Bill Seeks to Eliminate ISO

By Loretta Macktal, Executive Assistant to the Vice President, Government Relations

Capitol Update, Feb. 2, 2003 Share this on FacebookTweet thisEmail this to a friend

Senator Joseph Dunn (D-Garden Grove) has introduced legislation aimed at removing control of the state's electric grid from the Independent System Operator. This may only be the tip of the iceberg, however. According to Dunn, the measure, Senate Bill 72, is a placeholder bill for legislation to "re-regulate" California's electric industry.

Dunn chairs the Senate Select Committee on Price Manipulation, and has been a vocal critic of both the ISO and wholesale electric generators.

Last year, he called for the resignation of the ISO's chief executive officer, Terry Winter, and more recently he attempted to block the confirmation of ISO chairman Michael Kahn, but was unsuccessful on both counts. Winter remains at his post at the ISO, and Kahn was recently confirmed by the Senate by a 39-1 vote, with Dunn casting the lone dissenting vote.

SB 72, as written, would effectively eliminate the ISO by removing its current role as manager of the state's electric grid. Dunn asserts that this would put the state's grid back under state control, as was the case before California's electric restructuring law was enacted in 1996. Eliminating the ISO would not, however, remove federal regulators from the picture. Even if SB 72 were signed into law, the Federal Energy Regulatory Commission still has jurisdiction over the transmission of electricity.

While Dunn says SB 72 is a legislative vehicle to "re-regulate" California's electric industry, neither Dunn nor his staff have provided additional details as to how the bill will attempt to accomplish this.

Last year, Dunn authored SB 2000, which prohibited generators, marketers, and other market participants from engaging in a long list of unlawful acts and practices, and required violators to disgorge the profits and pay up to three times the amount of disgorgement plus attorney fees. The bill contained prohibitions on energy sales that were not only vague, but would have potentially made otherwise rational marketplace behavior unlawful. Unable to muster enough votes, Dunn let the bill die on the Senate floor.

Meanwhile, changes are in store for Dunn's Select Committee on Price Manipulation. Created during the height of the energy crisis, the committee has conducted a high-profile investigation of market behavior, and held numerous committee meetings, including a well-publicized hearing with H. Ross Perot, but it now appears Dunn's committee will go out of business on March 31. The committee has focused attention on a number of instances of questionable market behavior by some generators and marketers, but has yet to find a "smoking gun".

Committee staff indicates that the committee will not issue a final report prior to closing down. This is regrettable. From the outset, CMTA has urged all parties engaged in the various ongoing investigations to include all relevant facts and avoid oversimplification and distortions. After months of hearings and accusations, at least a semblance of closure might be accomplished by having the committee issue a set of findings and recommendations. At the very least, a final report by the committee might close some doors and clarify some of the issues raised during the investigation. Unless we fully understand what went wrong in 2000 and 2001, we will not adopt appropriate solutions and we will be planting the seeds for the next crisis.

Moreover, continued uncertainty about the outcome of various investigations discourages private investment in generation in California ? investment that is necessary in order to meet the state's energy needs and avoid future energy crises.
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