BILL ANALYSIS �
AB 1390
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Date of Hearing: April 4, 2011
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Steven Bradford, Chair
AB 1390 (Committee on Utilities and Commerce) - As Introduced:
February 23, 2011
SUBJECT : Energy crisis litigation.
SUMMARY : Renews the Attorney General's ability to sign for
Electricity Oversight Board (EOB) to effect certain 2000-01
Energy Crisis settlements.
EXISTING LAW :
1)Required the Attorney General, until January 1, 2010, to
represent the Department of Finance and to succeed to all
right, claims, powers, and entitlements of the Electricity
Oversight Board in any litigation or settlement to obtain
ratepayer recovery for the effects of the
2000-02 Energy Crisis.
2)Prohibited the Attorney General from expending the proceeds of
any settlements of those claims, with certain exceptions.
FISCAL EFFECT : Unknown.
COMMENTS : The purpose of this committee bill is to re-cast a
sunsetted authority for the Attorney General to access funds
held in an escrow account owned by the Electricity Oversight
Board, which was prematurely de-funded with no legal successor.
1)Background : The EOB was created by AB 1890 (Brulte), Chapter
854, Statutes of 1996,
which deregulated California's wholesale electricity industry.
The Board was created 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.
Among the many developments associated with the 2001 Energy
Crisis was the bankruptcy of the PX in March 2001, and the
replacement of the EOB appointed CAISO stakeholder board with
gubernatorial appointees. Subsequent legislation gave the EOB
authorization to conduct certain other activities such as the
following:
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a) Petition the Federal Energy Regulatory Commission (FERC)
on Specific Transmission Matters. SB 1388 (Peace), Chapter
1040, Statutes of 2000, required EOB to petition FERC to
allow the recovery of certain expenses of investor owned
utilities related to the replacement and expansion of the
state's electricity transmission grid.
b) Communicate ISO's Rule Changes to FERC. AB 5X (Keeley),
Chapter 1X, Statutes of 2001, required EOB to direct CAISO
to amend its bylaws in response to FERC decisions, and to
communicate this action to FERC.
c) Investigate Any Matter Related to the Wholesale
Electricity Market. SB 47(Bowen), Chapter 766, Statutes of
2001, gave EOB broad authority to investigate and initiate
proceedings at FERC in response to market manipulation by
electricity market participants.
As a result of these statutory responsibilities, EOB's primary
duty at that time was to act as a market monitor, oversee the
state's electricity market and initiate proceedings at FERC in
response to market manipulation. The EOB has been a participant
in over 400 proceedings at FERC and has been a litigant in over
100 cases in the federal courts of appeal. Through 2005-06, EOB
has been a party to settlements of over $1 billion for various
overcharges.
2)Elimination of EOB : As part of the 2007-08 budget process,
the Governor 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
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 PUC.
The following year, the Governor's 2008-09 budget proposal
included no funding for EOB and restated his intent that EOB
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cease its operations by April 1, 2008.
1)Unfinished business : Until defunded in 2008, the EOB was one
of the complainants in the
Energy Crisis cases, along with the PUC, Attorney General (AG),
Pacific Gas & Electric, Southern California Edison, 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. Presently, the Cal Parties have no access to the funds
established under the 2004 escrow agreement because no one can
sign for the EOB. There is approximately $70 million in those
accounts. JP Morgan Chase state they will not disburse funds
from those accounts without a signature from the EOB or a court
order. This bill allows the AG to sign for the EOB,
facilitating the settlement of certain Energy Crisis claims.
REGISTERED SUPPORT / OPPOSITION :
Support
California Public Utilities Commission (CPUC) (sponsor)
San Diego Gas & Electric (SDG&E)
Opposition
None on file.
Analysis Prepared by : DaVina Flemings / U. & C. / (916)
319-2083