BILL ANALYSIS Bill No: AB 808 SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION Senator Edward Vincent, Chair 2003-2004 Regular Session Staff Analysis AB 808 Author: Canciamilla As Amended: June 25, 2003 Hearing Date: July 1, 2003 Consultant: Steve Hardy SUBJECT Energy Agency Consolidation DESCRIPTION AB 808 would establish a State Energy Agency and reorganize the state's energy regulatory framework as follows: 1)Contains findings and declarations relative to California's existing regulatory system, which has resulted in significant fragmentation, duplication, overlap, and confusion in the formulation and execution of the state's energy related functions. Also, that having a single agency responsible for the siting of generation, transmission, and natural gas infrastructure will increase the efficiency and effectiveness of the siting process. 2)Requires the Governor to transmit a plan for the reorganization of the energy regulatory activities of California to the Legislature on or before July 1, 2004, as specified. 3)Establishes the Energy Agency (Agency), with a cabinet-level Secretary of Energy appointed by the Governor and confirmed by the Senate. 4)Requires the Governor's reorganization plan to include all of the following: AB 808 (Canciamilla) continued Page 2 a) Establish within the Agency all major policy making functions with respect to the state's energy policy. b) Eliminate the California consumer Power and Conservation Financing Authority and transfer its authority to the Energy Agency. c) Merge the State Energy Resources Conservation and Development Commission into the Agency. d) Eliminate the Electricity Oversight Board and transfer its functions for monitoring and investigating wholesale energy markets to the Agency. e) Transfer all policy making functions with respect to energy matters currently performed by the Public Utilities Commission (PUC), and establish review mechanisms to ensure that the regulatory activities of the PUC are consistent with the State's energy policy to the Agency as specified. f) Transfer all energy conservation programs and oversight currently performed by the PUC, to the Agency as described. g) Establish a single board in the Agency, with responsibility for state approval for the siting of energy production, storage, and transmission facilities, including both electric and gas plants as specified. The decisions of the board on any application for certification of a site and related facility will be subject to judicial review by the Supreme Court of California. h) Establish the Secretary of Energy, or his/her designee, as the sole authorized representative of the state before the Federal Energy Commission. i) Require the Independent System Operator (ISO) to report any filings or appearances before the Federal Energy Regulatory Commission to the Secretary of the Agency. j) Provide for public oversight of the ISO by the Agency, to the extent permitted under federal law. aa) Establish a mechanism for the PUC to timely advise AB 808 (Canciamilla) continued Page 3 the board responsible for siting energy facilities and the Secretary to avoid unexpected rate impacts. bb) Establish a mechanism for adequate solicitation and consideration of public comments before described final decisions are made by the Secretary which will protect the public as specified 5)Allows the Director of Finance to direct the transfer of unexpired and unencumbered balances of other funds available for use in connection with any function related to this reorganization as specified. 6)Contains a number of definitions and declarations relevant to this act. In addition, AB 808 clearly describes the duties and responsibilities of the Secretary, and further provides that the agency can do "any and all things necessary to carry out the purposes of this act." 7)Requires the Agency to maintain its headquarters in Sacramento and describes the handling and availability of both public and confidential records, and the establishment of a Legal Affairs Department as specified. 8)Declares that the Agency is responsible for planning, developing, and implementing all major aspects of the state energy policy to ensure an adequate, reasonably priced supply of electricity and gas. 9)Requires agencies, departments, and commissions as described, to coordinate their activities with the Agency with respect to energy programs they retain powers and authority over. 10)Requires the Secretary, in consultation with ISO, to determine appropriate reserve levels needed to maintain the reliability and stability of the electrical transmission and distribution grid. 11)Provides that the PUC will ensure that electrical corporations meet the reserve levels determined to be appropriate by the Secretary. AB 808 (Canciamilla) continued Page 4 12)Requires the Secretary to establish goals for energy conservation and resource efficiency as described. The Secretary will be responsible for coordinating these programs, and consolidating them where desirable. 13)Requires the Secretary to report to the Legislature regarding liquefied natural gas, natural gas conservation measures, and other options to improve the supply and distribution of a reliable natural gas supply in California as described, within 90 days following his/her confirmation. PRIOR LEGISLATION Governor's Reorganization Plan No. 2, 1995 Session. Energy reorganization plan similar to this, which would have eliminated the California Energy Commission (CEC) and the Department of Conservation. (Approval rejected by the Senate) AB 2062 (Pescetti) 2001-2002 Session. Would have created an Energy Agency eliminating all PUC regulatory authority and jurisdiction relating to energy. (Held in Senate Committee on Energy, Utilities and Communications) AB 2383 (Diaz) 2001-2002 Session. Directed the Little Hoover Commission to study the consolidation of existing energy-related agencies into a cabinet-level department. (Held in Senate Committee on Energy, Utilities and Communications) EXISTING LAW 1.Provides for regulation of public utilities, including gas and electrical corporations, by PUC. 2.Provides for regulation by California Energy Commission (CEC) of energy conservation, renewable electricity generation and siting of electric power plants. 3.Authorizes the Consumer Power and Conservation Financing Authority to issue up to $5,000,000,000 of revenue bonds to augment electric generating facilities and ensure a sufficient and reliable supply of electricity. AB 808 (Canciamilla) continued Page 5 4. Authorizes the Governor to change the structure of Executive Branch agencies to, among other things, promote better execution of laws, reduce expenditures, increase efficiency, and eliminate duplicative efforts. BACKGROUND The authors believe that the state's recent experiences during the energy crisis brought to light a lack of accountability by regulators, and also revealed considerable inter-agency competition and functional duplication that has tended to degrade the operations of the state's energy regulatory programs. Accordingly, the authors believe that the recent energy crisis and the public focus on energy programs present a unique opportunity to comprehensively reorganize the state's energy agencies to achieve policy consistency, accountability, efficiency and responsiveness. Under existing law, the Governor may propose an executive branch reorganization plan. A reorganization plan becomes effective 60 days after it has been submitted to the Legislature unless either the Senate or the Assembly adopts, by a majority vote, a resolution rejecting the plan. The Little Hoover Commission has 30 days after the plan has been submitted to the Legislature to report to the Governor and the Legislature its evaluation of the reorganization and any recommendations for changes. The law contemplates enactment in the following year of statutory language to give effect to the reorganization, but the reorganization is effective regardless of whether any follow-up statutes are enacted. In its analysis of the 2002-03 Budget, the Legislative Analyst's Office (LAO) Perspectives and Issues feature, examined whether California should re-organize its energy-related activities. LAO noted that the state has a number of different state departments, boards, and commissions involved in implementing, overseeing, and managing the state's various energy-related policies and responsibilities. This multiplicity of agencies, AB 808 (Canciamilla) continued Page 6 and evidence of certain duplicative activities and other problems, suggests that it is time for the state to assess how its various energy-related entities are organized and interacting with one another. Given the number of these organizational changes and the speed, with which they have occurred, it is not surprising that a number of potentially unnecessary duplications and overlaps have come to light, according to LAO's report. In a report issued earlier this year on the causes and policy options presented by the California energy crisis, the Public Policy Institute of California (PPI) observed that the electricity sector restructuring, followed by an energy crisis, has led to an ad hoc and confusing mix of state agencies and departments. PPI observed that the existing structure of energy policymaking institutions is an impediment to attaining the basic goals of the electricity sector. PPI noted that state energy policy has lost its coherence because the interrelated facets of energy policy are addressed in so many separate forums. PPI suggested that a cabinet-level post be created in order to coordinate policy and functions now that the worst of the energy crisis has passed. Supporters believe that California's recent energy crisis made obvious the need for regulatory restructuring. The regulatory response to the energy crisis lacked coordination and cooperation amongst the numerous agencies and commissions with jurisdiction over the energy market. Supporters believe that California lacked a cohesive energy policy, and that crisis management became the basis of the state's energy policy, and further that better coordination and control of energy issues will be necessary to manage future crises. The California Municipal Utilities Association (CMUA) opposes this effort at this time in the belief that it is not now wise to rearrange the energy agencies until the state has determined what the electricity market structure ought to look like. In particular, CMUA opposes a continuing role for ISO in ensuring electric reliability. SUPPORT: California Chamber of Commerce Pacific Gas and Electric Company AB 808 (Canciamilla) continued Page 7 CH2M Hill OPPOSE: California Municipal Utilities Association DUAL REFERRAL: Energy, Utilities and Communications FISCAL COMMITTEE: Senate Appropriations ********** SMH:bkh