BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  SB 699
                                                                  Page  1

          SENATE THIRD READING
          SB 699 (Hill)
          As Amended  August 22, 2014
          Majority vote

           SENATE VOTE  :Vote not relevant  
           
           UTILITIES & COMMERCE            14-0                 
          APPROPRIATIONS      17-0        
           
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          |Ayes:|Bradford, Patterson,      |Ayes:|Gatto, Bigelow,           |
          |     |Bonilla, Buchanan,        |     |Bocanegra, Bradford, Ian  |
          |     |Chávez, Dahle, Fong, Beth |     |Calderon, Campos,         |
          |     |Gaines, Garcia,           |     |Donnelly, Eggman, Gomez,  |
          |     |Roger Hernández, Jones,   |     |Holden, Jones, Linder,    |
          |     |Mullin, Quirk, Rendon     |     |Pan, Quirk,               |
          |     |                          |     |Ridley-Thomas, Wagner,    |
          |     |                          |     |Weber                     |
           ----------------------------------------------------------------- 
           SUMMARY  :  Requires the Public Utilities Commission (PUC) to  
          consider adopting rules to address physical security risks to  
          the distribution systems of electrical corporations.   
          Specifically,  this bill  :

          1)Requires the PUC to open a new proceeding or phase of an  
            existing proceeding by July 1, 2015, to consider adoption of  
            rules.

          2)Authorizes the PUC to, consistent with other provisions of  
            law, withhold from the public information generated or  
            obtained pursuant to these rules that it deems would pose a  
            security threat to the public if disclosed.

           FISCAL EFFECT  :  According to the Assembly Appropriations  
          Committee:

          1)Increased one-time costs to the PUC in the $500,000 to  
            $600,000 range to expand the rule-making proceeding.

          2)Potential increased contracting costs of up to $250,000 for  
            consultant services.

          3)Unknown, likely minor, ongoing costs.









                                                                  SB 699
                                                                  Page  2

           COMMENTS  :  

          1)Author's statement:  According to the author, "The security of  
            our nation's infrastructure is of paramount importance.  The  
            recent sophisticated attack on an electric substation that a  
            former vice president at PG&E [Pacific Gas and Electric  
            Company] described as a "dress rehearsal" for future attacks  
            is evidence - not only that we are vulnerable - but that our  
            vulnerabilities are clearly understood by those who wish to  
            exploit them.  As has been made clear by a recent National  
            Research Council report, one of the best ways to protect  
            ourselves from an attack on the electric grid is to lessen the  
            damage that any attack can do.  If we lessen the consequence  
            of the failure of any one location or piece of equipment, if  
            we increase the speed with which we can respond to an outage,  
            if we can protect critical facilities from power disruption by  
            using clean distributed generation, then the effort required  
            for a malicious actor to seriously disrupt our power delivery  
            system will make the target much less interesting - and we  
            will be left with a more reliable grid."
          2)The Metcalf electrical substation attack.  A major driver of  
            this bill is the extensive damage that occurred in April 2013  
            at an electrical substation caused by a physical attack  
            (approximately 100 rounds from a high-powered rifle) fired on  
            electrical equipment.  The severity of the damage and the  
            appearance that the attack was well planned raised attention  
            to the extent to which critical electric infrastructure were  
            vulnerable to potential terrorist attacks and raised questions  
            about the extent to which utilities addressed potential  
            vulnerabilities.  In this incident the utility successfully  
            rerouted power to maintain electrical services and the  
            California Independent System Operator called for customer  
            conservation to maintain electrical system frequency within  
            federal regulatory requirements.

            Investigations into identifying the perpetrator(s) of the  
            attack are ongoing.

          3)Distinction between federal and state jurisdiction of the  
            electricity grid.  The Federal Energy Regulatory Commission  
            (FERC) is a federal agency that regulates the interstate  
            transmission of electricity, natural gas, and oil, including  
            regulations of transmission and wholesale sales of electricity  
            in interstate commerce.  California utilities own and operate  
            facilities that are regulated by FERC.








                                                                  SB 699
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             The PUC regulates investor owned electric, gas, water, rail,  
            some telecommunication companies.  The PUC has authority to  
            order the California Investor Owned Utilities (IOUs) to  
            maintain distribution infrastructure and make improvements as  
            deemed necessary and allow the IOUs to recover these costs in  
            rates.

            California's Publicly Owned Utilities (POUs) are  
            self-governing by a local government (city or county) or an  
            independently elected Board of Directors.

            The attack occurred at an electrical substation under the  
            jurisdiction of FERC.  Similarly, interstate natural gas  
            pipelines are under the jurisdiction of FERC.  Most  
            telecommunication industries are regulated by the Federal  
            Communication Commission.


           Analysis Prepared by  :    Brandon Gaytan / U. & C. / (916)  
          319-2083 


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