BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
DEBRA BOWEN, CHAIRWOMAN
SB 96 - Peace Hearing Date: August
25, 1999 S
As Amended: June 14, 1999 FISCAL B
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DESCRIPTION
As approved by the Senate , this bill declared the intent of
the Legislature to provide for the evolution of the
Independent System Operator (ISO) and the Power Exchange
(PX) into regional organizations that would be governed by
members selected by participating states.
As amended in the Assembly , this bill now enacts specific
provisions relating to the governing structures of the ISO
and the PX, and the duties of the Electricity Oversight
Board (EOB).
Specifically, this bill :
1. Limits the EOB's confirmation powers to the
appointments of customer representatives to the ISO and
PX governing boards, thus removing the EOB's current
ability to confirm all representatives to the governing
boards.
2. Limits the EOB's authority to serve as an appeals
board for decisions made by the ISO to matters that are
exclusively within the jurisdiction of the state.
3. Specifies those matters which are exclusively the
jurisdiction of the state.
4. Specifies that if the ISO or PX reach agreements to
serve states in addition to California, such agreements
shall be effective upon approval by the governing
boards, the EOB, and acceptance for filing by the
Federal Energy Regulatory Commission (FERC).
KEY QUESTION
Should the state revise its electric restructuring statutes
to reflect changes required by FERC?
BACKGROUND
AB 1890 (Brulte), Chapter 854, Statutes of 1996,
established intent language that contemplates California's
entry into an interstate compact with other western states
to require utilities selling energy into California markets
to adhere to standards and protocols to protect the
reliability of regional transmission and distribution
systems.
AB 1890 established the ISO to ensure efficient use and
reliable operation of the state's electricity transmission
system, while the PX was established to provide an open,
efficient public auction to meet customers' electricity
loads. AB 1890 requires the governing boards of the ISO
and the PX to be composed of California residents appointed
by the EOB. The EOB itself is composed of five members -
three voting members appointed by the Governor who must be
California residents and electricity ratepayers, and one
non-voting member each appointed from the Assembly and the
Senate.
Inasmuch as the ISO and the PX are non-public entities
engaged in the interstate transmission and wholesale power
markets, their operations are subject to FERC jurisdiction
under the Federal Power Act. When it approved the ISO and
the PX tariffs, FERC rejected those portions of the ISO and
PX bylaws requiring California residency and EOB
appointment of governing board members. In doing this,
FERC exercised jurisdiction over not only the interstate
operations of the ISO and the PX, but also over the
framework of the institutions themselves.
FERC found that the EOB's role (and thus the state's role)
in regulating the ISO and the PX conflicted with FERC's own
jurisdiction and undermined the independence of the ISO and
the PX governing boards. FERC further found the residency
requirement established in AB 1890 to be inconsistent with
FERC's policy to provide "broad-based, non-discriminatory,
open-access transmission service" (FERC Order No. 888) and
that it "discourages participation in the ISO by
out-of-state entities by denying them meaningful
representation." FERC did recognize a limited oversight
function for the EOB on strictly California matters. This
bill reflects revisions to the governance structure of the
ISO and PX, as well as the authority of the EOB, which FERC
finds acceptable.
COMMENTS
1.Good To See You Again . This bill is before the committee
pursuant to Senate Rule 29.10. The committee may not
amend the bill, but if it would like to see changes made,
it can ask the author to return the bill to the Assembly
for amendments.
2.FERC News . FERC issued a declaratory order on August 5,
1999 regarding changes to the governance structure of the
ISO and PX, as well as the authority of the EOB, proposed
in SB 96. That order declares that the changes proposed
by SB 96 outline "an interim role for the Oversight Board
that is consistent with our prior orders." The changes
to the law proposed by SB 96 are necessary so the ISO and
PX governing boards may file amended bylaws as required
by FERC.
3.Reining In The EOB . Fundamentally, the changes required
by FERC restrict the EOB's authority to matters which are
strictly the jurisdiction of the state. Therefore, the
EOB may only confirm the end user and public interest
group appointments to the ISO and PX governing boards,
because the end users and public interest groups are
necessarily limited to Californians. However, the EOB
may not confirm the seller appointments because sellers
of electricity will not necessarily be California
entities. If and when other states elect to join the ISO
and/or PX, the EOB role will need to change again so
other states may have their end user and public interest
groups appointed to the boards, if they so desire. To
that end, the FERC declaratory order declares that the
ISO and PX governance procedures prescribed in this bill
are only acceptable until such time as another state
elects to participate with California in either the ISO
or the PX. At that time further statutory changes will
be necessary.
4.Is The ISO Getting New Powers? The CPUC has concerns
about a provision in SB 96 which it believes implies that
retail electric service ratemaking is under the
jurisdiction of the ISO, rather than the CPUC. The
implication arises on Page 5, Lines 24-25, where various
state authorities are listed in the context of the ISO's
authority. The author disagrees with the CPUC's concerns
and does not intend that ratemaking responsibilities be
transferred from the CPUC to the ISO. The committee may
wish to ask the author to clarify his intent as it
relates to this issue.
POSITIONS
Support:
California Independent System Operator
PG&E
Southern California Edison
Oppose:
None reported to Committee.
Randy Chinn
SB 96 Analysis
Hearing Date: August 25, 1999