BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 96|
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UNFINISHED BUSINESS
Bill No: SB 96
Author: Peace (D), et al
Amended: 6/14/99
Vote: 21
SENATE ENERGY, U.&C. COMMITTEE : 10-0, 3/23/99
AYES: Bowen, Baca, Brulte, Hughes, Kelley, Mountjoy,
Peace, Solis, Speier, Vasconcellos
NOT VOTING: Alarcon
SENATE FLOOR : 35-0, 4/26/99 (Consent)
AYES: Alpert, Bowen, Brulte, Burton, Chesbro, Costa, Dunn,
Escutia, Figueroa, Hayden, Haynes, Hughes, Johannessen,
Johnson, Johnston, Kelley, Knight, Lewis, McPherson,
Monteith, Morrow, Mountjoy, Murray, O'Connell, Ortiz,
Peace, Polanco, Poochigian, Rainey, Schiff, Sher, Solis,
Speier, Vasconcellos, Wright
NOT VOTING: Alarcon, Baca, Karnette, Leslie, Perata
ASSEMBLY FLOOR : 77-0, 7/15/99 - See last page for vote
SUBJECT : Electrical restructuring: Independent System
Operator:
Power Exchange
SOURCE : Author
DIGEST : This bill declares legislative intent, and
revises specific provisions relating to the governing
structures of the Independent System Operator (ISO) and the
Power Exchange (PX), and the duties of the Electricity
CONTINUED
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Oversight Board (EOB) to reflect a settlement between the
state and the Federal Energy Regulatory Commission (FERC).
Assembly Amendments add co-authors and add the provisions
that revise the governing structure of the ISO and the PX
and the duties of the EOB to reflect the settlement.
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).
ANALYSIS : 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.
This bill replaces that provision with more detailed intent
language that also describes the evolution of the ISO and
the PX into organizations that would serve the western
regional market and would be governed by members selected
by participating states and overseen, jointly or
separately, by those states. These changes reflect the
Federal Energy Regulatory Commission's (FERC) position that
the ISO and the PX, as corporations engaged in interstate
commerce of electricity transmission and wholesale power,
can't be governed exclusively by California.
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.
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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).
Background :
AB 1890 required the establishment of the ISO and the PX as
"separately incorporated public benefit, nonprofit
corporations." The purpose of the ISO is to ensure
efficient use and reliable operation of the state's
electricity transmission system, while the PX is intended
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 Electricity Oversight
Board (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 their
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.
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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 :
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 this bill. That order declares that the changes
proposed by this bill outline "an interim role for the
Oversight Board that is consistent with our prior orders."
The changes to the law proposed by this bill are necessary
so the ISO and PX governing boards may file amended bylaws
as required by FERC.
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
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changes will be necessary.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
Minor, absorbable costs to the EOB to adopt the governance
modifications in the bill.
SUPPORT : (Verified 8/26/99)
PG&E
Southern California Edison
California Independent System Operator
ASSEMBLY FLOOR :
AYES: Aanestad, Ackerman, Alquist, Aroner, Ashburn,
Baldwin, Bates, Battin, Baugh, Bock, Brewer, Briggs,
Calderon, Campbell, Cardenas, Cardoza, Cedillo, Corbett,
Correa, Cox, Cunneen, Davis, Dickerson, Ducheny, Dutra,
Firebaugh, Floyd, Frusetta, Gallegos, Granlund, Havice,
Hertzberg, Honda, House, Jackson, Kaloogian, Keeley,
Knox, Kuehl, Leach, Leonard, Longville, Lowenthal,
Machado, Maddox, Maldonado, Margett, Mazzoni, McClintock,
Migden, Nakano, Olberg, Oller, Robert Pacheco, Rod
Pacheco, Pescetti, Reyes, Romero, Runner, Scott, Shelley,
Soto, Steinberg, Strickland, Strom-Martin, Thompson,
Thomson, Torlakson, Vincent, Washington, Wayne, Wesson,
Wiggins, Wildman, Wright, Zettel, Villaraigosa
NOT VOTING: Florez, Lempert, Papan
NC:jk 8/27/99 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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