BILL ANALYSIS
SJR 2 X2
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Date of Hearing: September 10, 2001
ASSEMBLY COMMITTEE ON ENERGY COSTS AND AVAILABILITY
Roderick D. Wright, Chair
SJR 2 X2 (Morrow) - As Amended: July 3, 2001
SENATE VOTE : 27-4
SUBJECT : Electricity pricing.
SUMMARY : Memorializes the Federal Energy Regulatory Commission
(FERC) and the Congress to take various actions to alleviate the
high cost of wholesale electric power. Specifically, this bill :
1)Urges FERC to do all of the following:
a) Provide cost estimates to obtain more precise measures
of appropriate competitive price levels, obtain better
measures of potential capacity withholding by generators,
and determine the role of marketers in the production and
bidding behavior of generators.
b) Cooperate with the California Public Utilities
Commission, the California Attorney General, and other
state investigators, including providing appropriate access
to confidential data, and examine behavior outside
California to determine why electric imports declined.
c) Conduct formal hearings on illegal pricing and capacity
withholding, and extend the 60 day refund deadline pursuant
to findings in these hearings.
d) Impose temporary (until March 1, 2003), just and
reasonable load-differentiated demand rates or
cost-of-service based rates applicable to electricity from
generators in service prior to June 1, 2001.
2)Urges Congress to hold oversight hearings to ensure FERC
completes the work described above, determine whether FERC met
its mandate under Federal Power Act (FPA) regarding a
wholesale competitive market, whether necessary accountability
and resources rest with FERC to accomplish all of the above
objectives, and require FERC to ensure just and reasonable
rates.
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EXISTING LAW :
1)Grants FERC exclusive authority over wholesale electric
prices.
2)Requires FERC to "promote the interests of consumers through
the provision of an adequate and reliable supply of energy at
the lowest reasonable cost."
FISCAL EFFECT : Unknown.
COMMENTS :
FERC Actions
Under the Federal Power Act, FERC is required to ensure that
wholesale electric rates are "just and reasonable," and this
resolution directs itself to ensuring that requirement is met
consistently. FERC issued a proposed order in November 2000
finding that sellers in California's electricity market had the
potential to exercise market power, and that rates sometimes
exceeded just and reasonable levels. In April of 2001 FERC
issued a price mitigation plan setting marginal cost prices for
sales to the California Independent System Operator (CAISO)
during Stage One, Two, and Three Emergencies. Lower cost
generators are required to set the market clearing price under
this model, while higher cost generators make higher bids. FERC
modified its earlier position in a June 2001 price mitigation
plan expanding the scope of the plan to apply to spot market
sales throughout the West at all hours. Additionally, FERC has
issued several orders requiring specified sellers to provide
refunds for sales during specified periods.
Resolution Urging FERC and Congress to Take Actions to Alleviate
High Wholesale Costs
This resolution finds that numerous studies of California's
electric markets reveal that these markets aren't workably
competitive, that evidence supports a presumption that high
wholesale prices resulted from deliberate actions by generators
and marketers to withhold supply, and that analyses of capacity
withholding have been constrained by a limited availability of
data. This resolution further finds that FERC, after
determining that wholesale electric prices have not been just
and reasonable, has not taken sufficient corrective regulatory
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action.
This resolution urges FERC to, work with the United States
Department of Justice and the Federal Trade Commission, using
confidential data, to provide refined benchmark cost estimates
to obtain more precise measures of the appropriate competitive
price level of Electricity. This resolution also requires FERC
to obtain better measures of potential capacity withholding
behavior of generators, and to determine the role of marketers
in the production and bidding behavior of the California
generators. Finally, it calls on FERC to impose temporary
load-differentiated demand rates or cost of service rates until
March 1, 2003, for electricity from generators in service prior
to June 1, 2001.
This resolution is similar to a number of other resolutions
asserting that FERC has not done enough within the scope of its
authority to control wholesale prices in California.
Additionally, like numerous other resolutions that have come
before the Committee this year, this resolution calls for a
return to cost-based pricing on a temporary basis.
Staff recommends:
To the extent this resolution provides specific direction for
remedial action to address the wholesale electricity price
situation within FERC's existing charter, it should be
supported.
REGISTERED SUPPORT / OPPOSITION :
Support
Sempra Energy
Opposition
None on file.
Analysis Prepared by : Joseph Lyons / E. C. & A. / (916)
319-2083