BILL ANALYSIS Ó
AB 1524
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Date of Hearing: April 28, 2015
ASSEMBLY COMMITTEE ON JUDICIARY
Mark Stone, Chair
AB 1524
(Committee on Utilities and Commerce) - As Introduced March 16,
2015
PROPOSED CONSENT
SUBJECT: ELECTRICITY: ENERGY CRISIS LITIGATION
KEY ISSUE: SHOULD THE ATTORNEY GENERAL BE AUTHORIZED AN
ADDITIONAL TWO YEARS, until January 1, 2018, to REPRESENT THE
ELECTRICITY OVERSIGHT BOARD IN EFFECTING SETTLEMENT OF CLAIMS
RELATING TO THE 2000-2002 ENERGY CRISIS?
SYNOPSIS
This non-controversial bill, authored by the Assembly Utilities
and Commerce Committee, simply seeks to extend, for an
additional two years, the temporary authority of the Attorney
General (AG) to represent the Electricity Oversight Board (EOB)
in any litigation or settlement to obtain ratepayer recovery for
the effects of the 2000-02 energy crisis. This authority will
sunset of its own accord on January 1, 2016, and only a
temporary two-year extension is sought because the need for the
AG to exercise this authority is only temporary. The bill would
allow the AG to continue to do what she is doing under existing
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authority - namely, to sign off on financial settlements
relating to claims arising from the 2000-2002 energy crisis.
This bill previously was approved by the Assembly Utilities and
Commerce Committee on consent and has no known opposition.
SUMMARY: Extends, from January 1, 2016 to January 1, 2018, the
temporary authority given to the Attorney General to represent
the Department of Finance and exercise, 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.
EXISTING LAW:
1)Authorizes, until January 1, 2016, the Attorney General to
represent the Department of Finance and to succeed to all
rights, claims, powers, and entitlements of the EOB in any
litigation or settlement to obtain ratepayer recovery for the
effects of the 2000-02 energy crisis. (Public Utilities Code
Section 343(a). All further references are to this code
unless otherwise stated.)
2)Prohibits, until January 1, 2016, the Attorney General from
expending the proceeds of any settlements of those claims,
except as specified. (Section 343(b).)
3)Prohibits, until January 1, 2016, the Attorney General from
distributing or expending the proceeds of any settlements of
claims allocated to the EOB. (Section 343(c).)
FISCAL EFFECT: As currently in print this bill is keyed fiscal.
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COMMENTS: This bill, authored by the Assembly Utilities and
Commerce Committee, simply seeks to extend, for an additional
two years, the temporary authority given to the Attorney General
(AG) to represent the Electricity Oversight Board (EOB) in any
litigation or settlement to obtain ratepayer recovery for the
effects of the 2000-02 energy crisis. This authority will
sunset of its own accord on January 1, 2016, and only a
temporary extension is sought because the need for the AG to
exercise this authority is only temporary. The bill would allow
the AG to continue to do what she is doing under existing
authority - namely, to sign off on financial settlements
relating to claims arising from the 2000-2002 energy crisis.
Background on the now defunct Energy Oversight Board. 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, to oversee the state's electricity market and initiate
proceedings at the 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.
As part of the 2007-08 budget process, Governor Schwarzenegger
proposed an EOB budget of $4.1 million, but also proposed budget
bill language which authorized the Director of Finance to reduce
appropriations to EOB. Although savings were reflected, the
Governor's proposal did not specify how EOB's existing workload
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and authority would be transferred to another state agency. In
response, the Legislature stated in budget hearings that
elimination of the EOB and transfer of its remaining duties
should be addressed in the policy committee process.
Accordingly, the Legislature approved the EOB's operating budget
and rejected the proposal to authorize the Director of Finance
to reduce its budget appropriation.
The Governor vetoed the Legislature's decision to appropriate
funding for the EOB, then exercised his veto authority to reduce
EOB's 2007-08 budget by 25 percent. In his veto message, the
Governor declared his expectation that, by April 1, 2008, the
EOB would be eliminated and its duties transferred to the Public
Utilities Commission. The following year, the Governor's
2008-09 budget proposal included no funding for EOB, and
restated his intent that EOB cease its operations by April 1,
2008.
Attorney General needed to represent the EOB for the purpose of
settling remaining claims. Until it was defunded in 2008, the
EOB was one of the complainants in the Energy Crisis cases,
along with the PUC, Attorney General, Pacific Gas & Electric,
Southern California Edison, and San Diego Gas & Electric
(collectively, the "Cal Parties"). The Cal Parties brought the
Energy Crisis cases against approximately 65 energy sellers,
have now settled with over half of the sellers, and continue to
negotiate settlement with the remaining sellers.
In 2004, the Cal Parties, including 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 the EOB, are required to issue effective
escrow instructions for the purpose of disbursing funds
resulting from settlements with individual Energy Crisis-era
sellers. This bill simply continues to allow the AG to sign for
the EOB, facilitating the settlement of certain Energy Crisis
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claims.
Recent Supreme Court decision allows further Energy Crisis suits
against energy companies. On April 21, 2015, the U.S. Supreme
Court by a 7-2 vote ruled that energy companies can be sued
under state antitrust laws for illegally manipulating natural
gas prices during California's 2000-2002 energy crisis. (Oneok,
Inc. v. Learjet, Inc. 575 U.S. ___ (2015).) Respondents, led by
manufacturers, hospitals, and other institutions that purchased
natural gas directly from interstate pipelines, sued petitioner
interstate pipelines alleging violations of state antitrust laws
that resulted in driving up wholesale prices of natural gas.
The Court rejected petitioners' argument that federal law, the
Natural Gas Act, preempted respondents' state law claims.
As a result of this decision, there will likely be additional
state law claims relating to the 2000-2002 energy crisis for
which authority of the Attorney General to represent the EOB
will be needed.
REGISTERED SUPPORT / OPPOSITION:
Support
None on file
Opposition
AB 1524
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None on file
Analysis Prepared by:Anthony Lew / JUD. / (916) 319-2334