STATE OF CALIFORNIA ARNOLD SCHWARZENEGGER, Governor

PUBLIC UTILITIES COMMISSION

505 VAN NESS AVENUE

SAN FRANCISCO, CA 94102-3298

February 27, 2004 Agenda ID #3291

TO: PARTIES OF RECORD IN RULEMAKING 02-11-039

RE: NOTICE OF AVAILABILITY OF DRAFT DECISION ADOPTING GENERAL ORDER IMPLEMENTING AND ENFORCING ELECTRIC GENERATOR GENERAL DUTY STANDARDS FOR OPERATION AND MAINTENANCE, MAINTENANCE STANDARDS, AND CAISO'S OUTAGE COORDINATION PROTOCOL

Consistent with Rule 2.3(c) of the Commission's Rules of Practice and Procedure, I am issuing this Notice of Availability of the above-referenced draft decision. The draft decision was issued by Administrative Law Judge (ALJ) John Thorson on February 27, 2004. An Internet link to this document was sent via e-mail to all the parties on the service list who provided an e-mail address to the Commission. An electronic copy of this document can be viewed and downloaded at the Commission's Website ( www.cpuc.ca.gov). A hard copy of this document can be obtained by contacting the Commission's Central Files Office [(415) 703-2045].

When the Commission acts on the draft decision, it may adopt all or part of it as written, amend or modify it, or set it aside and prepare its own decision. Only when the Commission acts does the decision become binding on the parties.

Parties to the proceeding may file comments on the draft decision as provided in Article 19 of the Commission's "Rules of Practice and Procedure." These rules are accessible on the Commission's website at http://www.cpuc.ca.gov. Pursuant to Rule 77.3 opening comments shall not exceed 25 pages.

Consistent with the service procedures in this proceeding, parties should send comments in electronic form to those appearances and the state service list that provided an electronic mail address to the Commission, including ALJ Thorson at jet@cpuc.ca.gov. Service by U.S. mail is optional, except that hard copies should be served separately on ALJ Thorson, and for that purpose I suggest hand delivery, overnight mail or other expeditious methods of service. In addition, if there is no electronic address available, the electronic mail is returned to the sender, or the recipient informs the sender of an inability to open the document, the sender shall

immediately arrange for alternate service (regular U.S. mail shall be the default, unless another means - such as overnight delivery-- is mutually agreed upon). The current service list for this proceeding is available on the Commission's Web page, www.cpuc.ca.gov.

/s/ ANGELA K. MINKIN

Angela K. Minkin, Chief

Administrative Law Judge

ANG:tcg

Attachment

ALJ/JET/tcg DRAFT Agenda ID #3291

Quasi-legislative

Decision DRAFT DECISION OF ALJ THORSON (Mailed 2/27/2004)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Rulemaking to implement the provisions of Public Utilities Code § 761.3 enacted by Chapter 19 of the 2001-02 Second Extraordinary Legislative Session.

Rulemaking 02-11-039 (Filed November 21, 2002)

DRAFT DECISION ADOPTING GENERAL ORDER

IMPLEMENTING AND ENFORCING ELECTRIC

GENERATOR GENERAL DUTY STANDARDS FOR OPERATION AND MAINTENANCE, MAINTENANCE STANDARDS, AND

CAISO'S OUTAGE COORDINATION PROTOCOL

TABLE OF CONTENTS

Title Page

DRAFT DECISION ADOPTING GENERAL ORDER IMPLEMENTING
AND ENFORCING ELECTRIC GENERATOR GENERAL DUTY STANDARDS
FOR OPERATION AND MAINTENANCE, MAINTENANCE STANDARDS,
AND CAISO'S OUTAGE COORDINATION PROTOCOL 1

A. Background 3

B. Procedural History 5

C. Commission Jurisdiction 6

D. Implementation and Enforcement Approach 10

E. Participants' Major Concerns 12

1. General Concerns 12

a. Delegation of Functions to Staff 12

b. Procedures to Implement Standards 14

c. Enforcement Procedures 15

d. Potential Conflict with Other Authorities 16

e. Interference with FERC/CAISO Authority 16

f. Incorporation in Tariff 17

g. Amendments to Standards 20

2. General Duty Standards 22

a. Enforceability 22

b. Relationship with Existing Rules 24

c. Authority to Adopt, Implement and Enforce General Duty Standards 25

3. Maintenance Standards 26

a. Status of Appendix A to Standards 26

b. Unique Characteristics of Generating Assets 26

c. Overlap with Other Requirements 27

d. Relationship to Commission's Ratemaking and Regulatory Functions 28

F. CEQA Compliance 29

G. Comments on Draft Decision 30

H. Assignment of Proceeding 30

Findings of Fact 30

Conclusions of Law 32

ORDER 33

DRAFT DECISION ADOPTING GENERAL ORDER

IMPLEMENTING AND ENFORCING ELECTRIC

GENERATOR GENERAL DUTY STANDARDS FOR OPERATION AND MAINTENANCE, MAINTENANCE STANDARDS, AND

CAISO'S OUTAGE COORDINATION PROTOCOL

We adopt a General Order (GO) providing rules for the implementation and enforcement of (1) General Duty Standards for operation and maintenance and (2) more detailed standards for the maintenance of facilities for the generation of electric energy owned by an electrical corporation or located in the State of California. By adopting the GO, set forth as Attachment A to this decision, we also enforce the Outage Coordination Protocol adopted by the California Independent System Operation (CAISO). We issue the GO in response to legislation enacted by the California Legislature in 2002, now codified at Pub. Util. Code § 761.3.

While the General Duty and Maintenance Standards themselves were developed and adopted by the California Electricity Generation Facilities Standards Committee¹ ("Standards Committee" or "Committee"), the California Legislature has directed us to enforce and implement these provisions. Similarly, while CAISO has developed and adopted the Outage Coordination Protocol, the Legislature has also required that we enforce the Protocol. Our implementation and enforcement of the General Duty Standards, Maintenance Standards, and Protocol will help ensure the reliable operation of Generating Assets subject to our authority and provide for public health and safety.

We intend that this GO will be the basic framework for implementing and enforcing all standards and amendments adopted by the Standards Committee including logbook, maintenance, and operational standards. As a result of today's decision, the General Duty Standards and Maintenance Standards, as well as the generators' obligations under the CAISO Protocol, become enforceable through the GO. After other requirements and standards are adopted by the Committee, filed with us, and formally acted upon by us, we intend that these other requirements and standards will be appended to the GO and thereafter implemented and enforced by the Commission. Once this proceeding is concluded, the GO will codify all standards and requirements applicable to facilities used for the generation of electric energy (pursuant to Pub. Util. Code § 761.3)² and set forth the procedures to be used for implementation and enforcement.

A. Background

The statewide energy crisis of 2000-2001 resulted in many economic and personal hardships to people and businesses within California. In our recent filing with the Federal Energy Regulatory Commission (FERC), we indicated that the total cost of electricity needed to serve California, for the period of May 2000 through June 2001, was $19 billion higher than the cost incurred during the combined years of 1998, 1999, and 2000. Our filings with FERC document many instances of Generating Assets being placed on reserve status for questionable reasons and resulting in electricity power outages.³

In 2002, the California Legislature passed Senate Bill SBX2 39 during its second extraordinary session to help avoid such outages in the future. The Legislature determined that the public interest, as well as the public health and safety, requires the electric generating facilities and power plants in the state to be maintained appropriately and operated efficiently.

We commenced this rulemaking proceeding to address our obligations under the legislation, now codified at Pub. Util. Code § 761.3. Under the statute, we worked with CAISO to create the Standards Committee. As contemplated by the legislation, both our staff and that of CAISO provide administrative assistance to the Standards Committee. The Standards Committee is responsible for adopting standards for the maintenance and operation of facilities that generate electric energy for use or compensation within the state. The Standards Committee has adopted Logbook Standards for Thermal Powerplants (Thermal Logbook Standards) (filed with us on April 2, 2003), Maintenance Standards for Generators with Suggested Implementation and Enforcement Model (Maintenance Standards)(filed with us on May 16, 2003), and Revised General Duty Standards for Operation and Maintenance (General Duty Standards) (filed with us on June 6, 2003). The CAISO has previously adopted the Outage Coordination Protocol (Protocol). ⁴

Our decision today and the accompanying GO address the implementation and enforcement of the General Duty and Maintenance Standards, as well as the enforcement of the CAISO Protocol. We are contemporaneously considering a draft decision to enforce the Thermal Logbook Standards. Once we have finalized the logbook decision, the operative provisions of that decision will be included in the GO we adopt today.

In the next few months, we anticipate that the Committee will adopt operational standards and logbook standards for hydroelectric generation facilities. Once these operational and hydroelectric logbook standards are filed with us, we also will decide how they will be implemented and enforced. We intend to incorporate these operational and hydroelectric logbook standards into today's GO and use the GO to implement and enforce these standards.