BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                            



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                                 UNFINISHED BUSINESS


          Bill No:  SB 699
          Author:   Hill (D), et al.
          Amended:  8/22/14
          Vote:     21


           ASSEMBLY FLOOR  :  78-0, 8/26/14 - See last page for vote

           SENATE ENERGY, UTIL. & COMMUNIC. COMM.  :  7-0, 8/28/14 (Pursuant  
            to Senate Rule 29.10)
          AYES:  Padilla, Fuller, Cannella, Corbett, DeSaulnier, Hill,  
            Wolk
          NO VOTE RECORDED:  Block, De León, Knight, Pavley


           SUBJECT  :    Public utilities:  electrical corporations

           SOURCE  :     Author


           DIGEST  :    This bill requires the Public Utilities Commission  
          (PUC) to consider adopting rules to address physical security  
          risks to the distribution systems of electrical corporations.

           Assembly Amendments  delete the Senate version of this bill which  
          required an electrical corporation to annually report to the PUC  
          specified capital expenditures and instead add the current  
          language.

           ANALYSIS  :    

          Existing law:

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                                                                     SB 699
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          1.Provides that the PUC has regulatory authority over public  
            utilities, including electrical corporations, as defined.

          2.Requires the PUC to adopt inspection, maintenance, repair, and  
            replacement standards for the distribution systems of investor  
            owned utilities (IOUs) in order to provide high-quality, safe,  
            and reliable service.

          3.Requires the PUC to conduct a review to determine whether the  
            standards have been met and to perform the review after every  
            major outage.

          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.

           Background
           
          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.

          The Federal Energy Regulatory Commission (FERC) is a federal  
          agency that regulates the interstate transmission of  

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                                                                     SB 699
                                                                     Page  
          3

          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.

          The PUC regulates investor owned electric, gas, water, rail,  
          some telecommunication companies.  The PUC has authority to  
          order 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 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.

           Comments
           
          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."

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  Yes

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          According to the Assembly Appropriations Committee:

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

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

           Unknown, likely minor, ongoing costs.


           ASSEMBLY FLOOR  :  78-0, 8/26/14
          AYES:  Achadjian, Alejo, Allen, Ammiano, Bigelow, Bloom,  
            Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian  
            Calderon, Campos, Chau, Chávez, Chesbro, Conway, Cooley,  
            Dababneh, Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox,  
            Frazier, Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon,  
            Gorell, Gray, Grove, Hagman, Hall, Harkey, Roger Hernández,  
            Holden, Jones, Jones-Sawyer, Levine, Linder, Logue, Lowenthal,  
            Maienschein, Mansoor, Medina, Melendez, Mullin, Nazarian,  
            Nestande, Olsen, Pan, Patterson, Perea, John A. Pérez, V.  
            Manuel Pérez, Quirk, Quirk-Silva, Rendon, Ridley-Thomas,  
            Rodriguez, Salas, Skinner, Stone, Ting, Wagner, Waldron,  
            Weber, Wieckowski, Wilk, Williams, Yamada, Atkins
          NO VOTE RECORDED:  Muratsuchi, Vacancy


          JG:e  8/29/14   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  NONE RECEIVED

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