BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 1390|
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CONSENT
Bill No: AB 1390
Author: Assembly Utilities and Commerce Committee
Amended: As introduced
Vote: 21
SENATE ENERGY, UTIL. & COMMUNIC. COMM. : 10-0, 6/21/11
AYES: Padilla, Fuller, Berryhill, Corbett, De León,
DeSaulnier, Rubio, Simitian, Strickland, Wright
NO VOTE RECORDED: Pavley
SENATE APPROPRIATIONS : Senate Rule 28.8
ASSEMBLY FLOOR : 70-0, 5/12/11 (Consent) - See last page
for vote
SUBJECT : Energy crisis litigation
SOURCE : Public Utilities Commission
DIGEST : This bill requires the Attorney General, until
January 1, 2013, to succeed the Electricity Oversight Board
in any litigation or settlement to obtain electricity
ratepayer relief as a result of the 2000-02 energy crisis.
ANALYSIS :
Existing law:
1. Requires the Attorney General (AG), until January 1,
2010, to represent the Department of Finance and to
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succeed to all right, 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.
2. Prohibits the AG from expending the proceeds of any
settlements of those claims, with certain exceptions.
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 and the Power Exchange 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 the Federal Energy Regulatory
Commission in response to market manipulation. The EOB has
been a participant in over 400 proceedings at the Federal
Energy Regulatory Commission 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 Power Exchange in March
2001 and the replacement of the EOB by an appointed
California Independent System Operator 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.
Elimination of EOB . As part of the 2007-08 budget process,
the Governor proposed an EOB budget of $4.1 million, but
also proposed budget bill language which authorized the
Director of the Department of Finance to reduce
appropriations to EOB. Although savings were reflected,
the Governor's proposal did not specify how EOB's existing
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workload and authority would be transferred to another
state agency. In response, the Legislature stated in
budget hearings that elimination of the EOB and transfer of
its remaining duties should be addressed in the policy
committee process. Accordingly, the Legislature approved
the EOB's operating budget and rejected the proposal to
authorize the Director of the Department of Finance to
reduce its budget appropriation.
The Governor vetoed the Legislature's decision to
appropriate funding for the EOB then exercised his veto
authority to reduce EOB's 2007-08 budget by 25 percent. In
his veto message, the Governor declared his expectation
that, by April 1, 2008, the EOB would be eliminated and its
duties transferred to the Public Utilities Commission. The
following year, the Governor's 2008-09 budget proposal
included no funding for EOB and restated his intent that
EOB cease its operations by April 1, 2008.
Comments
According to the Senate Energy, Utilities and
Communications Committee, the EOB, until defunded in 2008,
was one of the complainants in several cases stemming from
the energy crisis, along with the Public Utilities
Commission, AG, Pacific Gas and Electric, Southern
California Edison, and San Diego Gas & Electric
(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.
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There is approximately $70 million in those accounts. JP
Morgan will not disburse funds from those accounts without
a signature from the EOB or a court order.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 7/13/11)
Public Utilities Commission (source)
Office of the Attorney General
Pacific Gas and Electric Company
San Diego Gas & Electric Company
Southern California Edison
ARGUMENTS IN SUPPORT : Southern California Edison writes
that they have "been working with the Attorney General's
office, the CPUC, and the other California utilities to
return monies stolen during the energy crisis to California
ratepayers. While settlements have been reached with a
majority of the sellers, there is still well over $1
billion in refunds left to be recovered; AB 1390 will
enable the Attorney General's office to continue the
process of refund recovery through January 1, 2013."
San Diego Gas & Electric Company writes, "The Electricity
Oversight Board was one of the complainants in
approximately 65 cases against energy sellers arising out
of the energy crisis (along with the Public Utilities
Commission; the Attorney General; PG&E; Southern California
Edison; and SDG&E). Litigation and settlement discussions
continue with many of these sellers. It is our
understanding that the escrow accounts established to
handle settlement proceeds require the signatures of all
these plaintiffs, including the Electricity Oversight
Board, to permit disbursal of funds. With the effective
termination of Electricity oversight Board activities, a
substitute entity is needed to provide the requisite
signatures. Prior law gave this authority to the Attorney
General. The sunset of that law has proven to be
premature, and its reinstatement is needed to continue
processing that litigation and handling the funds received
as a result. Because AB 1390 merely reinstates prior law
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that was needed to assist in energy crisis litigation,
SDG&E supports this bill."
ASSEMBLY FLOOR :
AYES: Achadjian, Allen, Ammiano, Atkins, Beall, Bill
Berryhill, Block, Blumenfield, Bonilla, Bradford,
Brownley, Buchanan, Butler, Charles Calderon, Campos,
Carter, Chesbro, Cook, Davis, Dickinson, Donnelly, Eng,
Feuer, Fletcher, Fong, Fuentes, Furutani, Beth Gaines,
Galgiani, Gatto, Gordon, Grove, Hagman, Halderman, Hall,
Harkey, Hayashi, Hill, Huber, Hueso, Huffman, Jeffries,
Jones, Knight, Lara, Logue, Ma, Mansoor, Mendoza, Miller,
Monning, Morrell, Nestande, Nielsen, Norby, Olsen, Pan,
Perea, V. Manuel Pérez, Silva, Skinner, Smyth, Solorio,
Swanson, Valadao, Wagner, Wieckowski, Williams, Yamada,
John A. Pérez
NO VOTE RECORDED: Alejo, Cedillo, Conway, Garrick, Gorell,
Roger Hernández, Bonnie Lowenthal, Mitchell, Portantino,
Torres
RM:mw 7/13/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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