for the Oversight Board that
is consistent with" prior FERC orders. On December 15, 2000
FERC issued a final order on California indicating that it would
establish procedures to discuss the selection process for an
independent ISO board with state representatives and that in the
interim the board should turn over decision making power and
operating control to ISO management. The order also
substantially diminished the role of the Power Exchange (PX).
The legislature enacted AB X1 5 (Kelley), Chapter 1, Statutes of
2001 First Extraordinary Session, requiring the replacement of
the ISO's 26 member stakeholder board with a governing board
composed of five members appointed by the Governor. The members
were required to be independent of any ISO market participant.
The five new members were confirmed by EOB on January 23, 2001.
This bill, SB 47, requires Senate confirmation of members of ISO
governing board and requires establishment of appointments for
up to three year terms which are staggered among the members.
This bill allows people who have served on the PX board to serve
on the ISO board if they are not otherwise affiliated with an
ISO market participant. This bill follows up on the work
started in AB X1 5, which was an urgency measure. An urgency
measure cannot be the vehicle to remove confirmation duties of a
state office and EOB is a state office. Therefore, this regular
session bill is an appropriate vehicle to continue the necessary
reforms sought in AB X1 5.
Staff recommends:
The author may wish to address the issue of whether or not
service on the PX board constitutes an inherent conflict for a
member of the ISO governing board. The role of the PX is
currently so diminished that it may not be viewed any longer to
be a market participant, though clearly in its history it has
been. The author may wish to consider deleting the provision
from Section 2 of this bill, amending Section 337 of the Public
Utilities Code, at lines 12 through 15 of page 4 of the current
bill text. This would eliminate any appearance of a conflict
for any governing board member going forward. Concurrent board
service on both entities seems to be inherently mixing the role
of a stakeholder with that of an independent decision maker, the
very conflict that recent reforms have sought to overcome.
REGISTERED SUPPORT / OPPOSITION :
SB 47
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Support
California First Amendment Coalition
Opposition
None on file
Analysis Prepared by : Kelly Boyd / U. & C. / (916) 319-2083