BILL ANALYSIS Ó 1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
SB 1533 - Padilla Hearing Date:
April 24, 2012 S
As Amended: March 27, 2012 FISCAL B
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DESCRIPTION
Current law requires the Attorney General (AG), until January 1,
2013, 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 prohibits the AG from expending the proceeds of any
settlements of those claims, with certain exceptions.
This bill eliminates the sunset date of 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 was a participant in over
400 proceedings at FERC and was a litigant in over 100 cases in
the federal courts of appeal. Through 2005-06, the 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
1. Author's Purpose . The purpose of this 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 numerous cases stemming from the energy crisis, along with
the California Public Utilities Commission (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 many of the sellers, and continue to negotiate
settlements 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. Difficulties in
getting EOB signatures on settlement agreements and escrow
disbursement instructions began cropping up in 2007, when the
EOB began to be dismantled This bill allows the AG to
continue to sign for the EOB, facilitating settlement of
certain energy crisis claims and disbursement of escrow
funds.
2. Status of Cases ? The CPUC, the sponsor of this bill,
references escrow accounts that were frozen due to the lack
of signatures by the now defunct EOB as necessitating this
statute and that there are more cases yet to be settled in
which EOB was a participant. There are no details available
for those cases. The CPUC should be asked to provide a
summary of all outstanding litigation and the status of
escrow funds so that the Legislature is aware of the number
and status of the cases still unresolved as well as the
status of escrow funds from settlements previously concluded.
3. Legislative Review . This bill permanently extends
signature authority for the AG in energy crisis settlements
which stem from actions more than ten years ago. In this
instance, a sunset of the AG's signature authorization is one
of the few ways to keep the progress and status of these very
old cases in front of the Legislature. Consequently, the
committee may wish to consider revising the sunset clause in
current law to January 1, 2016.
4. CPUC v. NRG . The CPUC recently announced the settlement
of a claim pending at the Federal Energy Regulatory
Commission from the energy crisis with NRG. The $120 million
settlement would allocate $20 million directly to ratepayers
but the remaining in-kind funds would be dedicated to
increasing the infrastructure for the charging of electric
vehicles and under ownership by NRG. This settlement would
be unaffected by the terms of this bill because the CPUC was
the only claimant in that action.
5. Related Legislation . AB 1457 (Huber), a technical
clean-up bill, contains a provision identical to this bill.
POSITIONS
Sponsor:
California Public Utilities Commission
Support:
None on file
Oppose:
None on file
Kellie Smith
SB 1533 Analysis
Hearing Date: April 24, 2012