Legislative Analyst's Office
Analysis of the 2001-02 Budget Bill
The Electricity Oversight Board was created by Chapter 854, Statutes of 1996 (AB 1890, Brulte), which restructured California's electricity industry. The board oversees the electricity market and the activities of the Independent System Operator, the nonprofit organization that manages the portion (approximately 75 percent) of the electricity transmission system owned by the state's three investor-owned utilitiesPacific Gas and Electric, Southern California Edison, and San Diego Gas and Electric. In addition, the board is responsible for representing the state before the Federal Energy Regulatory Commission, which has jurisdiction over some aspects of California's restructured electricity market.
The budget includes $4.4 million for the board's activities in the budget year, which is $1.6 million more than estimated current-year expenditures due to proposals for additional staff and consultant funds to enhance its market monitoring and oversight activities in response to the electricity crisis. Proposed 2001-02 funding would support 30.4 personnel-years (PYs), an increase of 10.4 PYs.
We withhold recommendation on the $500,000 requested to contract with the University of California Energy Institute for electricity market analysis until the board reports to the Legislature prior to budget hearings on specific proposals to allocate the requested funds.
The budget proposes $500,000 on an ongoing basis for the board to contract with the University of California Energy Institute to analyze the state's electricity market. According to the board, the institute would (1) perform independent, long-term research on topics such as congestion management reform, supply issues, competition in the retail market for electricity, price responsiveness of demand, and market design; (2) develop methods for detecting market abuses; and (3) assess different market structures. Beyond mentioning these general research topics, the board does not include a definite proposal for using the funds. Consequently, we withhold recommendation on the $500,000 request. The board should report to the Legislature prior to budget hearings on specific proposals to allocate the requested funds.