BILL NUMBER: SJRX1 2	INTRODUCED
	BILL TEXT


INTRODUCED BY   Senator Morrow

                        MARCH 12, 2001

   Senate Joint Resolution No. 2--Relative to electricity pricing.


	LEGISLATIVE COUNSEL'S DIGEST


   SJR 2, as introduced, Morrow.  Electricity pricing.
   This measure would memorialize the members of the Federal Energy
Regulatory Commission to, using confidential information, provide
refined benchmark cost estimates to obtain more precise measures of
the appropriate competitive price level of electricity, obtain better
measures of potential capacity withholding behavior of generators,
determine the role of marketers in the production and bidding
behavior of the California generators, and examine the behavior of
generators located outside the California Independent System
Operator, as specified.  The measure would further memorialize the
Congress to hold committee hearings and engage in all other necessary
oversight activities to ensure that the Federal Energy Regulatory
Commission completes these determinations and estimates in as timely
a manner as possible and to review the confidential industry data, as
specified.
   Fiscal committee:  no.




   WHEREAS, It is clear that the electrical power crisis in
California and the Western Regional Coordinating Council area (WRCC)
is primarily a supply-side deficiency, created in large part by
California's failure to expand and upgrade its electricity generation
and transmission infrastructure during the past decade; and
   WHEREAS, While it is logical that the inadequate supply of
electricity, especially during peak periods, would drive wholesale
market prices higher, many observers allege that the extraordinarily
high actual prices of the past year are too high to be explained by
standard market fundamentals in a workably competitive market; and
   WHEREAS, Analytical studies of wholesale electricity market
performance during the past year in California, reviewed both the
competitive benchmark prices, including all major market
fundamentals, and potential capacity withholding; and several of
these studies, including one conducted by the California Independent
System Operator (ISO), conclude all of the following:
   (a) The markets were not workably competitive.
   (b) The high wholesale electricity prices cannot be explained as
the natural outcome of "market fundamentals", such as rising natural
gas prices, increased loads in California, reduction of supplies
available for import into California due to higher loads elsewhere in
the Western States Coordinating Council (WSCC), or poor
hydroelectric conditions in the Northwest, in competitive markets
since there is a very significant gap between actual market prices
and competitive benchmark prices that take account of these market
fundamentals.
   (c) There is empirical evidence, not yet adequately explained
away, to support a presumption that the high prices experienced were
the product of deliberate actions on the part of generators or
marketers controlling the dispatch of generating capacity to withhold
supply and increase market prices; and
   WHEREAS, While analyses of possible capacity withholding behavior
have been constrained by the limited availability of data, there is
sufficient empirical evidence to warrant further investigation of
supply and bidding behavior by generators and marketers operating in
the California market; and
   WHEREAS, Inasmuch as the Federal Energy Regulatory Commission
(FERC) has determined that wholesales prices have been unfair, but
refused to take corrective regulatory action, leading to numerous
allegations that the FERC has failed to discharge its
responsibilities mandated by the Federal Power Act (16 U.S.C. Sec.
791a et seq.) to ensure a competitive wholesale electricity market,
and these allegations have tainted the FERC's reputation; and now,
therefore, be it
   Resolved, by the Senate and Assembly of the State of California,
jointly, That further study is required to support the efforts of
state, regional, and federal policy makers to design appropriate
remedies to the market failures identified in the studies; and be it
further
   Resolved, That further study is required to help determine whether
the FERC properly discharged its duties; and be it further
   Resolved, Full study requires access to confidential data held
only by FERC; and be it further
   Resolved, That the Legislature respectfully memorializes that FERC
to do all of the following:
   (a) With the use of confidential data, provide refined benchmark
cost estimates to obtain more precise measures of the appropriate
competitive price level.
   (b) With the use of confidential data, obtain better measures of
potential capacity withholding behavior of generators, and determine
the role of marketers in the production and bidding behavior of the
California generators.
   (c) Examine the behavior of generators located outside the
California ISO to determine exactly why importers declined as much as
they did.
   (d) Conduct formal hearings on the issue of illegal pricing and
capacity withholding.
   (e) Extend the 60-day refund deadlines pending the findings of
these examinations and hearings; and be it further
   Resolved, That the Legislature respectfully memorializes the
Congress of the United States to do all of the following:
   (a) Hold committee hearings and engage in all other necessary
oversight activities to ensure that the FERC completes the above
described determinations and estimates in as timely a manner as
possible.
   (b) Hold committee hearings and engage in all other necessary
oversight activities, including reviewing the above described
confidential industry data to determine whether the FERC has met its
mandate, under the Federal Power Act, to ensure existence of a
competitive wholesale electric market.
   (c) Ensure that the FERC has both the necessary accountability to
the Congress and resources to accomplish all the above; and be it
further
   Resolved, That the Secretary of the Senate transmit copies of this
resolution to the President and Vice President of the United States,
The Speaker of the House of Representatives, to each Senator and
Representative from California in the Congress of the United States,
and to each member of the Federal Energy Regulatory Commission.