BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 2516
                                                                  Page  1

          Date of Hearing:   April 16, 2012

                    ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
                               Steven Bradford, Chair
                 AB 2516 (Bradford) - As Amended:  February 24, 2012
          
          SUBJECT  :   Independent System Operator

           SUMMARY  :   This bill expands California Independent System 
          Operator (CAISO) management requirements.   Specifically,  this 
          bill  :  adds to existing law governing CAISO operations:

          1)Reducing, to the maximum extent possible, overall economic 
            cost to the state's consumers.

          2)Conducting internal operations in a manner that maximizes 
            electricity reliability at the lowest cost for ratepayers.

          3)Communicating, to the maximum extent possible, with all 
            balancing coordinators operating in California.

           EXISTING LAW:  Requires the CAISO to manage the transmission grid 
          and related energy markets in a manner consistent with:

          1)Efficient use of available energy resources.

          2)Reducing, to the extent possible, overall economic cost to the 
            state's consumers.

          3)Applicable state law intended to protect the public's health 
            and the environment.

          4)Maximizing the availability of existing electric generation 
            resources necessary to meet the needs of the state's 
            electricity consumers. 


           FISCAL EFFECT  :   Unknown

           COMMENTS  :   

          1)According to the author, "Following a widespread power outage 
            that occurred in September 2011 in the San Diego region, The 
            Assembly Utilities and Commerce Committee held a hearing to 
            investigate the outage.  Based on testimony at the hearing, it 








                                                                  AB 2516
                                                                  Page  2

            was not clear that CAISO and other balancing authorities in 
            the region were regularly communicating with each other before 
            the outage."  This bill recognizes the need for all entities 
            involved with providing or enabling the safe, reliable supply 
            of electricity to ensure that electricity rates remain 
            affordable to Californians.

          2)CAISO is responsible for matching California's electricity 
            supply with demand and maintaining frequency of the power 
            grid.   It is the largest balancing authority in the western 
            interconnection managing 80% of California's power grid and an 
            estimated 35% of all electricity transmission in the west.   
            Other balancing authorities operating in California include 
            PacifiCorp, Sacramento Municipal Utility District, Sierra 
            Pacific Power, Turlock Irrigation District, Nevada Energy, Los 
            Angeles Department of Water and Power, Western Area Lower 
            Colorado and Imperial Irrigation District. 

          3)While CAISO maintains a robust stakeholder process for 
            developing new market rules and addressing issues, there is no 
            mandated requirement for communication between all entities 
            involved in providing consistent and reliable electricity to 
            ratepayers.  

          4)Annually, the CAISO sets revenue requirements consisting of 
            operations and maintenance budget, outstanding debt bond 
            service, capital expenses, and miscellaneous revenue and 
            expenses.  The revenue requirement is then collected from ISO 
            customers through the grid management charge (GMC).

          5)The CAISO focuses on maintaining cost equity with other ISO 
            and Regional Transmission Operator (RTO) peers, the goal being 
            a bundled Grid Management Charge (GMC) cost per megawatt hours 
            (MWh) at or below median level of North American ISO/RTO GMC 
            rates.

             a)   New England ISO: $1.011
             b)   Independent Electricity System Operator (Ontario): 
               $0.834
             c)   ERCOT: $0.797
             d)   California ISO: $0.791
             e)   New York ISO: $0.676
             f)   Midwest ISO: $0.437
             g)   PJM: $0.347
             h)   Southwest Power Pool: $0.229








                                                                  AB 2516
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          1)CAISO is in the process of revising portions of its tariff 
            governing the calculation of available transfer capacity 
            (ATC).  In certain narrowly defined circumstances the 
            amendment will allow the CAISO to use a transmission 
            reliability margin (TRM) to reduce the ATC on a particular 
            Intertie scheduling path.  The amendment is intended to 
            address operational constraints that arise in the Hour Ahead 
            Scheduling Process (HASP) and gives market participants and 
            the CAISO the flexibility necessary to maintain uninterrupted 
            service.

          2)CAISO also establishes rules and procedures for independent 
            energy generators to interconnect to the electricity grid. To 
            a great extent, California's investor owned utilities adopt 
            similar rules. 

          3)It is not clear that the CAISO process considers potential 
            rate impacts along with reliability and safety when developing 
            these rules. AB 2516 would clarify that rate impacts should be 
            considered in a manner that does not diminish or reduce safety 
            and reliability.

          4)AB 2516 establishes CAISO management priorities that include 
            communication between all balancing operators in California as 
            well as a focus on internal operational cost efficiencies.    

           REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          None on File.

           Opposition 
           
          None on File.
           
          Analysis Prepared by  :    Susan Kateley / U. & C. / (916) 
          319-2083