BILL ANALYSIS
SB 1753
Page A
SENATE THIRD READING
SB 1753 (Bowen)
As Amended June 27, 2002
Majority vote
SENATE VOTE :21-12
UTILITIES AND COMMERCE 10-4 GOVERNMENTAL ORGANIZATION
14-7
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|Ayes:|Wright, Calderon, |Ayes:|Horton, Canciamilla, |
| |Canciamilla, Diaz, | |Cardenas, Cardoza, |
| |Horton, Kelley, Nation, | |Chavez, Cohn, Corbett, |
| |Papan, Reyes, Simitian | |Firebaugh, Papan, |
| | | |Longville, Nation, Reyes, |
| | | |Wiggins, Wright |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Pescetti, Bill Campbell, |Nays:|Strickland, Briggs, |
| |La Suer, Maddox | |Dickerson, Harman, La |
| | | |Suer, Maddox, Wyland |
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APPROPRIATIONS 16-7
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|Ayes:|Steinberg, Alquist, |
| |Aroner, Cohn, Corbett, |
| |Correa, Diaz, Firebaugh, |
| |Goldberg, Negrete McLeod, |
| | |
| |Papan, Pavley, Simitian, |
| |Washington, Wiggins, |
| |Wright |
| | |
|-----+--------------------------|
|Nays:|Bates, Ashburn, Daucher, |
| |Maldonado, Robert |
| |Pacheco, Runner, Zettel |
| | |
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SUMMARY : Modifies the duties of the Independent System Operator
(ISO). Specifically, this bill :
SB 1753
Page B
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; and,
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
meeting statutes applicable to state agencies<1>;and,
d) Provide public access to corporate records, consistent
with the general policies of the California Public Records
Act. (Government Code 6250 et seq.)
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<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.
SB 1753
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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).
FERC has jurisdiction over the transmission of electric energy
and the sale of electric energy at wholesale in interstate
commerce. ISO is a California non-profit public benefit
corporation that controls and maintains California's electric
power transmission grid. As part of its responsibilities, ISO
acts as a power broker between generators and utilities. ISO
Tariff governs these transactions, on file with FERC. ISO also
coordinates and controls plant outages in the state, among other
duties.
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.
Last fall, FERC conducted an operational audit of ISO. On July
17, 2002, FERC issued an order<2> in the wake of recommendations
contained in a January 25, 2002 independent consultant's audit
report on ISO. In the order, FERC found that the continuation
of the existing ISO board, appointed by the Governor pursuant to
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<2> Order Concerning Governance of the California Independent
System Operator Corporation, 100 FERC 61, 059
SB 1753
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state law,<3> will hamper the ability of ISO to implement its
market redesign proposal, and thus FERC's ". . . ability to
ensure non-discriminatory transmission services and just and
reasonable rates in the West. This is because the
State-controlled Governing Board of the ISO is not capable of
operating its interstate transmission facilities on a
non-discriminatory basis. . .." FERC found that the ISO board,
as presently constituted, does not meet the independence
requirement contained in earlier FERC decisions applicable
nationwide.
Among other things, FERC directed ISO to adopt a two-tier form
of governance by January 1, 2003. The top tier would consist of
an independent, non-stakeholder board, while the lower tier will
consist of an advisory committee of stakeholders, which may
recommend options to the Board, and an advisory committee of the
California Electricity Oversight Board (EOB), which will serve
as the state's representative in advising the ISO board.
On August 7, 2002, at the urging of Governor Davis and Attorney
General Lockyer, the ISO Governing Board voted to refuse to
disband, and so notified FERC. In turn, FERC sued California on
August 16, 2002 in a U.S. District Court in Washington, DC for
defying its order to dissolve the Governing Board. The suit
asks the court to compel California to follow FERC's July 17
order.
In light of the above, this bill now gives rise to myriad issues
concerning the appropriate role of government and private
entities concerning operation of the state's electricity system,
and injects additional issues into the ongoing showdown between
California and FERC.
Analysis Prepared by : Paul Donahue / U. & C. / (916) 319-2083
FN: 0006921
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<3> Section 377 of the Public Utilities Code provides in part
that the ISO governing board shall be composed of a five-member
independent governing board of directors appointed by the
Governor and subject to confirmation by the Senate.