BILL NUMBER: SB 920 INTRODUCED
BILL TEXT
INTRODUCED BY Senator Bowen
FEBRUARY 21, 2003
An act to amend Sections 352 and 372 of, to amend and renumber
Section 454.1 of, to add Section 345.3 to, to repeal Sections 346,
348, and 350 of, and to repeal Article 2 (commencing with Section
334), Article 4 (commencing with Section 355), and Article 5
(commencing with Section 359) of Chapter 2.3 of Part 1 of, the Public
Utilities Code, relating to public utilities.
LEGISLATIVE COUNSEL'S DIGEST
SB 920, as introduced, Bowen. Electricity Oversight Board:
Independent System Operator: Power Exchange.
(1) The existing restructuring of the electrical services industry
within the Public Utilities Act provides for the establishment of an
Independent System Operator and a Power Exchange as separately
incorporated public benefit nonprofit corporations. An Electricity
Oversight Board (Oversight Board) is also established to oversee the
Independent System Operator and the Power Exchange in order to ensure
the success of electric industry restructuring and to ensure a
reliable supply of electricity in the transition to a new market
structure. Pursuant to an order of the Federal Energy Regulatory
Commission, the Power Exchange has ceased to function. The Oversight
Board is granted various powers including, but not limited to,
requiring the revision of the bylaws of the Independent System
Operator and the approval of the entry of the Independent System
Operator into a multistate entity or a regional organization.
Existing law requires the Independent System Operator to adopt
certain inspection, maintenance, repair, and replacement standards
for the transmission facilities under its control and to make a
related report to the Oversight Board. Existing law authorizes the
Independent System Operator and the Power Exchange to enter into a
regional compact or other comparable agreement to become western
states regional organizations.
This bill would repeal those provisions establishing, and granting
powers to, the Oversight Board, and would make certain conforming
changes to existing law. The bill would require the Independent
System Operator to revise its own bylaws, would require the
Legislature to approve the entry of the Independent System Operator
into a multistate entity or a regional organization, and would repeal
that provision regarding the adoption of standards for transmission
facilities. Because any violation of the Public Utilities Act is a
crime, the bill, by establishing new duties for the Independent
System Operator, would impose a state-mandated local program by
changing the definition of a crime. The bill would repeal certain
provisions relating to the Power Exchange. The bill would repeal the
regional compact provision.
(2) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Article 2 (commencing with Section 334) of Chapter 2.3
of Part 1 of the Public Utilities Code is repealed.
SEC. 2. Section 345.3 is added to the Public Utilities Code, to
read:
345.3. (a) The Independent System Operator 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.
Any reference in this chapter or in any other provision of law to
the Independent System Operator governing board means the independent
governing board appointed under this subdivision.
(b) A member of the independent governing board appointed under
subdivision (a) may not be affiliated with any actual or potential
participant in any market administered by the Independent System
Operator.
(c) (1) All appointments shall be for three-year terms.
(2) There is no limit on the number of terms that may be served by
any member.
(d) The Independent System Operator shall revise its articles of
incorporation and bylaws in accordance with this section, and shall
make filings with the Federal Energy Regulatory Commission as it
determines to be necessary.
(e) For the purposes of the initial appointments to the
Independent System Operator governing board, as provided in
subdivision (a), the Governor shall appoint one member to a one-year
term, two members to a two-year term, and two members to a three-year
term.
SEC. 3. Section 346 of the Public Utilities Code is repealed.
346. The Independent System Operator shall immediately
participate in all relevant Federal Energy Regulatory Commission
proceedings. The Independent System Operator shall ensure that
additional filings at the Federal Energy Regulatory Commission
request confirmation of the relevant provisions of this chapter and
seek the authority needed to give the Independent System Operator the
ability to secure generating and transmission resources necessary to
guarantee achievement of planning and operating reserve criteria no
less stringent than those established by the Western Systems
Coordinating Council and the North American Electric Reliability
Council.
SEC. 4. Section 348 of the Public Utilities Code is repealed.
348. The Independent System Operator shall adopt inspection,
maintenance, repair, and replacement standards for the transmission
facilities under its control no later than September 30, 1997. The
standards, which shall be performance or prescriptive standards, or
both, as appropriate, for each substantial type of transmission
equipment or facility, shall provide for high quality, safe, and
reliable service. In adopting its standards, the Independent System
Operator shall consider: cost, local geography and weather,
applicable codes, national electric industry practices, sound
engineering judgment, and experience. The Independent System
Operator shall also adopt standards for reliability, and safety
during periods of emergency and disaster. The Independent System
Operator shall report to the Oversight Board, at such times as the
Oversight Board may specify, on the development and implementation of
the standards in relation to facilities under the operational
control of the Independent System Operator. The Independent System
Operator shall require each transmission facility owner or operator
to report annually on its compliance with the standards. That report
shall be made available to the public.
SEC. 5. Section 350 of the Public Utilities Code is repealed.
350. The Independent System Operator, in consultation with the
California Energy Resources Conservation and Development Commission,
the Public Utilities Commission, the Western Systems Coordinating
Council, and concerned regulatory agencies in other western states,
shall within six months after the Federal Energy Regulatory
Commission approval of the Independent System Operator, provide a
report to the Legislature and to the Oversight Board that does the
following:
(a) Conducts an independent review and assessment of Western
Systems Coordinating Council operating reliability criteria.
(b) Quantifies the economic cost of major transmission outages
relating to the Pacific Intertie, Southwest Power Link, DC link, and
other important high voltage lines that carry power both into and
from California.
(c) Identifies the range of cost-effective options that would
prevent or mitigate the consequences of major transmission outages.
(d) Identifies communication protocols that may be needed to be
established to provide advance warning of incipient problems.
(e) Identifies the need for additional generation reserves and
other voltage support equipment, if any, or other resources that may
be necessary to carry out its functions.
(f) Identifies transmission capacity additions that may be
necessary at certain times of the year or under certain conditions.
(g) Assesses the adequacy of current and prospective institutional
provisions for the maintenance of reliability.
(h) Identifies mechanisms to enforce transmission right-of-way
maintenance.
(i) Contains recommendations regarding cost-beneficial
improvements to electric system reliability for the citizens of
California.
SEC. 6. Section 352 of the Public Utilities Code is amended to
read:
352. The Independent System Operator may not enter into a
multistate entity or a regional organization as authorized
in Section 359 unless that entry is approved by the
Oversight Board Legislature .
SEC. 7. Article 4 (commencing with Section 355) of Chapter 2.3 of
Part 1 of the Public Utilities Code is repealed.
SEC. 8. Article 5 (commencing with Section 359), of Chapter 2.3 of
Part 1 of the Public Utilities Code is repealed.
SEC. 9. Section 372 of the Public Utilities Code is amended to
read:
372. (a) It is the policy of the state to encourage and support
the development of cogeneration as an efficient, environmentally
beneficial, competitive energy resource that will enhance the
reliability of local generation supply, and promote local business
growth. Subject to the specific conditions provided in this section,
the commission shall determine the applicability to customers of
uneconomic costs as specified in Sections 367, 368, 375, and 376.
Consistent with this state policy, the commission shall provide that
these costs shall not apply to any of the following:
(1) To load served onsite or under an over the fence arrangement
by a nonmobile self-cogeneration or cogeneration facility that was
operational on or before December 20, 1995, or by increases in the
capacity of such a facility to the extent that such increased
capacity was constructed by an entity holding an ownership interest
in or operating the facility and does not exceed 120 percent of the
installed capacity as of December 20, 1995, provided that prior to
June 30, 2000, the costs shall apply to over the fence arrangements
entered into after December 20, 1995, between unaffiliated parties.
For the purposes of this subdivision, "affiliated" means any person
or entity that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common on
control with another specified entity. "Control" means either of the
following:
(A) The possession, directly or indirectly, of the power to direct
or to cause the direction of the management or policies of a person
or entity, whether through an ownership, beneficial, contractual, or
equitable interest.
(B) Direct or indirect ownership of at least 25 percent of an
entity, whether through an ownership, beneficial or equitable
interest.
(2) To load served by onsite or under an over the fence
arrangement by a nonmobile self-cogeneration or cogeneration facility
for which the customer was committed to construction as of December
20, 1995, provided that the facility was substantially operational on
or before January 1, 1998, or by increases in the capacity of such a
facility to the extent that the increased capacity was constructed
by an entity holding an ownership interest in or operating the
facility and does not exceed 120 percent of the installed capacity as
of January 1, 1998, provided that prior to June 30, 2000, the costs
shall apply to over the fence arrangements entered into after
December 20, 1995, between unaffiliated parties.
(3) To load served by existing, new, or portable emergency
generation equipment used to serve the customer's load requirements
during periods when utility service is unavailable, provided such
emergency generation is not operated in parallel with the integrated
electric grid, except on a momentary parallel basis.
(4) After June 30, 2000, to any load served onsite or under an
over the fence arrangement by any nonmobile self-cogeneration or
cogeneration facility.
(b) Further, consistent with state policy, with respect to
self-cogeneration or cogeneration deferral agreements, the commission
shall do the following:
(1) Provide that a utility shall execute a final self-cogeneration
or cogeneration deferral agreement with any customer that, on or
before December 20, 1995, had executed a letter of intent (or similar
documentation) to enter into the agreement with the utility,
provided that the final agreement shall be consistent with the terms
and conditions set forth in the letter of intent and the commission
shall review and approve the final agreement.
(2) Provide that a customer that holds a self-cogeneration or
cogeneration deferral agreement that was in place on or before
December 20, 1995, or that was executed pursuant to paragraph (1) in
the event the agreement expires, or is terminated, may do any of the
following:
(A) Continue through December 31, 2001, to receive utility service
at the rate and under terms and conditions applicable to the
customer under the deferral agreement that, as executed, includes an
allocation of uneconomic costs consistent with subdivision (e) of
Section 367.
(B) Engage in a direct transaction for the purchase of electricity
and pay uneconomic costs consistent with Sections 367, 368, 375, and
376.
(C) Construct a self-cogeneration or cogeneration facility of
approximately the same capacity as the facility previously deferred,
provided that the costs provided in Sections 367, 368, 375, and 376
shall apply consistent with subdivision (e) of Section 367, unless
otherwise authorized by the commission pursuant to subdivision (c).
(3) Subject to the fire wall described in subdivision (e) of
Section 367 provide that the ratemaking treatment for
self-cogeneration or cogeneration deferral agreements executed prior
to December 20, 1995, or executed pursuant to paragraph (1) shall be
consistent with the ratemaking treatment for the contracts approved
before January 1995.
(c) The commission shall authorize, within 60 days of the receipt
of a joint application from the serving utility and one or more
interested parties, applicability conditions as follows:
(1) The costs identified in Sections 367, 368, 375, and 376 shall
not, prior to June 30, 2000, apply to load served onsite by a
nonmobile self-cogeneration or cogeneration facility that became
operational on or after December 20, 1995.
(2) The costs identified in Sections 367, 368, 375, and 376 shall
not, prior to June 30, 2000, apply to any load served under over the
fence arrangements entered into after December 20, 1995, between
unaffiliated entities.
(d) For the purposes of this subdivision, all onsite or over the
fence arrangements shall be consistent with Section 218 as it existed
on December 20, 1995.
(e) To facilitate the development of new microcogeneration
applications, electrical corporations may apply to the commission for
a financing order to finance the transition costs to be recovered
from customers employing the applications.
(f) To encourage the continued development, installation, and
interconnection of clean and efficient self-generation and
cogeneration resources, to improve system reliability for consumers
by retaining existing generation and encouraging new generation to
connect to the electric grid, and to increase self-sufficiency of
consumers of electricity through the deployment of self-generation
and cogeneration, both of the following shall occur:
(1) The commission and the Electricity Oversight Board
shall determine if any policy or action undertaken by the
Independent System Operator, directly or indirectly, unreasonably
discourages the connection of existing self-generation or
cogeneration or new self-generation or cogeneration to the grid.
(2) If the commission and the Electricity Oversight Board
find that any policy or action of the Independent System
Operator unreasonably discourages, the connection of existing
self-generation or cogeneration or new self-generation or
cogeneration to the grid, the commission and the Electricity
Oversight Board shall undertake all necessary efforts to
revise, mitigate, or eliminate that policy or action of the
Independent System Operator.
SEC. 10. Section 454.1 of the Public Utilities Code, as added by
Chapter 1040 of the Statutes of 2000, is amended and renumbered to
read:
454.1.
454.6. (a) Reasonable expenditures by transmission owners
that are electrical corporations to plan, design, and engineer
reconfiguration, replacement, or expansion of transmission facilities
are in the public interest and are deemed prudent if made for the
purpose of facilitating competition in electric generation markets,
ensuring open access and comparable service, or maintaining or
enhancing reliability, whether or not these expenditures are for
transmission facilities that become operational.
(b) The commission and the Electricity Oversight Board
shall jointly facilitate the efforts of
the state's transmission owning electrical corporations to obtain
authorization from the Federal Energy Regulatory Commission to
recover reasonable expenditures made for the purposes stated in
subdivision (a).
(c) Nothing in this section alters or affects the recovery of the
reasonable costs of other electric facilities in rates pursuant to
the commission's existing ratemaking authority under this code or
pursuant to the Federal Power Act (41 Stat. 1063; 16 U.S.C. Secs.
791a, et seq.). The commission may periodically review and adjust
depreciation schedules and rates authorized for an electric plant
that is under the jurisdiction of the commission and owned by
electrical corporations and periodically review and adjust
depreciation schedules and rates authorized for a gas plant that is
under the jurisdiction of the commission and owned by gas
corporations, consistent with this code.
SEC. 11. No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.