Under existing law, the Public Utilities Commission (PUC) has regulatory authority over public utilities. Existing law requires the PUC to award reasonable advocates fees, reasonable expert witness fees, and other reasonable costs of preparation for and participation in a hearing or proceeding of the PUC involving an electrical, gas, water, or telephone corporation to a customer who complies with specified procedures when the customers presentation makes a substantial contribution to the adoption, in whole or in part, of the PUCs order or decision and where participation or intervention without an award of fees or costs imposes a significant financial hardship.

This bill would establish a mechanism to provide compensation for reasonable advocates fees, reasonable expert witness fees, and other reasonable costs of participation in processes of the Independent System Operator (ISO), proceedings of the Federal Energy Regulatory Commission (FERC) that affect Californias environment and consumers, and certain proceedings at the State Energy Resources Conservation and Development Commission (Energy Commission). (ISO) related to proceedings concerning transmission planning, the transmission access charge, energy markets, and regionalization. The bill would require an organization intending to seek compensation to submit an annual notice of intent and eligibility to the Energy Commission PUC containing specified information. The Energy Commission PUC would be required to timely issue a finding as to whether the organization is an eligible group, as defined, that may file for compensation. The bill would authorize an eligible group, by March 31 of each year, to file for compensation from an electrical corporation that is a transmission-owning utility, as defined, for participation in eligible proceedings for the prior calendar year. The bill would require the Energy Commission, PUC, within 90 days after the filing of the request for compensation or within 60 days after the submission of additional supporting documentation, whichever occurs later, to determine whether the eligible group has productively participated in an eligible proceeding, and if so, to direct that the reasonable costs of participation, including advocates fees, expert witness fees, and associated costs, as respectively defined, be paid by the electrical corporation from moneys held in trust by the electrical corporation for that purpose. The bill would require that payment be denied to any eligible group that engages in vexatious behavior or attempts to unreasonably obstruct the orderly and timely fulfillment of the responsibilities of the ISO or FERC. ISO. The bill would require the Energy Commission to adopt guidelines commission to adopt rules governing the intervenor funding program at a publicly noticed meeting offering all interested parties an opportunity to comment. The bill would require the Energy Commission , in consultation with the PUC and PUC, in consultation with the ISO, to report to all relevant policy and fiscal committees of the Legislature by January 1, 2024, 3 years after the program is implemented with sufficient information for the Legislature to determine the effectiveness of the program in achieving greater access and transparency, increasing productive participation, and minimizing negative impacts on ratepayers and the environment. The PUCs authority to award intervenor compensation pursuant to the program would become inoperative 4 years after the program is implemented.

Under existing law, a violation of any order, decision, rule, direction, demand, or requirement of the PUC is a crime.

Because certain provisions of the bill would require an order or requirement to be imposed by the PUC upon an electrical corporation, and a violation of the order or requirement would be a crime, the bill would impose a state-mandated local program by creating a new crime.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Under existing law, the Public Utilities Commission (PUC) has regulatory authority over public utilities. Existing law requires the PUC to award reasonable advocates fees, reasonable expert witness fees, and other reasonable costs of preparation for and participation in a hearing or proceeding of the PUC involving an electrical, gas, water, or telephone corporation to a customer who complies with specified procedures when the customers presentation makes a substantial contribution to the adoption, in whole or in part, of the PUCs order or decision and where participation or intervention without an award of fees or costs imposes a significant financial hardship.

This bill would establish a mechanism to provide compensation for reasonable advocates fees, reasonable expert witness fees, and other reasonable costs of participation in processes of the Independent System Operator (ISO), proceedings of the Federal Energy Regulatory Commission (FERC) that effect affect Californias environment and consumers, and certain proceedings at the State Energy Resources Conservation and Development Commission (Energy Commission). The bill would require an organization intending to seek compensation to submit an annual notice of intent and eligibility to the Energy Commission containing specified information. The Energy Commission would be required to timely issue a finding as to whether the organization is an eligible group, as defined, that may file for compensation. The bill would authorize an eligible group, by March 31 of each year, to file for compensation related to from an electrical corporation that is a transmission-owning utility, as defined, for participation in eligible proceedings for the prior calendar year. The bill would require the Energy Commission, within 90 days after the filing of the request for compensation or within 60 days after the submission of additional supporting documentation, whichever occurs later, to determine whether the eligible group has productively participated in an eligible proceeding, and if so, to direct that the reasonable costs of participation, including advocates fees, expert witness fees, and associated costs, as respectively defined, be paid by the ISO. electrical corporation from moneys held in trust by the electrical corporation for that purpose. The bill would require that payment be denied to any eligible group that engages in vexatious behavior or attempts to unreasonably obstruct the orderly and timely fulfillment of the responsibilities of the ISO or FERC. The bill would require the Energy Commission to adopt guidelines governing the intervenor funding program at a publicly noticed meeting offering all interested parties an opportunity to comment. The bill would require the Energy Commission , in consultation with the PUC and the ISO, to report to all relevant policy and fiscal committees of the Legislature by January 1, 2024, sufficient information for the Legislature to determine the effectiveness of the program in achieving greater access and transparency, increasing productive participation, and minimizing negative impacts on ratepayers and the environment.

Under existing law, the Public Utilities Commission (PUC) has regulatory authority over public utilities. Existing law requires the PUC to award reasonable advocates fees, reasonable expert witness fees, and other reasonable costs of preparation for and participation in a hearing or proceeding of the PUC involving an electrical, gas, water, or telephone corporation to a customer who complies with specified procedures when the customers presentation makes a substantial contribution to the adoption, in whole or in part, of the PUCs order or decision and where participation or intervention without an award of fees or costs imposes a significant financial hardship.

This bill would establish a mechanism to provide compensation for reasonable advocates fees, reasonable expert witness fees, and other reasonable costs of participation in processes of the Independent System Operator (ISO), proceedings of the Federal Energy Regulatory Commission (FERC) that effect Californias environment and consumers, and certain proceedings at the State Energy Resources Conservation and Development Commission (Energy Commission). The bill would require an organization intending to seek compensation to submit an annual notice of intent and eligibility to the Energy Commission containing specified information. The Energy Commission would be required to timely issue a finding as to whether the organization is an eligible group, as defined, that may file for compensation. The bill would authorize an eligible group, by March 31 of each year, to file for compensation related to participation in eligible proceedings for the prior calendar year. The bill would require the Energy Commission, within 90 days after the filing of the request for compensation or within 60 days after the submission of additional supporting documentation, whichever occurs later, to determine whether the eligible group has productively participated in an eligible proceeding, and if so, to direct that the reasonable costs of participation, including advocates fees, expert witness fees, and associated costs, as respectively defined, be paid by the ISO. The bill would require that payment be denied to any eligible group that engages in vexatious behavior or attempts to unreasonably obstruct the orderly and timely fulfillment of the responsibilities of the ISO or FERC. The bill would require the Energy Commission to adopt guidelines governing the intervenor funding program at a publicly noticed meeting offering all interested parties an opportunity to comment.

This bill would require that any payment of compensation to an eligible group be made from the Intervenor Trust Fund, which would be established by the ISO upon receiving approval from the FERC. The bill would require the ISO to (1) annually consult with the Energy Commission to determine the expected amount of funding needed to support payments of compensation to eligible groups for productive participation in eligible proceedings, (2) collect sufficient moneys to support the intervenor funding program through a charge assessed on transmission-owning utilities calculated based on the utilitys proportionate share of total California load within the territory serviced by the electrical grid that is under the operational control of the ISO, and (3) deposit the funds collected into the Intervenor Trust Fund and to hold those funds in trust for the authorized purposes. If the collection of funds by the ISO is held invalid by order of any federal agency or court, the PUC, in consultation with the Energy Commission, would be required to annually determine the expected amount of funding needed to support payments of compensation to eligible groups for productive participation in eligible proceedings and to require each electrical corporation to identify and collect the anticipated intervenor funding program costs attributable to its share of California load within the territory serviced by the electrical grid that is under the operational control of the ISO. If the collection of funds by the ISO is held invalid by order of any federal agency or court, the Energy Commission would require each local publicly owned electric utility within the ISO to annually collect and remit anticipated intervenor funding program costs attributable to its proportionate share of California load within the territory serviced by the electrical grid that is under the operational control of the ISO. The bill would require that all moneys collected by the electrical corporations or local publicly owned utilities be held in a trust account by the utility, and be paid by the utility to eligible groups as directed by the Energy Commission. The bill would authorize the Energy Commission to include as a transmission-owning utility that is subject to the bills requirements an electrical corporation or local publicly owned electric utility that is in the process of turning over, or negotiating to turn over, operational control of its electrical transmission grid to the ISO, to the extent it serves customers within the state and, if the utility has not yet turned over operational control to the ISO, provides for separate administration of its proportionate share of intervenor compensation.

Date of Hearing: August 23, 2017

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez Fletcher, Chair

SBPCA Bill Id:SB 520

Author:(Mitchell) – As Amended Ver:July 19, 2017

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

SUMMARY:

This bill allows eligible groups to seek compensation for their participation in California Independent System Operator (CAISO) proceedings that concern transmission planning, the transmission access charge, energy markets, or regionalization. Specifically, this bill:

1. Requires the California Public Utilities Commission (PUC) to adopt rules governing an intervenor funding program at a publicly noticed meeting offering all interested parties the opportunity to comment.
2. Limits eligibility to a nonprofit group that directly represents ratepayer interests or environmental justice communities that have a history of substantial contributions in PUC proceedings as specified.
3. Funds the program from charges on participating transmission owners the costs of which will be paid for by ratepayers in the form of nonbypassable elements of distribution rates.
4. Requires PUC, in consultation CAISO to report to all relevant policy and fiscal committees of the Legislature three years after the program is implemented to aid the Legislature in determining the effectiveness of the program in achieving greater access and transparency, increasing productive participation, and minimizing negative impacts on ratepayers and the environment.
5. Sunsets the intervenor program four years after it is implemented.

FISCAL EFFECT:

1. Unknown costs, potentially in the millions of dollars (ratepayer funds) for compensation to intervenors.
2. Increased annual PUC costs of approximately $1.3 million (Public Utilities Reimbursement Account) to create and implement the new program, including a formal Order Instituting Rulemaking (OIR) proceeding.

COMMENTS:

1. Purpose. According to the author, “The ISO has taken on increased importance in recent years due to the evolution of wholesale electric markets and regional coordination. The decisions made by ISO have a significant impact on customer rates and can support, or undermine, California’s ability to achieve a range of clean energy goals. Without the involvement of public interest groups, participation will continue to be dominated by profit-maximizing corporate special interests seeking to further their own private agendas. ”
2. Background. Participation in CAISO is open to the public yet there is may be an imbalance of represented interests. A recent participant list from one of the CAISO’s most significant planning processes (transmission needs) was provided to the Assembly Utilities and Energy Committee by the CAISO. It shows that utilities and other vested interests (including transmission owners, technology companies, owners of electric generation facilities, business customers, and trade associations of these groups) dominate the participation with few environmental and consumer advocate groups. The author opines that by funding an intervenor compensation program more environmental justice and consumer advocate nonprofits would be able to sustain meaningful participation in the CAISO stakeholder processes with the intended goal of achieving California’s environmental goals and advocating for fair rates of Californians.
   
   

Analysis Prepared by: Jennifer Galehouse / APPR. / (916) 319-2081

Date of Hearing: July 12, 2017

ASSEMBLY COMMITTEE ON UTILITIES AND ENERGY

Chris Holden, Chair

SBPCA Bill Id:SB 520

Author:(Mitchell) – As Amended Ver:May 26, 2017

SENATE VOTE: 23-12

SUBJECT: Electricity: intervenor funding

SUMMARY: Establishes a program to fund participation by specified nonprofit organizations that engage in productive participation in the proceedings of the Federal Energy Regulatory Commission (FERC), Independent System Operator (ISO), or California Energy Commission (CEC) or judicial review of FERC and ISO actions. Specifically this bill:

1. Establishes a mechanism to provide compensation for reasonable fees for advocacy, expert witness fees, and costs of participation in the following proceedings:
   
   1. Formal and informal processes, committees or boards established or relied upon by the ISO;
      
   2. Any activity at FERC relating to actions that affect the ISO or any proposal that affects rates charged by electrical corporations to California consumers;
      
   3. Judicial review of any ISO determination or tariff proposal, or any FERC decision affecting the ISO; and
      
   4. Proceedings at the CEC that relate to transmission planning issues.
      
2. Requires the CEC to develop guidelines, exempt from the Administrative Procedure Act, in consultation with the California Public Utilities Commission (CPUC), and administer the program in a manner that encourages ratepayer and environmental group participation in the regulation of regional energy markets, concerns about reasonableness of rates charged to California customers and other actions of the ISO.
   
3. Limits eligibility to independent nonprofit consumer, public health, social equity, or environmental organizations that represent the interest of residential or small commercial consumers and that are located in California and served by a transmission-owning utility and for which participation in eligible proceedings would pose a significant financial hardship.
   
4. Specifies certain program participation requirements, and parameters including applications for eligibility, eligible costs, rates for reimbursement and filing and notice deadlines. Maintains eligibility for groups that are prevailing parties in an action seeking judicial review.
   
5. Funds the program from charges on participating transmission owners the costs of which will be paid for by ratepayers in the form of nonbypassable elements of distribution rates.
   
6. Requires the CPUC to direct an electrical corporation which has not yet turned over operational control of its electrical transmission grid, to collect and hold its proportionate share of program costs in trust to be disbursed upon direction by the CEC.
   
7. Requires the CEC, in consultation with the CPUC and ISO to report to all relevant policy and fiscal committees of the Legislature by January 1, 2024 to aid the Legislature in determining the effectiveness of the program in achieving greater access and transparency, increasing productive participation, and minimizing negative impacts on ratepayers and the environment.
   

EXISTING LAW:

1. Establishes the ISO, comprised of five board members appointed by the Governor and subject to Senate confirmation, 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 ISO. (Public Utilities Code § 345.5)
   
2. Establishes the CEC and assigns it many duties, among them to collect forecasts of future supplies and consumption of all forms of energy and of future energy or fuel production and transporting facilities to be constructed; independently analyze such forecasts in relation to statewide estimates of population, economic, and other growth factors and in terms of the availability of energy resources, costs to consumers, and other factors; and formally specify statewide and service area electrical energy demands to be utilized as a basis for planning the siting and design of electric power generating and related facilities. (Public Resources Code § 25216)
   
3. Establishes within the CPUC an independent Office of Ratepayer Advocates to represent and advocate on behalf of the interests of public utility customers and subscribers within the jurisdiction of the CPUC. The goal of the office shall be to obtain the lowest possible rate for service consistent with reliable and safe service levels. For revenue allocation and rate design matters, the office shall primarily consider the interests of residential and small commercial customers. (Public Utilities Code § 309.5)
   
4. Provides compensation for reasonable advocate's fees, reasonable expert witness fees, and other reasonable costs to public utility customers and representatives of customers for participation or intervention in formal proceedings of the commission involving electrical, gas, water, telegraph, and telephone public utilities. (Public Utilities Code § 1802)
   
5. Authorizes intervenors involving electric, water, and telephone utilities to be compensated for making a substantial contribution to proceedings of the CPUC, as determined by the CPUC. (Public Utilities Code § 1801.3)
   
6. Requires intervenor compensation to be awarded to eligible intervenors in a timely manner, within a reasonable period after the intervenor has made the substantial contribution to a proceeding that is the basis for the compensation award. (Public Utilities Code § 1801.3)
   
7. Defines "compensation" to mean payments for all or part, as determined by the CPUC, of reasonable advocate's fees, reasonable expert witness fees, and other reasonable costs of preparation for and participation in a proceeding, and includes the fees and costs of obtaining an award, as specified, and of obtaining judicial review, if any. (Public Utilities Code § 1802)
   
8. Defines "customer" to mean any of the following:
   
   1. A participant representing consumers, customers, or subscribers of any electrical, gas, telephone, telegraph, or water corporation that is subject to the jurisdiction of the CPUC;
      
   2. A representative who has been authorized by a customer; or
   3. A representative of a group or organization authorized pursuant to its articles of incorporation or bylaws to represent the interests of residential customers, or to represent small commercial customers who receive bundled electric service from an electrical corporation. (Public Utilities Code § 1802)

FISCAL EFFECT: According to the Senate Committee on Appropriations:

• Approximately $2.5 million annually (Energy Resources Program Account or General Fund) to the CEC to develop and administer compensation programs.
• Unknown costs, likely in the millions of dollars (ratepayer funds), for compensation to intervenors.
• Unknown costs (General fund and various special funds) to the State as a ratepayer.

BACKGROUND:

CPUC Intervenor Compensation – The CPUC initiated its intervenor compensation program in 1981 and state law was enacted in 1984 to govern the program. The program is intended to ensure that intervenors – individuals and groups that represent the interests of utility ratepayers – have the financial resources to bring their concerns and interest to the CPUC at its proceedings. Intervenors advocate for a variety of ratepayers, including residential and small-business customers, minority groups, and the disabled. State law allows intervenors that participate in CPUC proceedings involving utilities, such as electric, gas, and water utilities, to request compensation for the costs associated with that participation. Public utilities pay these intervenor compensation awards from the amounts they collect from their ratepayers. These awards affect utility rates so that utilities can recoup any amounts they pay to intervenors.

Intervenor Eligibility – An intervenor planning to claim intervenor compensation must file a notice of intent to claim compensation that indicates the planned extent and estimated costs of the intervenor’s planned participation in a proceeding. Additionally, intervenors must show “significant financial hardship” to receive compensation, by submitting documents demonstrating that the intervenor could not afford to participate without undue hardship.

Costs – According to the CPUC’s “Intervener Compensation Database” in 2014 through 2016, the intervener program awarded a total of $8 million, $12 million and $10 million, respectively. It is unclear how the costs of the program proposed by this bill would compare with the cost of the CPUC’s existing program.^[1]

Comparing current intervenor compensation at CPUC to this measure

2013 State Auditor Review of Intervenor Compensation – In July 2013, the State Auditor reported on an audit it conducted of the intervenor compensation program at the CPUC. The report found that despite some administrative weaknesses, the CPUC had generally awarded compensation to intervenors in accordance with state law. The report identified the 10 largest intervenors from 2008 to 2012. During that time period, the CPUC awarded $25.5 million in intervenor compensation. The Utility Reform Network (TURN) accounted for approximately $12.7 million of the awards claimed, followed by the Utility Consumers Action Network with approximately $2.9 million, and Disability Rights Advocates with approximately $1.3 million.^[2]

Office of Ratepayer Advocates (ORA) – Within the CPUC is an independent ORA which exists to represent and advocate on behalf of the interests of public utility customers and subscribers within the jurisdiction of the CPUC. This office is actively involved in advocating for California utility customer interests. ORA’s goal is to obtain the lowest possible rate for service consistent with reliable and safe service levels. For revenue allocation and rate design matters, the office primarily considers the interests of residential and small commercial customers. ORA has a staff of 147 consisting of engineers, economists, scientists, and auditors with expertise in regulatory issues related to the electricity, natural gas, water, and communications industries in California. ORA’s staff performs in-depth review and analyses of regulatory policy issues and utility proposals, for funding that totals in the tens of billions of dollars, in order to determine whether utility requests are in the interest of the ratepayers who fund utility activities through their utility bills. ORA also supports environmental policies that benefit customers and seeks to ensure that utility actions comport with CPUC rules and California environmental laws and policy goals. In 2015, ORA participated in 192 CPUC proceedings.

Transmission Access Charges (TAC) – A California consumer’s electric bill reflects a variety of separate charges associated with providing electric services which are “bundled” into a single amount. Part of this bill is used to pay for the transmission service. These charges are called the Transmission Access Charge (TAC) and ISO’s Grid Management Charge (GMC). 

Most of California’s transmission facilities are owned by the three largest investor-owned public utilities: Pacific Gas and Electric (PG&E), Southern California Edison (SCE), and San Diego Gas and Electric (SDG&E). These transmission owners (TOs) are required to provide transmission service at just and reasonable rates. The rates cover the costs of providing transmission service as well as a return on the associated capital invested. The total cost of providing transmission service, including the return, is referred to as the utility’s retail transmission revenue requirement.  

The collective revenue requirements for all of the utilities (which also include some local publicly owned utilities (POUs) and out-of-state electrical corporations) that participate in the ISO are the basis for the TAC which is charged to retail electric customers, or retail ratepayers. The GMC that is charged covers the ISO’s cost for operating and managing the transmission component of the electric grid.

Because transmission rates are subject to oversight by the FERC, the transmission revenue requirements of the various utilities and POUs that participate in the ISO are determined in FERC proceedings called transmission owner (TO) rate cases. In some instances, utilities will file updates to a previously settled rate case when raising rates on a small subset of transmission components. As part of its statutory mandate, the CPUC – and other government and non-government organizations – intervene in these rate cases. 

CPUC FERC Participation – One aspect of CPUC's regulatory authority is to represent the interests of California's electric public utility consumers at the federal and regional level. The electric transmission system and California's wholesale markets are the two main features of federal and regional concern. The CPUC's efforts in transmission and wholesale market policies have served to advance California's electric system and market functions and promote California's environmental initiatives, while ensuring fair utility rates for California's electric public utility consumers. The CPUC has represented California’s interest in the submission of more than 100 documents to various state, regional and federal energy agencies including the FERC, the U.S. Department of Energy, the North American Electric Reliability Council, the ISO, and the CEC.^[3]

What are other states doing? The only regional transmission organization (RTO) consumer oversight program that the committee is aware was recently approved by FERC in February 2016 in the PJM territory. FERC approved a funding mechanism for the Consumer Advocates of the PJM States, Inc. (CAPS). CAPS is a non-profit organization comprised of “state advocate offices designated by the laws of their respective jurisdictions to represent the interests of utility consumers within the service territories of PJM.” These entities are comparable to the Office of Ratepayer Advocate in California. On February 29, 2016, FERC approved the initial CAPS budget at $450,000, and there is a formal process for any annual increases. PJM will collect CAPS’ annual budget through a dedicated formula rate included as an amendment to the PJM Tariff. PJM states that it will separately state the CAPS charge on the customers’ bills, which will reflect the application of CAPS funding rate to every megawatt-hour of energy delivered to the load. ^[4]

COMMENTS:

1. Author’s Statement. The California Consumer Participation Initiative (CalCPI) would enable the participation of non-profit consumer, environmental and public health organizations at the ISO and the FERC. The program would be administered by the CEC and available to California-based nonprofits that demonstrate financial hardship and represent the interests of residential or small business customers located within California.
   

Despite the importance of federal regulation to California’s environment and economy, there is no state program to encourage and support participation in key regional and federal electricity forums for the purpose of protecting consumer and environmental interests. The key forums are ISO and FERC. The ISO has taken on increased importance in recent years due to the evolution of wholesale electric markets and regional coordination. The decisions made by ISO have a significant impact on customer rates and can support, or undermine, California’s ability to achieve a range of clean energy goals. The FERC has extensive jurisdiction over wholesale electric market rules, utility transmission costs, and determining whether an array of state energy policies are preempted under federal law.

The amount of time and resources required to effectively participate at ISO and FERC prevents most consumer and environmental organizations from active engagement. The costs of participation can be significant due to the need to hire technical experts and attorneys to analyze complex matters of fact, law and policy. Absent a new source of funding to support this work, these nonprofit organizations will have limited ability to engage in these forums. Without the involvement of public interest groups, participation will continue to be dominated by profit-maximizing corporate special interests seeking to further their own private agendas.

1. Increasing Transmission Access Charges. The decisions made by ISO and FERC have significant impacts on utility rates which are reflected in the TAC. According to the author, since 2010, transmission rates for PG&E have increased almost 150% and now comprise approximately 11% of average rates (up from 5.5.% in 2010). For SCE transmission rates have increased by 140% since 2010 and now comprise almost 9% of average rates (up from 4% in 2010). These rates are derived from transmission and market decisions made by the ISO and reflected in ISO tariffs approved by FERC, these decisions have major impacts on California ratepayers.
   
2. POU Customer Exemption. Implementation of this bill would be funded strictly by the California IOU customers and exempts POU customers even if those customers are served by transmission lines and markets under the jurisdiction of the ISO creating a financial inequity between these customer groups.
   
3. Open Stakeholder Process? Although the ISO is a non-profit entity under the federal agency jurisdiction, it does generally follow open meeting guidelines. Public participation in formal and informal activities is accessible. The ISO has an open process where stakeholders can participate in person, via phone, or provide written comments. The ISO’s website is easily navigated and provides detailed information on its processes. In addition, FERC has a well-established process for participation, and the CPUC represents the interests of California ratepayers at many FERC proceedings.
   
   The open public process begs the question, why is this bill needed? In short, this is complicated stuff! The sponsor of this measure, TURN, argues that currently consumer and environmental groups are not able to have sustained participation in the ISO and FERC because they lack a dedicated funding source to pay for the technical expertise and resources needed to be involved in a meaningful way. This measure would provide a dedicated funding source which would allow these groups to have a sustained presence in ISO, FERC and CEC processes as these affect California ratepayers.
   
4. ISO Participants. Participation in ISO is open to the public as discussed above yet there is an imbalance of represented interests. A recent participant list from one of the ISO’s most significant planning processes (transmission needs) was provided to the Committee by the ISO. It shows that utilities and other vested interests (including transmission owners, technology companies, owners of electric generation facilities, business customers, and trade associations of these groups) dominate the participation with few environmental and consumer advocate groups. The author opines that by funding an intervenor compensation program more environmental and consumer advocate nonprofits would be able to sustain meaningful participation in the ISO stakeholder processes with the intended goal of achieving California’s environmental goals and advocating for fair rates of Californians.
   
5. Too Much Too Soon? The author makes a meaningful case for balancing representation in the ISO proceedings to ensure that ratepayer interests are represented. However, the expanse of this new program is concerning. It includes a broad range of groups which would be authorized and funded to participate in ISO, CEC, and FERC proceedings. Litigation expenses, which would be in federal courts, would also be funded. Given the uncharted territory and effectiveness of the program and the unknown expense, the committee may wish to consider amendments which approach the new program more gradually. It is recommended that the program:
   

• Be limited to proceedings at the ISO concerning transmission planning, the transmission access charge, energy markets and regionalization;
• That the eligible groups be limited to those which directly represent ratepayer interests or environmental justice communities, and that these groups have a history of substantial contributions in CPUC proceedings;
• Additionally, since the CPUC has long history in its administration of an intervenor compensation program (which has been reviewed by the State Auditor), we recommend that the CPUC also administer the ISO program for the sake of efficiency and expediency of implementation; and
• That the program sunset on January 1, 2023.

REGISTERED SUPPORT / OPPOSITION:

Support

Clean Coalition
Consumer Federation of California
Environmental Defense Fund
The Utility Reform Network
Vote Solar
Western Center On Law And Poverty

Oppose  

San Diego Gas & Electric 
California Business Roundtable
California Chamber of Commerce
California Manufacturers and Technology Association
Independent Energy Producers Association
Pacific Gas And Electric Company 
Southern California Edison

Analysis Prepared by: Elle Hoxworth / U. & E. /

1. Amounts shown are totals awarded to each intervenor in each corresponding year. All data is from the CPUC Intervenor Compensation Database. Current as of 2/24/2017; Drafted by GT2 ↑

2. California State Auditor. California Public Utilities Commission July 2013. https://www.bsa.ca.gov/pdfs/reports/2012-118.pdf ↑

3. http://www.cpuc.ca.gov/General.aspx?id=5229 ↑

4. Federal Energy Regulatory Commission, PJM Interconnection, L.L.C., Docket No. ER16-561-000, issued February 29, 2016. ↑

 THIRD READING  

Bill No: SB 520

Author:

Amended: 5/26/17

Vote:

SENATE ENERGY, U. & C. COMMITTEE: 8-3, 4/4/17

AYES: Hueso, Bradford, Hertzberg, Hill, McGuire, Skinner, Stern, Wiener

NOES: Morrell, Cannella, Vidak

SENATE APPROPRIATIONS COMMITTEE: 5-2, 5/25/17

AYES: Lara, Beall, Bradford, Hill, Wiener

NOES: Bates, Nielsen

SUBJECT:

SOURCE: The Utility Reform Network

DIGEST:

This bill establishes a program of compensation for certain independent nonprofit organizations that engage in productive participation in proceedings of the Federal Energy Regulatory Commission (FERC) or of the California Independent System Operator (CAISO) or of the California Energy Commission (CEC) that relate to transmission planning.

ANALYSIS:

Existing law:

1. Establishes the CAISO, comprised of five board members appointed by the governor and subject to Senate confirmation, 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. (Public Utilities Code §345.5)
2. Establishes the CEC (Public Resources Code §25200) and assigns it many duties, among them to collect forecasts of future supplies and consumption of all forms of energy and of future energy or fuel production and transporting facilities to be constructed; independently analyze such forecasts in relation to statewide estimates of population, economic, and other growth factors and in terms of the availability of energy resources, costs to consumers, and other factors; and formally specify statewide and service area electrical energy demands to be utilized as a basis for planning the siting and design of electric power generating and related facilities. (Public Resources Code §25216)
3. Authorizes the California Public Utilities Commission (CPUC) to regulate the rates and service of public utilities, including gas utilities. (Article 12 of the California Constitution, Public Utilities Code §§216(a), 221, 222, 227, and 228)
4. Establishes a program to provide compensation for reasonable advocate’s fees, reasonable expert witness fees, and other reasonable costs to public utility customers of participation or intervention in any proceeding of the CPUC. (Public Resources Code §1801 et seq.)

This bill:

1. Directs the CEC to adopt regulatory guidelines to govern a program to provide compensation to an eligible group that provides productive participation in a proceeding of CAISO and FERC that affect California’s environment and consumers, and transmission-related proceedings of the CEC.
2. Defines groups eligible for compensation as an independent nonprofit consumer, public health, social equity, or environmental organization that represents the interests of residential or small commercial consumers.
3. Requires the CPUC to direct each transmission-owning investor-owned electric utility (IOU) to identify a nonbypassable rate component to fund the IOU’s proportional share of the intervener compensation program, to be held in trust by the IOU and paid to an eligible group or groups, as directed by the CEC.

Background

Intervener Compensation Well-established at the CPUC. Since 1981, the CPUC has had a program for intervener compensation. The program was first instituted by the CPUC, then, in 1984, mandated in legislation. The program allows individuals and groups that represent residential or small commercial electric utility customers who would otherwise be financially unable to participate in CPUC proceedings. Funding for the program comes from the ratepayers of the utilities whose rates are regulated by the CPUC.

A recent State Auditor report of the intervener compensation program noted that ratepayers seem to be well-served by the program. [California State Auditor Report 2012-118] According to the auditor’s report:

Commission compensation decisions suggest that intervener participation in commission proceedings can substantially benefit ratepayers. For example, one compensation decision indicated that an intervener’s participation in a proceeding to set a utility’s rates benefited ratepayers by an estimated $354 million. The commission’s compensation decision indicated that the intervener raised more than 60 issues throughout the proceeding, and it awarded the intervener $784,000 for its work. In another case, the compensation decision stated that an intervener’s work on a different utility’s rate‑setting proceeding resulted in approximately $130 million in savings to ratepayers, and the commission awarded the intervener $586,000 in compensation. This intervener engaged with two consulting groups whose work resulted in expert findings that contributed to the recognized savings attributable to the intervener.

The sponsor of this bill, The Utility Reform Network (TURN), contends a somewhat similar compensation program is needed to allow groups that represent the interests of residential or small commercial consumers to participate in the proceedings of CAISO and, to the extent they effect California’s environment and consumers, FERC proceedings, as well as transmission-related proceedings of the CEC. The sponsor justifies its call for the program by noting (1) the decisions of these entities have a great effect on California consumers, economy and environment, and (2) that transmission costs, which CAISO, FERC and CEC each effect, have increased considerably. In addition, the sponsor notes the election of Donald Trump as President of the United States allows him to appoint a majority of FERC members in 2017. Because FERC decisions oftentimes trump state decisions, it is important that the viewpoints of California’s consumers and small businesses be represented in FERC proceedings.

Sounds like a good idea.

But What About Me? This bill limits compensation to “groups” that are independent nonprofit consumer, public health, social equity, or environmental organizations that represents the interests of residential or small commercial consumers. This differs from the CPUC’s intervener compensation program, which allows individuals and groups that productively contribute to a CPUC proceeding to receive compensation. The sponsor justifies this difference by noting that neither CAISO nor FERC sets retail rates or policies related to retail electric service; therefore, some of the rationales for individual customer involvement in the CPUC process are not at stake in the federal processes.

Costs. According to the CPUC’s Intervener Compensation Database, in each year 2014 through 2016, the intervener program awarded a total of $8 million, $12 million and $10 million, respectively. It is unclear how the costs of the program proposed by this bill compares with the cost of the CPUC’s existing program.

A coalition of business interests simply asserts it is inappropriate to use ratepayers to indirectly subsidize the activities of special interest organizations.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local: Yes

According to the Senate Committee on Appropriations:

• Approximately $2.5 million annually (Energy Resources Program Account or General Fund) to the CEC to develop and administer compensation programs.
• Unknown costs, likely in the millions of dollars (ratepayer funds), for compensation to intervenors.
• Unknown costs (General fund and various special funds) to the State as a ratepayer.

SUPPORT: (Verified 5/25/17)

The Utility Reform Network (source)

Asian Pacific Environmental Network

California Environmental Justice Alliance

Clean Coalition

Communities for a Better Environment

Consumer Federation of California

Environmental Defense Fund

Public Citizen, Inc.

Union of Concerned Scientists

Vote Solar

Western Center on Law and Poverty

OPPOSITION: (Verified 5/25/17)

California Business Roundtable

California Chamber of Commerce

California Manufacturers & Technology Association

Independent Energy Producers Association

Pacific Gas and Electric Company

ARGUMENTS IN SUPPORT: According to the author:

The amount of time and resources required to effectively participate at CAISO and FERC prevents most consumer and environmental organizations from active engagement. The costs of participation can be significant due to the need to hire technical experts and attorneys to analyze complex matters of fact, law and policy.

California needs to provide support to non-profit groups to participate actively at CAISO and FERC in order to fight against efforts to undermine clean energy policies and protect California consumers from escalating rates. Only by establishing a new support mechanism can these groups have sufficient resources to defend the public interest and fight to protect California’s leadership role.

ARGUMENTS IN OPPOSITION: Opponents object to using ratepayer monies to fund the activities of private interests.

Prepared by:

5/27/17 15:46:46

**** END ****

SENATE COMMITTEE ON APPROPRIATIONS

Senator Ricardo Lara, Chair

2017 - 2018 Regular Session

SB 520 (Mitchell) - Electricity: intervenor funding

*********** ANALYSIS ADDENDUM – SUSPENSE FILE ***********

The following information is revised to reflect amendments

adopted by the committee on May 25, 2017

Bill Summary:

SB 520 establishes, until January 1, 2025, a compensation program (intervenor compensation) for certain independent nonprofit organizations that engage in productive participation in Federal Energy Regulatory Commission (FERC), California Independent System Operator (CAISO), or California Energy Commission (CEC) transmission planning proceedings.

Fiscal Impact:

• Approximately $2.5 million annually (Energy Resources Program Account or General Fund) to the CEC to develop and administer compensation programs.
• Unknown costs, likely in the millions of dollars (ratepayer funds), for intervenor compensation reimbursements.
• Unknown costs (General fund and various special funds) to the State as a ratepayer.

Author Amendments:

Make technical changes to the bill.

Committee Amendments:

Requires the CEC to submit a report to the relevant committees in the Legislature by January 1, 2024, and sunsets the program on January 1, 2025.

-- END --

SENATE COMMITTEE ON APPROPRIATIONS

Senator Ricardo Lara, Chair

2017 - 2018 Regular Session

SB 520 (Mitchell) - Electricity: intervenor funding

This bill meets the criteria for referral to the Suspense File.

Bill Summary:

SB 520 establishes a compensation program for certain independent nonprofit organizations that engage in productive participation in Federal Energy Regulatory Commission (FERC), California Independent System Operator (CAISO), or California Energy Commission (CEC) transmission planning proceedings.

Fiscal Impact:

• Approximately $2.5 million annually (Energy Resources Program Account or General Fund) to the CEC to develop and administer compensation programs.
• Unknown costs, likely in the millions of dollars (ratepayer funds), for compensation to intervenors.
• Unknown costs (General fund and various special funds) to the State as a ratepayer.

Background:

The State Energy Triad: The State has three primary energy policymaking and regulatory entities: the CAISO, the CEC, and the CPUC. All three are governed by a five-member body; each member represents a specific area of expertise and is appointed by the Governor and subject to Senate confirmation.

• The California Independent System Operator. The CAISO is a state-created non-profit charged with overseeing the operation of California's bulk electric power system, transmission lines, and electricity market generated and transmitted by its member utilities.
• The California Energy Commission. The CEC is California’s primary energy policy and planning agency. Among other things, the Commission is responsible for forecasting future energy needs used for planning the siting and design of electric power generating facilities, promoting energy efficiency through appliance and building standards, and supporting renewable energy technologies. The Commission is a division of the California Natural Resources Agency.

• The California Public Utilities Commission. The CPUC regulates privately owned electric and natural gas providers. Through general rate cases, it determines allowable rates of return for utilities. It also administers various energy efficiency programs, and creates policy through its proceeding process.

Intervener Compensation. The California Public Utilities Code allows qualified parties in proceedings before the Commission to request compensation for their participation (allowable fees and costs). The program is intended to ensure that individuals and groups that represent residential or small commercial electric utility customers are not precluded from participation due to lack of financial resources. Funding for the program comes from the ratepayers of the utilities whose rates are regulated by the CPUC.

Proceedings. One of many ways in which the CPUC is unique amongst State entities is its rulemaking process. Unlike other agencies that are subject to the Administrative Procedures Act, the CPUC’s proceeding process more akin to a judicial process, where a “party” to the proceeding is required to adhere to formal courtroom etiquette, is subject to rules related to ex parte communications, and must be available for cross-examination.

Proposed Law:

This bill:

1. Directs the CEC to adopt regulatory guidelines to govern a program to provide compensation to an eligible group that provides productive participation in a proceeding of CAISO, of FERC that effect California’s environment and consumers, and transmission-related proceedings of the CEC.
2. Defines groups eligible for compensation as an independent nonprofit consumer, public health, social equity, or environmental organization that represents the interests of residential or small commercial consumers.
3. Directs CAISO to collect from transmission-owning utilities sufficiency monies to support the intervener program and provides a process, administered by CEC, for payment.
4. Provides an alternative funding mechanism, should a federal agency or court determine direction to CAISO to collect funds from transit-owning utilities to be invalid, by which CPUC requires each investor-owned electric utility to identify a rate component, and by which the CEC requires each publicly owned electric utility to collect revenue, each to fund transmission-owning utilities proportional share of the intervener compensation program.

Staff Comments:

Implementation resources. The CEC estimates that this bill will cost approximately $150,000 for one staff person to establish program guidelines and regulations, and ongoing annual costs of approximately $2.55 million for 17 program staff to administer the compensation program, conduct oversight of compensation funds, manage litigation, and conduct administrative review of compensation claims.

Energy Resources Program Account. The bill does not specify a funding source for implementation activities. The ERPA, which funds most of the CEC’s activities, is in a structural deficit. The CEC has some discretion to raise the tax which funds the ERPA. However, increased revenue may not be sufficient to cover costs associated with this bill or future unfunded mandates. It should be noted that this is a General Fund-fungible account. As such, any uses of this fund constitute a General Fund cost pressure.

Compensation. According to the CPUC’s Intervener Compensation Database, in each year 2014 through 2016, the intervener program awarded a total of $8 million, $12 million and $10 million, respectively.

-- END --

SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS

Senator Ben Hueso, Chair

2017 - 2018 Regular

Bill No: Hearing Date: 4/4/2017

SUBJECT:

DIGEST: This bill establishes a program of compensation for certain independent nonprofit organizations that engage in productive participation in proceedings of the Federal Energy Regulatory Commission (FERC) or of the California Independent System Operator (CAISO) or of the California Energy Commission (CEC) that relate to transmission planning.

ANALYSIS:

Existing law:

1. Establishes the CAISO, comprised of five board members appointed by the governor and subject to Senate confirmation, 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. (Public Utilities Code §345.5)
2. Establishes the CEC (Public Resources Code §25200) and assigns it many duties, among them to collect forecasts of future supplies and consumption of all forms of energy and of future energy or fuel production and transporting facilities to be constructed; independently analyze such forecasts in relation to statewide estimates of population, economic, and other growth factors and in terms of the availability of energy resources, costs to consumers, and other factors; and formally specify statewide and service area electrical energy demands to be utilized as a basis for planning the siting and design of electric power generating and related facilities (Public Resources Code §25216).
3. Authorizes the California Public Utilities Commission (CPUC) to regulate the rates and service of public utilities, including gas utilities. (Article 12 of the California Constitution, Public Utilities Code §§216(a), 221, 222, 227, and 228)
4. Establishes a program to provide compensation for reasonable advocate’s fees, reasonable expert witness fees, and other reasonable costs to public utility customers of participation or intervention in any proceeding of the CPUC. (Public Resources Code §1801 et seq.)

This bill:

1. Directs the CEC to adopt regulatory guidelines to govern a program to provide compensation to an eligible group that provides productive participation in a proceeding of CAISO, of FERC that effect California’s environment and consumers, and transmission-related proceedings of the CEC.
2. Defines groups eligible for compensation as an independent nonprofit consumer, public health, social equity, or environmental organization that represents the interests of residential or small commercial consumers.
3. Directs CAISO to collect from transmission-owning utilities sufficiency monies to support the intervener program and provides a process, administered by CEC, for payment.
4. Provides an alternative funding mechanism, should a federal agency or court determine direction to CAISO to collect funds from transit-owning utilities to be invalid, by which CPUC requires each investor-owned electric utility to identify a rate component, and by which the CEC requires each publicly owned electric utility to collect revenue, each to fund transmission-owning utilities proportional share of the intervener compensation program.

Background

Intervener Compensation Well-established at the CPUC. Since 1981, the CPUC has had a program for intervener compensation. The program was first instituted by the CPUC, then, in 1984, mandated in legislation. The program allows individuals and groups that represent residential or small commercial electric utility customers who would otherwise be financially unable to participate in CPUC proceedings. Funding for the program comes from the ratepayers of the utilities whose rates are regulated by the CPUC.

A recent State Auditor report of the intervener compensation program noted that ratepayers seem to be well-served by the program.^[1] According to the auditor’s report:

Commission compensation decisions suggest that intervener participation in commission proceedings can substantially benefit ratepayers. For example, one compensation decision indicated that an intervener’s participation in a proceeding to set a utility’s rates benefited ratepayers by an estimated $354 million. The commission’s compensation decision indicated that the intervener raised more than 60 issues throughout the proceeding, and it awarded the intervener $784,000 for its work. In another case, the compensation decision stated that an intervener’s work on a different utility’s rate‑setting proceeding resulted in approximately $130 million in savings to ratepayers, and the commission awarded the intervener $586,000 in compensation. This intervener engaged with two consulting groups whose work resulted in expert findings that contributed to the recognized savings attributable to the intervener.

The sponsor of this bill, The Utility Reform Network (TURN), contends a somewhat similar compensation program is needed to allow groups that represent the interests of residential or small commercial consumers to participate in the proceedings of CAISO and, to the extent they effect California’s environment and consumers, FERC proceedings, as well as transmission-related proceedings of the CEC. The sponsor justifies its call for the program by noting (1) the decisions of these entities have a great effect on California consumers, economy and environment, and (2) that transmission costs, which CAISO, FERC and CEC each effect, have increased considerably. In addition, the sponsor notes the election of Donald Trump as President of the United States allows him to appoint a majority of FERC members in 2017. Because FERC decisions oftentimes trump state decisions, it is important that the viewpoints of California’s consumers and small businesses be represented in FERC proceedings.

Sounds like a good idea.

But What About Me? This bill limits compensation to “groups” that are independent nonprofit consumer, public health, social equity, or environmental organizations that represents the interests of residential or small commercial consumers. This differs from the CPUC’s intervener compensation program, which allows individuals and groups that productively contribute to a CPUC proceeding to receive compensation.

The sponsor justifies this difference by noting that neither CAISO nor FERC sets retail rates or policies related to retail electric service; therefore, some of the rationales for individual customer involvement in the CPUC process are not at stake in the federal processes. This argument is not compelling. The author and committee may wish to amend the bill to allow individuals to receive compensation under the program, similar to what is allowed under the CPUC’s intervener compensation program.

Costs. According to the CPUC’s Intervener Compensation Database, in each year 2014 through 2016, the intervener program awarded a total of $8 million, $12 million and $10 million, respectively. This bill’s sponsor consistently receives more compensation from the program than any other individual participant. It is unclear how the costs of the program proposed by this bill would compare with the cost of the CPUC’s existing program.

Opponents to this bill object to the imposition of costs on ratepayers. The California Municipal Utilities Association (CMUA) accurately notes that its member organizations bear the cost if its participation in regulatory proceedings on behalf of their customers. CMUA objects to requiring these same customers to additionally fund participation by private entities, some of which have ample private funding, that purport to advocate on those customers’ behalf. The munis have a point. As local elected bodies, the munis themselves represent the interest of their customers in regulatory proceedings, and those customers pay the costs of the munis to do so. Therefore, the author and committee may wish to amend this bill to exempt municipal utilities from the requirements of this bill.

A coalition of business interests simply asserts it is inappropriate to use ratepayers to indirectly subsidize the activities of special interest organizations.

Prior/Related Legislation

None.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT:

The Utility Reform Network (Source)

Asian Pacific Environmental Network

California Environmental Justice Alliance

Clean Coalition

Communities for a Better Environment

Environmental Defense Fund

Public Citizen, Inc.

Union of Concerned Scientists

Vote Solar

OPPOSITION:

California Municipal Utilities Association

ARGUMENTS IN SUPPORT: According to the author:

The amount of time and resources required to effectively participate at CAISO and FERC prevents most consumer and environmental organizations from active engagement. The costs of participation can be significant due to the need to hire technical experts and attorneys to analyze complex matters of fact, law and policy.

California needs to provide support to non-profit groups to participate actively at CAISO and FERC in order to fight against efforts to undermine clean energy policies and protect California consumers from escalating rates. Only by establishing a new support mechanism can these groups have sufficient resources to defend the public interest and fight to protect California’s leadership role.

ARGUMENTS IN OPPOSITION: Opponents object to using ratepayer monies to fund the activities of private interests.

-- END --

1. California State Auditor Report 2012-118. ↑