BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Kevin de Le�n, Chair
SB 1277 (Steinberg) - Electricity: electrical restructuring:
Independent System Operator.
Amended: May 6, 2014 Policy Vote: EU&C 6-3
Urgency: No Mandate: No
Hearing Date: May 19, 2014 Consultant: Marie Liu
This bill meets the criteria for referral to the Suspense File.
Bill Summary: SB 1277 would require the Independent System
Operator (CAISO) to obtain the concurrence of the California
Public Utilities Commission (CPUC) before submitting any tariff
to the Federal Energy Regulatory Commission (FERC) to implement
a new auction- or market-based mechanism for ensuring that
sufficient resources are procured to meet California's
electricity needs.
Fiscal Impact:
One-time costs of $157,000 from the California Public
Utilities Reimbursement Account (special) for anticipated
litigation costs before FERC.
Unknown one-time costs, potentially up to $150,000, from
the California Public Utilities Reimbursement Account
(special) for a proceeding.
Background: Existing law recognizes the CAISO and requires it to
manage the transmission grid and related energy markets and make
the most efficient use of available energy resources including
energy, capacity, ancillary services, and demand bid into
markets administered by the CAISO. (PUC �345.5) CAISO is
regulated by FERC under the Federal Power Act.
Existing law also requires the CPUC, in consultation with the
CAISO, to establish resource adequacy requirements for all load
serving entities which are defined as an electrical corporation,
electric service provider, or community choice aggregator. (PUC
�380)
The staffs of CAISO and the CPUC have developed a "Joint
Reliability Plan" to modify the various mechanisms by which both
entities ensure that there is sufficient capacity available to
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meet California's future electricity needs. One element of this
plan is a "reliability services auction" that would create a new
auction-based mechanism for California's utilities to procure at
least some of the electricity to meet anticipated needs in
future years.
Proposed Law: This bill would require the CAISO to obtain the
concurrence of the CPUC before submitting any proposal to the
FERC to request approval of a new auction or market-based
mechanism for forward procurement of electricity or capacity
products to implement the Joint Reliability Plan.
The CPUC, when considering concurring with CAISO's proposal,
would be required to open a proceeding to make findings that
conclude that specific principles of the state will not be
diminished.
Staff Comments: The CPUC currently has an open proceeding
regarding the Joint Reliability Plan. However, this bill may
require the proceeding to deal with issues that are no longer
within its scope. If the bill results in the expansion of the
scope, or requires the proceeding to be extended, the CPUC could
incur additional proceeding costs. These costs are unknown, but
staff notes that in general, a proceeding at the CPUC requires
$150,000 in staff workload.
CAISO, in opposition to this bill, believes that this bill
violates the Federal Power Act because the bill would presumably
give the CPUC the indirect authority to regulate wholesale
electricity markets, which is the sole responsibility of FERC.
While litigation costs associated with legislation is often
speculative, in the case of this bill, staff believes that legal
action by the CAISO is highly likely, if not a certainty. In the
event of legal action by the CAISO, the CPUC would incur legal
costs to defend the legislation before FERC. The CPUC
anticipates one-time legal costs of approximately $157,000.
Staff notes that there may be additional costs to the state for
CAISO's legal costs as CAISO is supported by a fee on
electricity transmission in the state and the state is a
consumer of approximately 1% of the state's electricity.
However, staff estimates that the state's share of the CAISO's
legal costs are likely to be minor.
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