BILL ANALYSIS Ó 1 SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE ALEX PADILLA, CHAIR AB 1390 - Utilities & Commerce Hearing Date: June 21, 2011 A As Introduced: February 23, 2011 FISCAL B 1 3 9 0 DESCRIPTION Prior law required the Attorney General (AG), until January 1, 2010, to represent the Department of Finance and to succeed to all rights, claims, powers, and entitlements of the Electricity Oversight Board (EOB) in any litigation or settlement to obtain ratepayer recovery for the effects of the 2000-02 energy crisis and prohibited the AG from expending the proceeds of any settlements of those claims, with certain exceptions. This bill extends that authority until January 1, 2013. BACKGROUND The EOB was created by 1996 legislation which deregulated California's wholesale electricity industry. Its primary mission was to oversee the California Independent System Operator (CAISO) and the Power Exchange (PX) which for a time was the marketplace in which all electricity in the state was bought and sold. The EOB was given very broad authority over ensuring reliability of the state's supply of electricity. The EOB's primary duty at that time was to act as a market monitor, oversee the state's electricity market and initiate proceedings at Federal Energy Regulatory Commission (FERC) in response to market manipulation. The EOB has been a participant in over 400 proceedings at FERC and has been a litigant in over 100 cases in the federal courts of appeal. Through 2005-06, EOB had been a party to settlements of over $1 billion for various overcharges stemming from the energy crisis. Among the many developments associated with the energy crisis were the bankruptcy of the PX in March 2001 and the replacement of the EOB by an appointed CAISO stakeholder board with gubernatorial appointees. The EOB was ultimately defunded in 2008 but the Legislature did not assign a successor agency to assume its responsibilities. COMMENTS Author's Purpose . The purpose of this committee bill is to extend the period through which the AG may, on behalf of the EOB, sign settlements stemming from the 2000-02 energy crisis. Until defunded in 2008, the EOB was one of the complainants in several cases stemming from the energy crisis, along with the CPUC, AG, PG&E, Southern California Edison, and SDG&E (collectively, the "Cal Parties"). The Cal Parties brought the energy crisis cases against approximately 65 energy sellers, have now settled with over half of the sellers, and continue to negotiate settlement with remaining sellers. In 2004, the Cal Parties, including the EOB, entered into an escrow agreement with JP Morgan Chase Bank to handle all future settlements. Under that agreement, the signatures of all Cal Parties (including EOB) are required to issue effective escrow instructions for the purpose of disbursing funds resulting from settlements with individual energy crisis-era sellers. This bill allows the AG to sign for the EOB, facilitating settlement of certain energy crisis claims At present, therefore, the Cal Parties have no access to the funds contained in the escrows established under the 2004 escrow agreement because no one can sign for the EOB. There is approximately $70M in those accounts. JP Morgan will not disburse funds from those accounts without a signature from the EOB or a court order. ASSEMBLY VOTES Assembly Floor (70-0) Assembly Appropriations Committee (17-0) Assembly Utilities and Commerce Committee (15-0) POSITIONS Sponsor: Author California Public Utilities Commission Support: California Attorney General Southern California Edison Oppose: None on file Kellie Smith AB 1390 Analysis Hearing Date: June 21, 2011