BILL ANALYSIS Ó ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 1533| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: SB 1533 Author: Padilla (D) Amended: 5/1/12 Vote: 21 SENATE ENERGY, UTIL. & COMMUNIC. COMMITTEE : 12-0, 4/24/12 AYES: Padilla, Fuller, Berryhill, Corbett, De León, DeSaulnier, Emmerson, Kehoe, Pavley, Rubio, Simitian, Wright NO VOTE RECORDED: Strickland SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8 SUBJECT : Electricity: energy crisis litigation SOURCE : Public Utilities Commission DIGEST : This bill repeals existing law, on January 1, 2016, which requires the Attorney General (AG) to represent the Department of Finance and to succeed to all rights, claims, powers, and entitlements of the Electricity Oversight Board 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, except as specified. ANALYSIS : Existing law requires the 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 CONTINUED SB 1533 Page 2 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. 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 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 Public Utilities Commission (PUC), 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 CONTINUED SB 1533 Page 3 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. PUC v. NRG . The PUC recently announced the settlement of a claim pending at the FERC 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 PUC was the only claimant in that action. Related legislation AB 1457 (Huber), a technical clean-up bill, contains a provision identical to this bill. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: No SUPPORT : (Verified 5/15/12) Public Utilities Commission (source) RM:do 5/15/12 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED SB 1533 Page 4 CONTINUED