BILL ANALYSIS
SB 1753
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Date of Hearing: June 24, 2002
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Roderick D. Wright, Chair
SB 1753 (Bowen) - As Amended: June 13, 2002
SENATE VOTE : 21-12
SUBJECT : Independent System Operator: duties.
SUMMARY : Modifies the duties of the Independent System Operator
(ISO). Specifically, this bill :
1)Requires ISO to conduct its operations consistent with
applicable state and federal laws and consistent with the
interests of the people of the state.
2)Specifies, that to ensure electric service reliability and
public health and safety, ISO shall manage the electric grid
and markets consistent with:
a) Making the most efficient use of available energy
resources.
b) Reducing overall economic costs to consumers.
c) Applicable state law intended to protect public health
and safety.
d) Maximizing availability of existing electric generation
resources necessary to meet needs.
3)Directs ISO to:
a) Consult and coordinate with appropriate state and local
agencies to ensure that ISO operates in furtherance of
state laws governing environmental and consumer protection.
b) Ensure that the purposes and functions of ISO are
consistent with the purposes and functions of non-profit
public benefit corporations in the state, including
conflict of interest standards for officers and directors
of a corporation.
c) Maintain open meeting standards consistent with open
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meeting statutes applicable to state agencies.<1>
d) Provide public access to corporate records, consistent
with the general policies of the California Public Records
Act.<2>
EXISTING LAW :
1)Establishes ISO as a non-profit, public benefit corporation,
to ensure efficient use and reliable operation of the electric
transmission grid.
2) Provides for the formation and regulation of non-profit
public benefit corporations.
3)Requires officers and directors of a non-profit public benefit
corporation to perform their duties in the best interests of
the corporation, with such care as an ordinarily prudent
person in a like position would use under similar
circumstances.
FISCAL EFFECT : Unknown
COMMENTS :
ISO is a public utility under federal law and is regulated by
the Federal Energy Regulatory Commission (FERC). It was
incorporated in California as a non-profit public benefit
corporation, and is doing business in the state.
ISO controls and maintains California's electric power
transmission grid. As part of its responsibilities, ISO acts as
a power broker between generators and utilities. These
transactions are governed by ISO Tariff, on file with FERC. ISO
---------------------------
<1> This bill specifies that ISO's open meeting policy, as
adopted on April 23, 1998, meets this requirement, and this bill
requires ISO to maintain an open meeting policy that is no less
consistent with state open meetings law than its current policy.
<2> Government Code 6250 et seq. This bill specifies that
ISO's Information Availability Policy, as adopted on October 22,
1998, meets this requirement, and this bill requires ISO to
maintain a policy that is no less consistent with the Public
Records Act than its current policy
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also coordinates and controls plant outages in the state, among
other duties.
In general, FERC has jurisdiction over the transmission of
electric energy and the sale of electric energy at wholesale in
interstate commerce.
Author's statement
The author's background materials note that, although ISO
performs a public purpose, it is not a governmental agency, and
is not subject to general state laws governing the conduct of
state and local agencies. This bill expands on the original
charter of ISO, requiring it to conduct its operations
consistent with state and federal laws and the public interest,
and assigning it more detailed public obligations.
FERC operational audit of ISO
Last fall, FERC conducted an operational audit of ISO. The
purpose of the audit was to identify any problems in ISO's
structure and operations and recommend steps for improvements to
enhance ISO effectiveness.
Among other things, the report criticized ISO's mission
statement, noting that, "with the arrival of the current Board
of Governors, the mission of ISO was modified to provide 'safe,
reliable electric transmission services to all Californians
within its control at the lowest reasonable cost.' Put simply,
while the role of a system operator should be to maintain
reliability and facilitate functional competitive markets, the
current ISO mission statement, which emphasizes 'least cost,'
smacks of command and control approach more akin to a regulatory
body operating in a regulated industry than an independent
system operator."
Recent amendments
Recent amendments to this measure seemingly respond to the above
issue by directing ISO to manage the markets and the grid
consistent with reducing overall economic cost to consumers.
This bill formerly directed ISO to assure the least overall
economic cost to consumers.
Similarly, recent amendments to this bill direct ISO to maximize
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the availability of existing electric generation resources. An
earlier version of this bill directed ISO to assure maximum
availability of electric generation resources, which could have
been interpreted as a requirement that ISO become an electricity
provider and secure sufficient resources to meet the needs of
the state's consumers.
Jurisdictional and operational issues
This bill gives rise to issues concerning the appropriate role
of various government and private entities regarding the
operation of the state's electricity system.
ISO is a non-public entity engaged in transmission of
electricity and wholesale sales of electricity. The California
Public Utilities Commission has jurisdiction over retail sales
of electricity in the state. An assortment of government
entities enforce environmental, and health and safety laws.
This bill requires ISO to manage the grid and the related energy
markets in a manner that makes the most efficient use of
available energy resources, reduce economic cost to consumers,
and maximizes existing electric generation resources to meet the
needs of electricity consumers. A question arises as to how ISO
will set its priorities among these policies, which could at
times conflict with each other, or with orders applicable to ISO
issued by FERC as part of its regulatory control of ISO
operations.
ISO is a private, non-government corporation. One might argue
that it appears incongruous for this bill to suggest that it
maintain open meeting standards, and prohibit it from modifying
its existing open meeting policy in the future unless the
changes in policy are no less consistent with government open
meeting laws than the current policy.
Similarly, this bill prohibits ISO from modifying its
Information Availability Policy if it results in a policy that
is less consistent with the Public Records Act.
REGISTERED SUPPORT / OPPOSITION :
Support
California Municipal Utilities Association
SB 1753
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Public Utilities Commission
Opposition
None on file
Analysis Prepared by : Paul Donahue / U. & C. / (916) 319-2083