BILL ANALYSIS
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THIRD READING
Bill No: SB 39X
Author: Speier (D)
Amended: 4/2/01
Vote: 21
SENATE ENERGY, U.&C. COMMITTEE : 6-2, 2/22/01
AYES: Bowen, Alarcon, Dunn, Sher, Speier, Vasconcellos
NOES: Battin, Poochigian
SENATE APPROPRIATIONS COMMITTEE : 8-5, 3/5/01
AYES: Alpert, Bowen, Burton, Escutia, Karnette, Murray,
Perata, Speier
NOES: Battin, Johannessen, Johnson, McPherson, Poochigian
SUBJECT : Public Utilities
SOURCE : Author
DIGEST : This bill clarifies and enhances the states
regulatory authority over in-state electric generation
facilities.
Senate floor amendments of 4/2/01 (a) exempt
non-conventional power plants, such as renewable and
co-generation QFs, from the provision of the bill which
authorizes the CPUC to prescribe inspection, maintenance
and operating procedures for generators, and (b) authorize
the CPUC to "prevent an over-concentration of market
power".
ANALYSIS : The federal Public Utility Holding Company Act
CONTINUED
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of 1935 (PUHCA) authorized the Securities and Exchange
Commission (SEC) to monitor public utility holding
companies to protect consumers and investors. At the time
of PUHCA's passage, it was found that the activities of
holding companies engaged in interstate commerce affected
the public interest, but were not effectively regulated by
state utility commissions.
The sentiment of the time is best expressed in PUHCA's
policy declaration:
When abuses? become persistent and wide-spread the
holding company becomes an agency which, unless
regulated, is injurious to investors, consumers, and
the general public; and it is declared to be the
policy of this chapter? to meet the problems and
eliminate the evils as enumerated in this section,
connected with public-utility holding companies
which are engaged in interstate commerce or in
activities which directly affect or burden
interstate commerce; and for the purpose of
effectuating such policy to compel the
simplification of public-utility holding-company
systems and the elimination therefrom of properties
detrimental to the proper functioning of such
systems, and to provide as soon as practicable for
the elimination of public-utility holding companies
except as otherwise expressly provided in this
chapter.
By 1992, sentiments in Congress had changed and PUHCA was
amended to, among other things, exempt purely wholesale
generators owned by public utility holding companies from
SEC regulation.
These exempt wholesale generators (EWGs) are the
enterprises that have acquired most of the natural
gas-fired generation facilities divested by California's
investor-owned utilities (IOUs). They are affiliates of
public utilities from other states, such Duke, Reliant, and
Southern (Mirant), held in common by holding companies.
California IOUs have also established holding companies
which own EWGs, both within California and in other states.
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In AB 1890 (Brulte), Chapter 854, Statutes of 1996, EWG
owners were specifically exempted from the definition of a
"public utility" to avoid any suggestion that they would be
subject to CPUC "jurisdiction, control, and regulation" of
public utilities required by Section 216 of the Public
Utilities Code.
The change made by AB 1890 did not itself surrender
regulation of EWGs. It was consistent with the changes to
federal law and regulatory policy which created a merchant
class of generators that could be owned by the holding
company of a regulated utility, but would not itself be
subject to either SEC or state utility commission
regulation.
This bill seeks to clarify and enhance the state's
regulatory authority over in-state electric generation
facilities. Specifically, this bill:
1.Repeals a provision of AB 1890 that states ownership of a
wholesale generator does not necessarily make the owner a
"public utility." The effect of this is to subject these
generators to the "jurisdiction, control, and regulation"
of the California Public Utilities Commission (CPUC), to
the extent permitted by federal law.
2.Provides that the CPUC require that generators are
operated in a manner that ensures their availability to
maintain reliability, and authorizes the CPUC to prevent
an overconcentration of market power and ensure electric
service reliability by prohibiting economic and physical
withholding of power.
3.Extends the CPUC's fee authority to wholesale generators.
Authorizes the CPUC to annually determine a fee to be
paid by every generation facility to cover the
requirements of the bill.
4.Authorizes the CPUC, in consultation with the applicable
control area operator, to prescribe inspection,
maintenance and operating procedures for generators to
ensure public health and safety and reliability. The
bill exempts from this provision, facilities that
generate electric energy from other than a conventional
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power source, as defined, when the owner is a private
energy producer.
Comments
Executive Order . On February 8, Governor Davis issued
Executive Order D-23-01 relating to generator outages. The
order required the Independent System Operator (ISO) to
obtain planned outage schedules from generators, prepare a
coordinated outage plan, identify maintenance criteria and
establish performance benchmarks for generators. The ISO
is currently in the process of implementing the order.
The Governor's Budget sets aside $1 billion for energy
initiatives. In his State of the State, the Governor urged
that 50 new inspectors be added to the CPUC.
Related legislation
AB 8x (Migden) contains some provisions similar to this
bill but grants oversight authority to the ISO and the
Electricity Oversight Board.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to Senate Appropriations Committee analysis (as
amended 3/15/01):
Fiscal Impact (in thousands)
Major Provisions 2001-02 2002-03
2003-04 Fund
PUC Unknown, potentially in excess
of $500 Special*
annually and potentially offset
by increased
fee revenues in outyears
*Public Utilities Commission Utilities' Reimbursement
Account (URA)
Estimates of the number of wholesale generators in the
state vary from 34-100. The increased costs for the
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wholesale generator provisions of this bill are unknown and
depend on the number of wholesale generators and the extent
to which they are regulated, inspected, etc. For
illustrative purposes, for every five new inspectors
required by this bill, increased costs for salaries and
benefits alone could be $350,000 annually. This estimate
does not include support staff or other administrative
costs. There is currently a $15 million reserve in the
URA. It is likely that the increased costs could be
absorbed initially by the reserve. CPUC staff indicate
that in outyears, the costs could be recovered by a fee
increase, if necessary. CPUC staff indicate that there are
about 1000 power plants in the state, and that they
currently have 6-10 inspectors inspecting 22 plants.
To the extent that a determination must be made, involving
FERC and/or the courts, about whether the provisions of
this bill are appropriate for state regulation, there could
indirect costs.
NC:sl 4/3/01 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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