BILL ANALYSIS
SB 920
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Date of Hearing: June 30, 2003
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Sarah Reyes, Chair
SB 920 (Bowen) - As Amended: June 26, 2003
SENATE VOTE : 23-11
SUBJECT : Electricity Oversight Board: Independent System
Operator: Power Exchange.
SUMMARY : Eliminates the Electricity Oversight Board (EOB) and
transfers all legal and regulatory proceedings where EOB is a
party to the Attorney General and makes related changes to
provisions concerning the Independent System Operator (ISO) and
the Power Exchange (PX). Specifically, this bill :
1)Deletes provisions of law establishing, and granting powers to
EOB, which includes oversight of ISO.
2)Specifies that it is the intent of the Legislature to abolish
EOB as an agency of the State of California, and to preserve
the state's interest in any legal or regulatory proceedings
where EOB is a party by transferring the state's interest to
the Attorney General. The Attorney General is vested with the
power to exercise all rights, claims, powers or entitlements
of EOB in legal and regulatory proceedings, contracts,
settlements, tariffs, bylaws and articles of incorporation.
3)Requires ISO to receive approval from the Legislature before
entering into a multi-state entity or a regional organization.
4)Deletes an obsolete provision requiring ISO to provide a
report to the Legislature six months after Federal Energy
Regulatory Commission (FERC) approval, which was done in 2000.
EXISTING LAW:
1)Specifies that EOB duties are the following:
2)Oversee ISO and PX.
3)Determine the composition and terms of service and to exercise
the exclusive right to decline to confirm the appointments of
specific members of the governing board of PX.
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4)Serve as an appeal board for majority decisions of ISO
governing board.
5)Investigate any matter related to the wholesale market for
electricity to ensure that the interests of California's
citizens and consumers are served, protected, and represented
in relation to the availability of electric transmission and
generation and related costs, during periods of peak demand.
6)Establishes an EOB that has five members, of which the
Governor appoints the chair. The five members of EOB are
appointed in the following manner and serve three year terms:
7)Three members appointed by the Governor who are California
residents and electricity ratepayers;
8)One member appointed by the Speaker of the Assembly;
9)One member appointed by the Senate Rules Committee.
10)Establishes the governing board for ISO and requires any
changes to its bylaws to be in conformance with the Federal
Powers Act. FERC shall have the authority to take any action
necessary to address undue discrimination or other violations
of the Federal Powers Act as it pertains to ISO's bylaws.
11)Establishes ISO, as a nonprofit, public benefit corporation,
and to manage the transmission grid and related energy markets
consistent with applicable state and federal laws.
FISCAL EFFECT : Unknown.
COMMENTS :
According to EOB it was created in 1996 to help ensure reliable
electricity supply and state public oversight of market
operations. The state under AB 1890 (Brulte), Chapter 854,
Statutes of 1996, transferred responsibility for ensuring
short-term reliability and some key aspects of long-term
reliability away from the electric utilities and regulatory
bodies to ISO. Because ISO is not a State entity, EOB was
created to ensure accountability to a state body, and to ensure
that California citizens are not exposed to undue economic risk
in connection with system reliability.
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Legislation in 1996 restructured the electric generation market
and ended the vertical monopolies held by IOUs. Directives at
that time required IOUs to divest generation facilities, and to
transfer control of their transmission lines to ISO, a private,
non-profit corporation. As the State board created to provide
oversight for ISO, EOB has the primary responsibility of
monitoring grid reliability issues. These issues include
transmission planning, interconnection issues, congestion
management, and local reliability contracts. In addition, grid
reliability represents an integral component of the overall
operation of the restructured wholesale electricity markets.
EOB performs significant market monitoring functions, including
investigating and initiating market rate complaints and
participating in the extensive market redesign proceedings under
FERC.
What are the costs to eliminating EOB? The elimination of EOB
would result in a cost savings of $4.2 million, of which only
$730,000 is General Fund, but will deleting it cause any work
that EOB is currently involved with to fall through the cracks?
The bankruptcy of PX and the replacement of EOB appointed ISO
stakeholder board with a board of gubernatorial appointees
reduced the duties of EOB. Subsequent legislation gave the EOB
authority to conduct the following activities:
1)SB 1388 (Peace), Chapter 1040, Statutes of 2000, requires EOB,
in conjunction with PUC, to petition FERC to allow the
recovery of certain expenses of investor owned utilities
relating to the replacement and expansion of the state's
electricity transmission grid.
2)Communicate ISO's Rule Changes to FERC. Chapter 1, First
Extraordinary Session, Statutes of 2001 (AB X1 5 (Keeley)),
requires EOB to require ISO to amend its bylaws in response to
FERC decisions, and to communicate this action to FERC.
3)SB 47 (Bowen) Chapter 766, Statutes of 2001 authorizes EOB to
investigate any matter related to the wholesale market for
electricity.
4)Provide EOB with oversight over scheduling planned power
outages as well as monitoring, investigating, and enforcing
activities related to unplanned outages.
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Should the Legislature wait till next year before eliminating
EOB pending their report? Most of EOB workload is currently
around the energy refund cases and FERC representation. This
year's joint budget conference committee adopted budget bill
language and supplemental report language that requires EOB to
report back to the Legislature on or before March 1, 2004,
describing the state's activities before FERC. This report
shall describe the roles of each agency that is active before
FERC, how the policies and objectives are determined, and what
mechanisms are in place to coordinate activities among the
several agencies.
Does the Governor need an energy policy advisor? EOB, which was
created in AB 1890 (Brulte) oversaw the functions of ISO and PX
and until the passage of AB 1X 5 had the authority to appoint
the members of EOB and ISO. During the energy crises EOB served
a valuable role in monitoring abuses in the wholesale market and
representing the state interest to FERC. By eliminating EOB
will this valuable service be lost and can the Attorney General
pick it up?
Does the Attorney General want the job? This bill seeks to move
all the legal and regulatory proceedings where EOB is a party to
the Attorney General but doesn't give the Attorney General any
more money. Will the Attorney General be able to pick up EOB's
workload while not jeopardizing any state interests in claims or
current proceedings with the resources that it currently has?
And will the courts and FERC be able to legally recognize the
Attorney General in cases or proceedings that EOB was a claimant
in? Furthermore, it is possible there may be a conflict of
interest for the Attorney General to pick up the claims and
proceedings that EOB is party in. An example would be in the
case of DWR contracts where the Attorney General represents the
state and EOB is the party arguing that the contracts are
unjustified and should be renegotiated.
Other issues that may pose a problem with the transfer is that
EOB under current settlement agreements has a responsibility and
authority to require generators to make changes to their plants
to comply with the agreements. Under this bill that
responsibility would now seem to fall with the Attorney General
and would it be the proper office to handle that responsibility?
Also, the Integrated Energy Policy Report developed by the
Energy Resources Conservation and Development Commission
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requires agencies like EOB to submit information to it for
purposes of developing the report. Under this bill the Attorney
General would seem to now be required to provide this
information, which is outside the mission and duties of the
agency.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file.
Opposition
None on file.
Analysis Prepared by : Daniel Kim / U. & C. / (916) 319-2083