III. Preliminary Scoping Memo

The rules and procedures implementing many of the reforms contained in Senate bill (SB) 960 are found in Article 2.5 of Practice and Procedure (Rules), which are posted on the Commission's web site. Pursuant to Rule 4(a), the rules in Article 2.5 shall apply to this proceeding. As per the provisions of SB 960, the present investigation is classified as a quasi-legislative proceeding and is expected to require hearings. In the preceding section, we have listed the issues to be considered in this investigation. This is a preliminary list of issues. The scope of this rulemaking may be expanded once we take comments from parties and conduct the initial PHC and formal hearings.

Carl W. Wood shall be the Assigned Commissioner. The Assigned Commissioner and assigned administrative law judge shall convene a PHC to develop a service list for this proceeding and to further delineate issues related to scope and schedule for this proceeding on a date and at a location to be specified by Assigned Commissioner Ruling ACR.

Any person who objects to the categorization of this investigation must file an appeal 10 days after the date of this OII. Pursuant to Rule 6.4(a) of the Commission's Rules of Practice and Procedure.

The temporary service list is attached to this order as Appendix B and shall be used for service until a service list for this proceeding is

established at the PHC. Persons who want to become a "party" to this proceeding shall appear at the PHC, or subsequent hearings, and fill out the "Notice of Party/Non-Party Status" form (appearance form).

Those persons who do not want to be parties, and only want notice of the hearings, rulings, proposed decisions, and decisions may either fill out an appearance form at hearing, or they may mail a written request to the Process Office requesting that they be added to the service list for information only.

Those persons employed by the State of California who are interested in this proceeding may require that they be added to the "state service" section of the service list either by appearing at the PHC or at the formal hearing and filling out an appearance form, or by mailing a written request for "state service" status to the Process Office. Parties are obligated to serve all documents they may submit or file in this proceeding on all names appearing on the state service list.

The Process office shall develop an initial service list based on the appearances at the first PHC. This initial service list shall be posted on the Commission's web site, www.cpuc.ca.gov, as soon as possible.

Ex Parte Communications

This proceeding is subject to Rule 7, which specifies standards for engaging in ex parte communications and the reporting of such communications. Pursuant to Rules 7(a)(3) and 7(d), ex parte communications will be allowed in this proceeding without any restrictions or reporting requirements unless and until the Commission modifies this determination of category.

IT IS ORDERED that:

1. A rulemaking is instituted on the Commission's own motion.

2. San Diego Gas and Electric Company (SDG&E); Pacific Gas and Electric Company (PG&E); Southern California Edison Company and the entities identified in Appendix B are made respondents to this proceeding and are ordered to provide preliminary responses on the issues listed in this rulemaking at the Prehearing Conference (PHC).

3. Respondents shall, and other parties may file and serve PHC statements to provide comment on this rulemaking. These PHC statements shall be filed and served 15 days from the effective date of this decision.

4. The Executive Director shall cause this Order Instituting Rulemaking to be served on the respondents.

5. The temporary service list is attached as Appendix C and shall be used for service of all pleadings until a service list for this proceeding is established. The official service list for this proceeding shall be created by the Process Office and posted on the Commission's web site ( www.cpuc.ca.gov) as soon as practicable after the first PHC. Parties may also obtain the service list by contacting the Commission's Process Office at (415) 703-2021.

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6. This rulemaking is categorized as quasi-legislative as that term is defined in Rule 5(d) of the Commission's Rules of Practice and Procedure.

7. Persons interested in having their names added to the service list for this proceeding shall follow the procedures described in this order.

This order is effective today.

Dated November 21, 2002 at San Francisco, California.

LORETTA M. LYNCH

President

HENRY M. DUQUE

CARL W. WOOD

MICHAEL R. PEEVEY

Commissioners

Commissioner Geoffrey Brown

being necessarily absent did not

participate.

APPENDIX A

BILL NUMBER: SBX2 39 CHAPTERED

CHAPTER 19

FILED WITH SECRETARY OF STATE APRIL 26, 2002

An act to amend Section 362 of, to add Section 761.3 to, and to

repeal Section 342, as added by Chapter 16 of the Statutes of 2001,

Second Extraordinary Session, of, the Public Utilities Code, relating

to public utilities.

THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

SECTION 1. The Legislature finds and declares all of the

following:

(a) Electric generating facilities and powerplants in California

are essential facilities for maintaining and protecting the public

health and safety of California residents and businesses.

(b) It is in the public interest to ensure that electric

generating facilities and powerplants located in California are

effectively and appropriately maintained and efficiently operated.

(c) Owners and operators of electric generating facilities and

powerplants provide a critical and essential good to California

residents. It is in the public interest that the Public Utilities

Commission seek enforcement capability from the Federal Energy

Regulatory Commission regarding the private generator agreement to

provide for broader state control of operational activities of

generation facilities in the state.

(d) To protect the public health and safety and to ensure

electrical service reliability and adequacy, the Public Utilities

Commission and the Independent System Operator shall work

collaboratively to develop clearly articulated, uniform operating

practices and procedures. The commission shall enforce compliance

with those practices and procedures.

SEC. 2. Section 342 of the Public Utilities Code, as added by

Section 3 of Chapter 16 of the Statutes of 2001, Second Extraordinary

Session, is repealed.

SEC. 3. Section 362 of the Public Utilities Code is amended to

read:

362. (a) In proceedings pursuant to Section 455.5, 851, or 854,

the commission shall ensure that facilities needed to maintain the

reliability of the electric supply remain available and operational,

consistent with maintaining open competition and avoiding an

overconcentration of market power. In order to determine whether the

facility needs to remain available and operational, the commission

shall utilize standards that are no less stringent than the Western

Systems Coordinating Council and North American Electric Reliability

Council standards for planning reserve criteria.

(b) The commission shall require that generation facilities

located in the state that have been disposed of in proceedings

pursuant to Section 851, are operated by the persons or corporations

who own or control them in a manner that ensures their availability

to maintain the reliability of the electric supply system.

SEC. 4. Section 761.3 is added to the Public Utilities Code, to

read:

761.3. (a) Notwithstanding subdivision (g) of Section 216 and

subdivisions (c) and (d) of Section 228.5, the commission shall

implement and enforce standards adopted pursuant to subdivision (b)

for the maintenance and operation of facilities for the generation of

electric energy owned by an electrical corporation or located in the

state to ensure their reliable operation. The commission shall

enforce the protocols for the scheduling of powerplant outages of the

Independent System Operator.

(b) (1) The commission and the Independent System Operator shall

jointly establish the California Electricity Generation Facilities

Standards Committee. The committee shall consist of three members,

one a member of the commission appointed by the commission, one a

member of the Independent System Operator board appointed by that

board, and one individual with expertise regarding electric

generation facilities and jointly appointed by the commission and the

Independent System Operator board. The committee, within 90 days of

the effective date of this section and after providing notice and

opportunity for public comment, shall adopt, and may thereafter

revise, standards for the maintenance and operation of facilities for

the generation of electric energy located in the state. The

standards shall be consistent with subdivision (d) of this section.

(2) The committee shall be supported by a reasonable amount of

staff time, which shall be provided proportionally by the agencies

represented on the committee.

(3) This subdivision shall be operative only until January 1,

2005.

(c) Nothing in this section authorizes the commission to establish

rates for wholesale sales in interstate commerce from those

facilities, or to approve the sale or transfer of control of

facilities that have been certified as exempt wholesale generators by

the Federal Energy Regulatory Commission pursuant to Section 79z-5a

(1) of Title 15 of the United States Code.

(d) (1) (A) Except as otherwise provided in this subdivision, this

section shall not apply to nuclear powered generating facilities

that are federally regulated and subject to standards developed by

the Nuclear Regulatory Commission, and that participate as members of

the Institute of Nuclear Power Operations.

(B) The owner or operator of a nuclear powered generating facility

shall file with the Oversight Board and the commission an annual

schedule of maintenance, including repairs and upgrades, updated

quarterly, for each generating facility. The owner or operator of a

nuclear powered generating facility shall make good faith efforts to

conduct its maintenance in compliance with its filed plan and shall

report to the Oversight Board and the Independent System Operator any

significant variations from its filed plan.

(C) The owner or operator of a nuclear powered generating facility

shall report on a monthly basis to the Oversight Board and the

commission all actual planned and unplanned outages of each facility

during the preceding month. The owner or operator of a nuclear

powered generating facility shall report on a daily basis to the

Oversight Board and the Independent System Operator the daily

operational status and availability of each facility.

(2) (A) Except as otherwise provided in this subdivision, this

section shall not apply to a qualifying small power production

facility or a qualifying cogeneration facility within the meaning of

Sections 201 and 210 of Title 11 of the federal Public Utility

Regulatory Policies Act of 1978 (16 U.S.C. Secs. 796(17), 796(18),

and 824a-3), and the regulations adopted pursuant to those sections

by the Federal Energy Regulatory Commission (18 C.F.R. Secs. 292.101

to 292.602, inclusive), nor shall this section apply to other

generation units installed, operated, and maintained at a customer

site, exclusively to serve that customer's load.

(B) An electrical corporation that has a contract with a

qualifying small power production facility, or a qualifying

cogeneration facility, with a name plate rating of 10 megawatts or

greater, shall report to the Oversight Board and the commission

maintenance schedules for each facility, including all actual planned

and unplanned outages of the facility and the daily operational

status and availability of the facility. Each facility with a name

plate rating of ten megawatts or greater shall be responsible for

directly reporting to the Oversight Board and the Independent System

Operator maintenance schedules for each facility, including all

actual planned and unplanned outages of the facility and the daily

operational status and availability of the facility, if that

information is not provided to the electrical corporation pursuant to

a contract.

(e) In developing the standards pursuant to subdivision (b), the

committee shall take into consideration generation facilities

scheduled for retirement, valid warranties on generation facilities,

and the operational authority of the Independent System Operator as

prescribed in the standard Participating Generator Agreement and

applicable sections of the Federal Energy Regulatory Commission's

approved Independent System Operator tariff.

(f) Nothing in this section shall result in the modification,

delay, or abrogation of any deadline, standard, rule, or regulation

adopted by a federal, state, or local agency for the purposes of

protecting public health or the environment, including, but not

limited to, any requirements imposed by the State Air Resources Board

or by an air pollution control district or an air quality management

district pursuant to Division 26 (commencing with Section 39000) of

the Health and Safety Code. The Independent System Operator shall

consult with the State Air Resources Board and the appropriate local

air pollution control districts and air quality management districts

to coordinate scheduled outages to provide for compliance with those

retrofits.

(g) The Independent System Operator shall maintain records of

generation facility outages and shall provide those records to the

Oversight Board and the commission on a daily basis. Each entity

that owns or operates an electric generating unit in California with

a rated maximum capacity of 10 megawatts or greater, shall provide a

monthly report to the Independent System Operator that identifies any

periods during the preceding month when the unit was unavailable to

produce electricity or was available only at reduced capacity. The

report shall identify the reasons for any such unscheduled

unavailability or reduced capacity. The Independent System Operator

shall immediately transmit the information to the Oversight Board and

the commission.

(h) This section does not apply to any of the following:

(1) Facilities owned by a local publicly owned electric utility as

defined in subdivision (d) of Section 9604.

(2) Any public agency that may generate electricity incidental to

the provision of water or wastewater treatment.

(3) Facilities owned by a city and county operating as a public

utility, furnishing electric service as provided in Section 10001.

SEC. 5. No reimbursement is required by this act pursuant to

Section 6 of Article XIII B of the California Constitution because

the only costs that may be incurred by a local agency or school

district will be incurred because this act creates a new crime or

infraction, eliminates a crime or infraction, or changes the penalty

for a crime or infraction, within the meaning of Section 17556 of the

Government Code, or changes the definition of a crime within the

meaning of Section 6 of Article XIII B of the California

Constitution.

SEC. 6. This act shall become operative only if Assembly Bill 28

of the 2001-02 Second Extraordinary Session is enacted and becomes

effective.

APPENDIX B

RESPONDENT PARTIES/PRELIMINARY SERVICE LIST

APPENDIX C

AGENTS FOR SERVICE

Reliant Energy Coolwater, LLC

Agent for service - C T Corporation System

818 West Seventh St.

Los Angeles, CA 90017

AES Redondo Beach, LLC

Agent for service - Corporation Service Company

CSC- Lawyers Incorporating Service

2730 Gateway Oaks Drive, Suite 100

Sacramento, CA 95833

AES Alamitos, LLC

Agent for service - Corporation Service Company

CSC- Lawyers Incorporating Service

2730 Gateway Oaks Drive, Suite 100

Sacramento, CA 95833

AES Huntington Beach, LLC

Agent for service - Anja Irwin

18904 Deodar St.

Fountain Valley, CA 92708

Reliant Energy Mandalay, LLC

Agent for service - C T Corporation System

818 West Seventh St.

Los Angeles, CA 90017

Reliant Energy Etiwanda, LLC

Agent for service - C T Corporation System

818 West Seventh St.

Los Angeles, CA 90017

Reliant Energy Ellwood, LLC

Agent for service - C T Corporation System

818 West Seventh St.

Los Angeles, CA 90017

El Segundo Power, LLC

Agent for service - C T Corporation System

818 West Seventh St.

Los Angeles, CA 90017

Long Beach Generation, LLC

Agent for service - C T Corporation System

818 West Seventh St.

Los Angeles, CA 90017

Duke Energy Oakland, LLC

Agent for service - C T Corporation System

818 West Seventh St.

Los Angeles, CA 90017

Duke Energy Moss Landing, LLC

Agent for service - C T Corporation System

818 West Seventh St.

Los Angeles, CA 90017

Duke Energy Morro Bay, LLC

Agent for service - C T Corporation System

818 West Seventh St.

Los Angeles, CA 90017

Reliant Energy Ormond Beach, LLC

Agent for service - C T Corporation System

818 West Seventh St.

Los Angeles, CA 90017

Cabrillo Power I, LLC

Agent for service - C T Corporation System

818 West Seventh St.

Los Angeles, CA 90017

Duke Energy South Bay, LLC

Agent for service - C T Corporation System

818 West Seventh St.

Los Angeles, CA 90017

Cabrillo Power II, LLC

Agent for service - C T Corporation System

818 West Seventh St.

Los Angeles, CA 90017

Mirant Delta, LLC

Agent for service - National Registered Agents, Inc.

2030 Main St. Suite 1030

Irvin, CA 92614

Mirant Potrero, LLC

Agent for service - National Registered Agents, Inc.

2030 Main St. Suite 1030

Irvin, CA 92614