BILL ANALYSIS
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THIRD READING
Bill No: SJR 7
Author: Alpert (D) & Morrow (R)
Amended: 3/20/01
Vote: 21
SENATE ENERGY, U.&C. COMMITTEE : 5-0, 3/15/01
AYES: Bowen, Morrow, Alarcon, Battin, Sher
SUBJECT : Federal Energy Regulatory Commission:
wholesale electric
prices
SOURCE : Author
DIGEST : This resolution memorializes Congress and the
President to support legislation to require the Federal
Energy Regulatory Commission (FERC) to (1) order refunds if
rates are unjust or unreasonable, and (2) establish
regional price caps if FERC determines rates are unjust or
unreasonable.
ANALYSIS : Under current law, the FERC is authorized to
order refunds for unjust or unreasonable rates. The
effective date of such refunds may not be earlier than 60
days after a complaint is filed or earlier than 60 days
after FERC publishes a notice of its intention to initiate
a refund process.
This resolution makes findings about high electric rates
charged to California consumers, notes FERC's orders
stating that current rates are unjust and unreasonable, and
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FERC's ordering of only minimal refunds and their refusal
to examine thousands of wholesale transactions whose prices
exceed the level that FERC set as the threshold for
examination and their refusal to revoke the ability of
electric generators to charge market-based rates.
This resolution memorializes Congress and the President to
support legislation introduced in Congress to require FERC
to (1) order refunds if rates are unjust or unreasonable,
and (2) establish regional price caps, as specified, if
FERC determines rates are unjust and unreasonable.
Background
On November 1, 2000, FERC issued a proposed order in
response to a complaint by San Diego Gas and Electric
(SDG&E) about high wholesale energy prices. FERC found
"the electric market structure and market rules for
wholesale sales of electric energy in California are
seriously flawed and that these structures and rules, in
conjunction with an imbalance of supply and demand in
California, have caused, and continue to have the potential
to cause, unjust and unreasonable rates for short-term
energy under certain conditions." (Docket No. EL00-95-000,
Order Proposing Remedies for California Wholesale Electric
Markets , p. 5) On December 15, 2000 FERC issued a final
order confirming that finding (Order Directing Remedies for
California Wholesale Markets, p. 33)
Comments
H.R. 268 (Filner), introduced on January 30, 2001, requires
that when FERC finds rates are unjust and unreasonable, it
must issue refunds with interest. That bill also requires
FERC to establish regional wholesale electric price caps,
based on the cost of providing electricity and a return on
investment, if FERC determines wholesale electric rates are
unjust or unreasonable, S. 26 (Feinstein), introduced on
January 22, 2001, permits either FERC or the Secretary of
Energy to impose regional wholesale electric price caps if
either determines rates are unjust or unreasonable. This
resolution is supportive of both bills.
On August 23, 2000, FERC opened proceedings to investigate
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the reasonableness of wholesale electric rates in
California. On December 15, 2000, FERC issued an order
adopting specific remedies to address dysfunctions in
California's wholesale electric markets. On March 9, 2001,
FERC issued an order directing specified sellers to provide
specified remedies ($69 million worth) or to alternatively
provide justification for their charges.
FISCAL EFFECT : Fiscal Com.: No
NC:cm 3/21/01 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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