BILL ANALYSIS                                                                                                                                                                                                    �



                                                                  SB 699
                                                                  Page  1

          Date of Hearing:   June 18, 2014

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                  Mike Gatto, Chair

                     SB 699 (Hill) - As Amended:  March 25, 2014 

          Policy Committee:                             Utilities and  
          Commerce     Vote:                            14-0

          Urgency:     No                   State Mandated Local Program:  
          Yes    Reimbursable:              No

           SUMMARY  

          This bill requires the Public Utilities Commission (PUC) to  
          adopt rules to address security threats to the distribution  
          systems of electrical corporations by July 1, 2015.  This bill  
          requires the PUC to adopt these rules at the same time  
          inspection, maintenance, repair and replacement standards are  
          adopted. 

           FISCAL EFFECT  

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

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

          3)Unknown, likely minor, ongoing costs.


           COMMENTS  

           1)Rationale.   The author introduced this bill in response to an  
            assault rifle attack on PGE's Metcalf transmission substation  
            in April 2013.  Over 100 rounds were fired over a 20-minute  
            period knocking out 17 transformers.  Prior to the shooting,  
            fiber optic cables in an underground vault were cut causing a  
            phone service outage.  To prevent a blackout in the Silicon  
            Valley, workers were able to re-route power, but it took a  
            month to repair the damage.  
           
            According to the author and a recent National Research Council  








                                                                  SB 699
                                                                  Page  2

            report, the best way to protect the electric grid from attack  
            is to reduce potential damage.  The author suggests there are  
            ways to prepare that will lessen the attractiveness of the  
            targeted attack while increasing grid reliability.  To this  
            end, the author recommends actions including lessening the  
            consequence of the specific failure, increasing response time,  
            and using clean distributed generation.  

            This bill requires PUC to adopt rules to require  
            investor-owned electric utilities (IOUs) to prepare for  
            potential security threats.

           2)Background.   The Federal Energy Regulatory Commission (FERC)  
            regulates the interstate transmission of 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,  
            and some telecommunication corporations. The PUC has authority  
            to order electrical corporations to maintain distribution  
            infrastructure and make improvements as deemed necessary and  
            recover costs through rates.

            California's Publicly Owned Utilities (POUs) are  
            self-governing by a local government (city or county) or an  
            independently elected Board of Directors.

            The Metcalf electrical substation is 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.
           
           
           Analysis Prepared by  :    Jennifer Galehouse / APPR. / (916)  
          319-2081