BILL ANALYSIS 1 1 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 1 7 5 3 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