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 ----------------------------------------------------------------- |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 Page 3 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 FN: 0005269