BILL ANALYSIS
SB 655
Page 1
Date of Hearing: July 6, 2009
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Felipe Fuentes, Chair
SB 655 (Padilla) - As Amended: May 20, 2009
SENATE VOTE : 25-11
SUBJECT : Independent System Operator: transmission facilities.
SUMMARY : Requires the California Independent System Operator
(CAISO) to appear annually before the appropriate policy
committees of the Senate and the Assembly to report on the
CAISO's activities, and states legislative intent that the CAISO
take all necessary steps to ensure that the transmission grid is
secure from intrusion by unauthorized persons or entities.
EXISTING LAW :
1)Creates the CAISO as a nonprofit public benefit corporation to
censure the reliability of electric service and the healthy
and safety of the public.
2)Requires the CAISO to consult and coordinate with state and
local agencies to ensure the CAISO operates in furtherance of
state law regarding consumer and environmental protection.
THIS BILL :
1)Makes a finding that the deployment of smart grid technology
creates additional opportunities for unauthorized persons or
entities to impact the transmission grid.
2)States legislative intent that the CAISO take all necessary
steps to ensure that the transmission grid is secure from
intrusion by unauthorized persons or entities.
3)Specifies that the CAISO shall operate in furtherance of the
California Renewables Portfolio Standard Program (SB 1078,
Sher, Chapter 516, Statutes of 2002) and the Global Warming
Solutions Act (AB 32, Nunez, Chapter 488, Statutes of 2006) in
consultation and coordination with appropriate state and local
agencies.
4)Requires the CAISO to appear annually before the appropriate
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policy committees of the Senate and the Assembly to report on
the CAISO's activities.
FISCAL EFFECT : Unknown.
COMMENTS : According to the author, the purpose of this bill is
to provide some legislative oversight to the CAISO. Due to
state environmental policies to reduce greenhouse gas emissions
and increase utilities' procurement of renewable energy
generation, California has launched into a new era of energy and
environmental leadership. However, the important and difficult
work of implementing and achieving these goals remains before
us. To be successful it is essential that the PUC, CEC and
CAISO share a common mission and responsibility in achieving
California's ambitious goals.
1) Background : The bill that deregulated California's
wholesale and retail energy markets, AB 1890 (Brulte, Chapter
854, Statutes of 1996), created the CAISO. Operation and
control of the electric grid was transferred from the
investor-owned utilities (IOUs) to the CAISO because of concerns
that the utilities would favor their own electric generation
facilities over those facilities owned by others.
The CAISO dispatches electricity, performs a needs analysis on
proposed transmission lines, and conducts auctions for the
purchase of electricity needed to meet immediate and near-term
needs. The CAISO governing board is composed of a five-member
independent governing board of directors appointed by the
Governor and subject to confirmation by the Senate.
Current law requires the Electricity Oversight Board (EOB) to
oversee the CAISO, which includes overseeing the policies and
markets the CAISO operates. The Legislature often met with
staff and members of the EOB to provide legislative direction on
CAISO oversight. Last year, the Governor defunded the EOB in the
Budget Act. Although statutes require oversight, none actually
exists and no successor agency was identified. This bill
attempts to provide some sort of Legislative awareness of the
CAISO by requiring the CAISO to annually appear before both
houses' policy committees.
2) Go, ready, set: The federal American Reinvestment and
Recovery Act of 2009 (2009 Energy Act) authorizes the federal
Department of Energy (DOE) to award $4 billion in grants ranging
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from $500,000 to $20 million for smart grid technology
deployments and grants of $100,000 to $5 million for the
deployment of grid monitoring devices. However, there's no
clear definition of a smart grid, and this bill anticipates that
a non-defined thing can be hacked.
The federal Energy Independence and Security Act of 2007 (2007
Energy Act) has provided funds for smart grid deployment, and it
also identifies a lead federal agency to develop standards and
protocols for a smart grid. In addition it creates a research,
development, and demonstration program for smart grid
technologies at the DOE. To further the implementation of smart
grid, it provides federal matching funds for portions of
qualified smart grid investments, and requires each state
regulatory authority to initiate consideration of whether to
allow utilities cost recovery for nonadvanced grid technologies,
deployment of a qualified smart grid system, and implementation
of the provision of periodic price information. None of this
has been completed.
3) The blank check : This bill states legislative intent that
the CAISO take all necessary steps to ensure that the
transmission grid is secure from intrusion by unauthorized
persons or entities. The author's office provided a Wall Street
Journal article that reports that the electric grid has been
hacked. Investigators found that the hackers left behind
software that could later be activated to disrupt grid
operations. The article revealed that the hacking was
apparently discovered not by the grid operators, but by U.S.
intelligence agencies. There was no indication whether
California's grid was hacked, or whether the current grid
without two-way communication could be hacked.
The CAISO's governing statutes discuss grid reliability but not
grid security. By expanding the CAISO's mission and
authorizing the CAISO to take "all necessary steps" to ensure
the grid is secure from intrusion when a smart grid hasn't even
been identified yet alone implemented, this bill provides a
blank check for an undefined purpose to the CAISO. No state
agency or the Legislature oversees the CAISO budget. Because
the CAISO costs are paid indirectly by ratepayers through the
transmission charge, this provision may be too broad and the
CAISO could assume tremendous costs without any entity
determining the value of benefits. (Although the CAISO must get
Federal Energy Regulatory Commission (FERC) approval for its
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grid management charge, if there is no objection or intervention
from any state agency that is charged with CAISO oversight, the
FERC approves the charges.)
Since the late 1990s the CAISO has spent billions of dollars on
a new procedure to settle accounts. Then it was called "Market
Design 2000" or "MD 2000." When that year passed with no new
design, the name changed to "MD 02", and then to Market Redesign
and Technology Upgrade, or "MRTU." The Legislature had no input
on whether the redesign was even necessary, let alone be privy
to the amount of ratepayer funds supporting it. MRTU finally
launched on April 1, 2009. There is no comprehensive analysis
of the amount of money expended for it or whether the
anticipated benefits have been achieved.
4) Does this bill protect the integrity of the grid : SB 655
makes a finding that the deployment of smart grid technology
creates additional opportunities for unauthorized persons or
entities to impact the transmission grid. However, the bill
only requires the CAISO to report annually to the Legislature
and doesn't do anything about ensuring the integrity except
provide legislative intent that the CAISO take all necessary
steps to ensure grid security.
Because there is no nexus between the legislative intent
language and the requirement that the CAISO appear before the
Legislature, and due to concern that there is no legislative
oversight of the CAISO expenditures, this committee may wish to
delete the legislative intent language.
REGISTERED SUPPORT / OPPOSITION :
Support
Clean Power Campaign
Opposition
None on file.
Analysis Prepared by : Gina Adams / U. & C. / (916) 319-2083