BILL ANALYSIS                                                                                                                                                                                                                   1
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             SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
                            DEBRA BOWEN, CHAIRWOMAN
          

          SB 1753 -  Bowen                                  Hearing  
          Date:  April 9, 2002                 S
          As Introduced:  February 21, 2002       FISCAL           B

                                                                       
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                                   DESCRIPTION
           
           Existing law  requires the creation of the Independent  
          System Operator (ISO) as a nonprofit public benefit  
          corporation and requires the ISO to ensure efficient use  
          and reliable operation of the transmission grid.

           This bill  expands the ISO's charter, requiring it to  
          conduct its operations consistent with state laws and the  
          public interest, and assigning it more detailed public  
          obligations.  Specifically, this bill requires the ISO to:

          1.Perform its grid management function at the least  
            possible cost to consumers and the environment.
          2.Coordinate with regulatory agencies to ensure its  
            activities are consistent with consumer and environmental  
            protection standards.
          3.Ensure its purposes and functions are consistent with its  
            tax-exempt corporate status.
          4.Provide public access to its meetings and records  
            according to standards analogous to the state open  
            meetings and public records laws that apply to  
            governmental agencies.

                                    BACKGROUND
           
          AB 1890 (Brulte), Chapter 854, Statutes of 1996, required  











               the creation of the ISO as a "separately incorporated  
               public benefit, nonprofit corporation."  When it  
               established the ISO, the Legislature gave little explicit  
               guidance as to its public obligations.  Section 345 of the  
               Public Utilities Code simply declares the purpose of the  
               ISO is to "ensure efficient use and reliable operation of  
               the transmission grid." 

               While the ISO is a corporation and not a governmental  
               agency, its performance of a public purpose is inherent in  
               its duties and fundamental to its status as a nonprofit  
               public benefit corporation.  The ISO functions as a public  
               utility, performing exclusive duties delegated to it by the  
               state, vital to maintain public health and safety and  
               funded by consumer electricity rates.  As such, the people  
               of the state have a unique and compelling interest in the  
               operation of the ISO.

               Because the ISO is not a governmental agency, it is not  
               subject to general state laws governing the conduct of  
               state and local agencies.  This bill expands on the  
               original charter of the ISO, requiring it to conduct its  
               operations consistent with state laws and the public  
               interest, and assigning it more detailed public  
               obligations.  

                                          COMMENTS
                
                1.Jurisdictional hazards.   Because the ISO is a non-public  
                 entity engaged in interstate transmission and wholesale  
                 power markets, its operations are subject to Federal  
                 Energy Regulatory Commission (FERC) jurisdiction under  
                 the Federal Power Act.  The Supreme Court recently  
                 affirmed FERC's broad assumption of authority over the  
                 transmission grid in its Order 888 (New York, et al v.  
                 FERC).  The federal jurisdiction may frustrate efforts to  
                 provide guidance to the ISO in state law on certain  
                 matters.  For example, state laws which seek to affect  
                 wholesale rates or terms and conditions of transmission  
                 service are likely to be preempted by federal law.  On  
                 the other hand, the state maintains jurisdiction over  
                 matters related to electric service reliability and  
                 public health and safety. 











           2.Reconciling cost vs. reliability vs. environment.   This  
            bill requires the ISO to "manage the transmission grid  
            and related energy markets in a manner that makes the  
            most efficient use of available energy resources and  
            facilitates reliable electricity service at the least  
            overall economic and environmental cost to the state's  
            consumers."  While this provision is intended to provide  
            general policy guidance to the ISO, there is some  
            question about how it would be applied in the short term  
            and how the ISO would reconcile potential conflicts  
            between economic cost, environmental cost and  
            reliability.  

            According to the author, this provision establishes a  
            policy, similar to the existing ISO policy of "efficient  
            use and reliable operation," which relies on the ISO's  
            governing board for specific implementation.  This is  
            analogous to the statutory charge given to the Air  
            Resources Board to achieve "maximum feasible emission  
            reductions," which has resulted in a variety of specific  
            agency initiatives to meet that goal.

           3.Public access.   The ISO has adopted public access  
            policies that approximate the Public Records Act and the  
            Bagley-Keene Open Meetings Act in terms of process.   
            However, the policies are voluntary creations of the  
            corporation and therefore lack the enforceability and  
            durability of statutes.  This bill would impose a  
            statutory requirement on the ISO to operate  consistent  
            with  these laws and to afford the greatest possible  
            public access, consistent with its other duties.

            This provision recognizes that the ISO is not a public  
            agency and that certain limited exceptions to the Public  
            Records Act and Bagley-Keene may be appropriate, but that  
            substantial compliance is the objective.  The ISO has  
            raised the concern that strict adherence to provisions of  
            these laws, such as the 10-day meeting notice  
            requirement, may be burdensome and hinder its efforts to  
            provide comprehensive and timely information to the  
            public.  To address this issue, the ISO has requested an  
            amendment that would require it to comply with the  
            "general policies" of these laws.  Instead,  the author  
            and the committee may wish to consider  requesting that  










                 the ISO identify those provisions of the Public Records  
                 Act or Bagley-Keene that it believes would be  
                 inappropriate to apply to the ISO, and consider  
                 exceptions on a case by case basis.

                                         POSITIONS
                
                Sponsor:
               
               Author

                Support:
                
               California Municipal Utilities Association

                Oppose:
                
               None on file


               


































          Lawrence Lingbloom 
          SB 1753 Analysis
          Hearing Date:  April 9, 2002