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

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                                      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