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:





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             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  




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               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.





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            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.




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          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, 




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          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




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                             CH2M Hill

           OPPOSE:     California Municipal Utilities Association

           DUAL REFERRAL:   Energy, Utilities and Communications

           FISCAL COMMITTEE:   Senate Appropriations



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