BILL ANALYSIS
SB 1437
Page 1
Date of Hearing: June 14, 2010
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Steven Bradford, Chair
SB 1437 (Kehoe) - As Amended: June 7, 2010
SENATE VOTE : (vote not relevant)
SUBJECT : Electricity: Independent System Operator: activities
report.
SUMMARY : Requires a representative of the California
Independent System Operator (CAISO) to annually appear before
the appropriate policy committees of the Senate and Assembly.
Specifically, this bill :
1)Requires the independent governing board of directors to
annually select a representative of the CAISO to appear before
the appropriate policy committees of the Senate and Assembly
to report on the activities of the CAISO.
2)Requires the representative of the CAISO to annually report on
the following:
a) A summary of actions undertaken by the CAISO to ensure
reliability of electric service and the health and safety
of the public by managing the transmission system and
related energy markets.
b) A summary of those actions undertaken by the CAISO
relative to the adoption or modification of performance or
prescriptive standards for transmission equipment or
facility.
c) The results of each review of major outage undertaken by
the CAISO.
EXISTING LAW :
1)Establishes the CAISO as a nonprofit, public benefit
corporation to ensure the efficient use and reliable operation
of the transmission grid.
2)Requires the CAISO to consult and coordinate with appropriate
state and local agencies to ensure the CAISO operates in
SB 1437
Page 2
furtherance of state law regarding consumer and environmental
protection.
3)Requires the CAISO to perform a review following a major
outage that affects at least 10% of the customers of the
entity providing the local distribution service, and address
the cause of the major outage, the response time and
effectiveness, and whether the transmission facility owner or
operator's operation and maintenance practices enhanced or
undermined the ability to restore service efficiently and in a
timely manner.
4)Mandates the CAISO is overseen by a five member Board of
Governors who are appointed by the Governor and confirmed by
the state Senate. The Board of Governors is charged with
carrying out the provisions of state and federal laws.
5)Preceding the creation of the CAISO Board of Governors, the
California Electricity Oversight Board (EOB) was established
to ensure that the interests of the people of California are
served and to oversee the CAISO.
6)Establishes the EOB to serve as an appeal board for majority
decisions of the CAISO governing board as they relate to
matters subject to exclusive state jurisdiction (this
provision has never been exercised).
FISCAL EFFECT : Unknown.
COMMENTS : According to the author, the purpose of this bill is
to provide transparency and public oversight of the CAISO. The
author cites recent events such as the power outage in San Diego
that occurred as a result of operator error at CAISO, in the
early morning of April 1, 2010. (This outage affected about
300,000 homes and businesses in the San Diego area.) The author
states that this outage demonstrates the importance of the
Legislature needing to be informed. Having the CAISO come and
give a public accounting on grid operations or similar events,
and how best to avoid operator errors is important not only for
elected officials, but also to ensure optimum grid reliability
for all those served by CAISO.
The CAISO : The CAISO was created in the bill that deregulated
the wholesale and retail electricity markets, AB 1890 (Brulte)
Chapter 854, Statutes of 2006, to ensure fair and open
SB 1437
Page 3
transmission access by all electricity providers. (The
investor-owned utilities still own and maintain the grid,
however, operation of the grid was transferred to the CAISO.)
The CAISO is required to operate the grid consistent with
Western Electricity Coordinating Council (WECC), which is the
western regional subgroup of the North American Electric
Reliability Corporation (NERC). NERC is the federally
designated Electric Reliability Organization. The CAISO is
governed by tariffs submitted to and approved by the Federal
Energy Regulatory Commission.
The CAISO governing board was originally a stakeholder board.
After the energy crisis in 2001, SB 47 (Bowen) Chapter 766,
Statutes of 2001, changed the composition of the governing board
to a five-member independent board of directors appointed by the
Governor and subject to confirmation by the Senate.
In addition to operating the transmission grid, the CAISO
operates a spot-market and ancillary services market to balance
and maintain physical stability. These balancing markets
procure just 3% to 5% of the electricity scheduled through the
CAISO, or just about 1,675 to 2,750 MW of peak demand in the
summer months (assuming an average of 27,000 MW; and up to
55,000 or 60,000 MW during the summer).
The CAISO markets are monitored by the Department of Market
Monitoring, which is comprised of 15 professional staff (mostly
Ph.D.s) who report directly to the CAISO Board of Governors, CEO
and the Federal Energy Regulatory Commission (FERC).
Additionally, a three-member market surveillance committee
comprised of three energy economists advises the CAISO Board of
Governor's management and staff on the CAISO markets.
CAISO role in formulating California energy and environmental
policies : The CAISO plays an important role in implementing
California's landmark policies. AB 32 (Nunez) Chapter 89,
Statutes of 2006, requires the California Air Resources Board
(ARB) to adopt a statewide greenhouse gas emissions limit
equivalent to the statewide greenhouse gas emissions levels in
1990 to be achieved by 2020. In 2008, the ARB began to develop
a plan for how California, including the power sector, would
reduce emissions through direct regulation, such as end-use
energy efficiency standards and renewables portfolio standards,
and through a cap-and-trade system.
SB 1437
Page 4
The CAISO has contributed to these endeavors in several ways,
most notably the efforts at grid planning and operational
assessments to support higher levels of renewables. In
addition, the CAISO has an ongoing dialogue with the state over
how the new wholesale power market design can provide valuable
price signals that will transparently reflect the costs of
greenhouse gas reductions over time, thus stimulating the
technological innovations needed on the system. As the major
entity handling imports and exports in California, the CAISO has
contributed to the policy conversations to ensure renewables
regulatory approaches are consistent with the western power
markets.
The CAISO also collaborates with the California Energy
Commission, the California Public Utilities Commission and the
State Water Resources Control Board. The agencies are working
together to reduce the impact of once-through cooling use on
marine life while still providing enough power to operate
California's grid in a reliable and economic manner. The
expected once-through-cooling technology rule is inter-related
with other major policies and laws such as AB 32, the renewables
portfolio goals and legal restrictions on the use of "priority
reserve" air credits in Southern California. The CAISO
consistently advocates and assists in helping reconcile these
policies that attempt to balance the environmental impact of
power generation on air and water while also ensuring a safe and
reliable electric system.
EOB oversight of the CAISO : The EOB was created during
deregulation (AB 1890, Brulte, Chapter 864, Statutes of 1996) to
serve as the Governor's oversight agency and legal enforcer.
The EOB served as an appeals board to the stakeholder boards of
the non-profits; CAISO and PX. (CAISO now has a
Governor-appointed board, and the PX filed for bankruptcy and is
now defunct.) Additional responsibilities included monitoring
and auditing the wholesale energy markets and ancillary services
the CAISO conducted to balance the grid.
(In the 2007-08 budget bill, the Legislature fully funded the
EOB. Subsequently, the Governor vetoed most of the funding to
an unsustainable appropriation level and left the EOB unfunded
while retaining oversight responsibilities.)
Lights out : Shortly after midnight on April 1, 2010, about
300,000 homes and businesses in the San Diego area lost power
SB 1437
Page 5
for about 45 minutes. After the CAISO performed an
investigation, it found that San Diego Gas & Electric asked the
CAISO to shut down a 600- megawatt plant in Otay Mesa, and the
CAISO control room operator allowed it. (Although the utility
schedules when the plants it has under contract should run, it
is up to the CAISO to issue order to turn them on or off.) The
CAISO investigation discovered another error occurred when the
control room personnel thought the situation had to be remedied
within 20 minutes, consistent with federal regulations. When it
appeared it would take longer than 20 minutes for enough
generation to come on line, the CAISO called for San Diego Gas &
Electric to "shed load" or drop service to customers. The CAISO
has taken personnel measures and steps to prevent a repeat,
including additional training and audible alarms that tell grid
operators when an area is getting close to not having enough
power to operate. The CAISO investigation was reviewed by the
WECC. The WECC found the investigation and subsequent remedies
appropriate and no further actions were requested.
The author and the Utility Consumers' Action Network (UCAN) are
concerned that the CAISO investigation is lacking and believe
that the public has a right to know exactly what happened and
what steps have been taken since the outage to protect
California from future outages.
In a letter to UCAN dated April 27, 2010, the CAISO states that
it is cooperating fully with the WECC's review of the event, and
is fully briefing state and federal regulatory agencies. Upon
the completion of the CAISO's review, a public report will be
issued.
REGISTERED SUPPORT / OPPOSITION :
Support
California Public Utilities Commission (CPUC) (if amended)
Opposition
None on file.
Analysis Prepared by : Gina Adams / U. & C. / (916) 319-2083