3. Jurisdiction: Hydro, Nuclear, EWGs, Other

As a threshold matter, some parties assert that the Committee has no jurisdiction to adopt standards for many types of powerplants, and the Commission has no jurisdiction to implement and enforce such standards. In particular, several parties say that hydroelectric and nuclear powerplants are exempt from these standards. Other parties contend that exempt wholesale generators (EWGs) subject to federal jurisdiction cannot be made subject to state jurisdiction by § 761.3.

3.1. Hydroelectric

The adopted Logbook Standards under consideration here apply only to thermal powerplants. The issue of their application to hydroelectric powerplants is moot with respect to this decision, and we will not address it at this time.7

3.2. Nuclear and Other Plants Specifically Excluded by § 761.3

We implement Committee-adopted thermal Logbook Standards for each facility used to generate electric energy by the use of thermal energy owned by an electrical corporation or located in California, with the following exceptions:

1. 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.

2. Qualifying small power production facilities or qualifying cogeneration facilities (both called qualifying facilities, or QFs) within the meaning of §§ 201 and 210 of Title 11 of the federal Public Utility Regulatory Policies Act of 1978 (16 U.S.C. §§ 796(17), 796(18), and 824a-3), and the regulations adopted pursuant to those sections by the Federal Energy Regulatory Commission (FERC; 18 C.F.R. §§ 292.101 to 292.602, inclusive).

3. Generation units installed, operated, and maintained at a customer site, exclusively to serve that customer's load.

4. Facilities owned by a local publicly owned electric utility as defined in § 9604(d).

5. Facilities at a public agency that are used to generate electricity incidental to the provision of water or wastewater treatment.

6. Facilities owned by a city and county operating as a public utility, furnishing electric service as provided in § 10001.

These exceptions are set forth in §§ 761.3(d) and (h). The Committee recognized these exceptions in Resolution No. 1.8 The Committee's list of exemptions is consistent with § 761.3, and we adopt the same exemptions for our implementation and enforcement of Logbook Standards for thermal powerplants.

3.3. EWGs

Several parties assert that Commission implementation and enforcement of Committee standards cannot govern operation and maintenance practices of EWGs.9 Rather, they claim that EWGs are regulated under federal law and exempt from state regulation. Although we acknowledge the fact that the Federal Energy Regulatory Commission (FERC) has adopted a rule involving the sales of electric power into the wholesale market that affects the scheduling of maintenance by EWGs, for the reasons discussed in more detail below, we do not believe that FERC's assertion of authority in this regard in any way preempts the state from taking action to oversee maintenance and operation activities either at power plants generally, or at EWGs in particular.

3.3.1. State Law

The Commission is charged with implementing and enforcing standards adopted by the Committee:

    "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." (§ 761.3(a), emphasis added.)

An electrical corporation "includes every corporation or person owning, controlling, operating, or managing any electric plant for compensation within this state..." with limited exceptions.10 (§ 218(a).) As a result, the Commission must apply Committee-adopted operation and maintenance standards to electricity generation facilities of every corporation or person who owns, controls, operates or manages any electric plant for compensation within California or located in California, with limited exceptions. The statute does not exclude EWGs.11

The Legislature specifically named plant types and categories that are excluded (e.g., nuclear, QFs, self-generation, publicly owned, incidental to water provision or wastewater treatment, owned by a city and county public utility). The Legislature could have, but did not, exclude EWGs.12

Section 5 of Article XII of the California Constitution gives the Legislature "plenary authority, unlimited by the other provisions of this constitution...to confer additional authority and jurisdiction upon the commission..."13 Pursuant to Section 5, the Legislature has specifically extended the applicability of Commission implementation and enforcement of operation and maintenance standards to EWGs, and conferred additional authority and jurisdiction upon the Commission through the following provision:

    "Notwithstanding subdivision (g) of Section 216 and subdivisions (c) and (d) of Section 228.5, the commission shall implement and enforce standards adopted [by the Committee] 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." (§ 761.3(a).)

Some parties point to § 228.5(d) and conclude that the Commission lacks jurisdiction over EWGs. Section 228.5(d) states:

      "Notwithstanding any other provision of law, an exempt wholesale generator is not a public utility subject to the general jurisdiction of the commission solely due to the ownership or operation of the facility."

EWGs may not be "subject to the general jurisdiction of the commission solely due to the ownership or operation of the facility." (Section 228.5(d).) Nonetheless, the Legislature has seen fit to make them explicitly subject to the additional, special, specific jurisdiction vested in the Commission to enforce operations and maintenance standards pursuant to § 761.3. Pursuant to Article XII, Section 5 of the Constitution, the Legislature was clearly within its rights to vest the Commission with this additional authority.

In fact, § 761.3 specifically directs that the Commission implement and enforce Committee-adopted standards to be followed by an electrical corporation notwithstanding specific provisions of the Public Utilities Code that would otherwise exclude EWGs from Commission jurisdiction (i.e., §§ 216(g), 228.5(c), 228.5(d)). As a result, the law provides the Commission with the specific and necessary jurisdictional basis to apply adopted standards to EWGs.

Moreover, the Legislature made specific findings and declarations in adopting § 761.3 that further support this conclusion. (Section 1, Chapter 19, SB X2 39.) In particular, the Legislature found and declared that:

It is of particular importance that in extending the reach of the Commission's authority to implement and enforce powerplant operation and maintenance standards to EWGs, the Legislature focused on the need to protect public health and safety, and on the need to protect public service adequacy and reliability. With respect to electric power generating facilities located within the state, these underlying policy considerations of public health and safety and of public service adequacy and reliability are undoubtedly matters of state concern, both legislative and regulatory. Moreover, the state's jurisdiction over matters of public health and safety, and over the adequacy and reliability of public services (which certainly must be read to include jurisdiction over the adequacy and reliability of the electric power supplies needed to meet the demands of the customers of the electric utilities regulated by this Commission) in no way conflicts with, impedes, or in any way subordinates, the jurisdiction of FERC over the rates and tariffs charged by the EWGs.

A number of the parties to this proceeding have pointed out that the regulation of wholesale energy transactions is within the exclusive domain of FERC. We do not disagree that pursuant to the Federal Power Act,14 FERC has exclusive authority over rate-setting in wholesale power markets and over the prices that EWGs may charge for the power they provide. Indeed, §761.3(c) explicitly acknowledges that we are not authorized either to set rates for wholesale power sales in interstate commerce or to approve the sale or transfer of control of an EWG's facilities.

However, our inability to regulate wholesale energy transactions in no way implicates or limits our ability, under state law, to regulate in order to protect the public health and safety of California's energy users or to assure the reliability and adequacy of their power supply. The Federal Power Act explicitly confirms this by withdrawing from FERC all regulatory authority with respect to "facilities for the generation of electric energy."15 Unfortunately, certain commenters have attempted to conflate these two entirely distinct, and unrelated, regulatory functions, one of which, relating to wholesale rates and tariffs, is within the exclusive purview of FERC, but the other of which, relating to public health and safety and the adequacy and reliability of public services, is clearly within the authority of the state and of this Commission. We have previously explained how the authority of the California Independent System Operator (ISO) over transmission system reliability in no way inhibits us from taking actions to protect public health and safety and to assure the adequacy and reliability of the state's energy supply. See Decision D.99.07-028.16 We direct the attention of the parties to our reasoning on the jurisdictional question addressed in that Decision, which is directly analogous to the jurisdictional question we are faced with in this Decision.

We accordingly believe that the language of SBX2 39 and §761.3 provides us with clear and explicit authorization to implement and enforce generator maintenance and operation standards, even as to EWGs, so long as our regulatory purpose in so doing is guided by, and limited to, the public health and safety and service adequacy and reliability considerations that are unquestionably the business and the responsibility of the state and of this Commission. Excluding EWGs from the provisions of SB X2 39 would eliminate an important number of powerplants the Legislature has found and declared to be essential facilities providing a critical and essential good. Excluding EWGs would frustrate the legislative goals of protecting public health and safety and ensuring electrical service reliability and adequacy. Our implementation and enforcement of generator maintenance and operation standards is intended to, and will, support these goals of protecting public health and safety and ensuring electrical service reliability and adequacy, thereby assuring the continued availability of a critical and essential public good, namely, electric power to the customers of California's investor-owned electric utilities.

Moreover, excluding EWGs would limit Commission implementation and enforcement to the few remaining powerplants of PG&E and SCE.17 The Commission already has this jurisdiction. (§ 451, 701, 761, 768) We decline to interpret § 761.3 in a manner that would make its passage meaningless.

The fact that we may have independent authority under state law to implement and enforce such standards does not gainsay the fact that FERC also has authority to regulate wholesale rates and tariffs. Under its authority, in order to protect against anti-competitive behavior or the exercise of market power in wholesale energy markets, FERC may impose conditions, indirectly touching upon plant maintenance, on EWGs in connection with their sales into the wholesale market.18 However, the fact that a FERC rule may indirectly impact the maintenance of generation facilities does not confer jurisdiction upon FERC over the generation facilities themselves. As discussed above, Section 201(b) of the Federal Power Act is explicit in denying to FERC jurisdiction over generation facilities, while that Act does assign to FERC responsibility over wholesale price formation. However, FERC's limited and indirect actions to date in regard the scheduling of generator maintenance are intended to implement FERC's unquestioned authority over ratemaking within wholesale markets; they are in no way intended or structured to address the public health and safety and service reliability and adequacy concerns that are at the heart of SB X2 39.

Because FERC and California have different purposes for taking actions that address the same activity, namely the maintenance and operation of powerplants owned by EWGs, we consider it important to try to harmonize the efforts we are taking in this and related decisions to implement California's generation facility maintenance and operation standards with the responsibilities of FERC. It does not serve the interests of California, FERC or the EWGs for there to be conflicting sets of rules that serve different regulatory purposes, but that address closely related subjects, in this case, those relating to generator maintenance and operation activities.

In this regard, certain parties have advocated that we should work with the ISO to implement generator maintenance and operation standards and an oversight process to support the coordinated availability of generation. Those parties are doubtless aware that the Committee is a joint entity made up of representatives of both the Commission and the ISO and that the staffs of the two entities collaborated fully on the development of the standards we adopt today.

We agree that it is in the best interests of all of the affected entities, including the EWGs, for there to be one single set of generator maintenance and operation standards that would serve both FERC's market-related concerns as well as California's public health and safety and service adequacy and reliability concerns.

Toward this end, and in a spirit of comity with our federal counterpart, FERC, we shall forward the standards that we adopt in this Decision, and in all related current and future decisions that implement generator maintenance and operation standards, to the ISO with a request that the ISO submit these adopted standards to FERC for approval as amendments to the ISO's tariff. FERC approval of the same standards that we adopt will accomplish three important goals: (1) it will eliminate any potential conflict in the maintenance and operation requirements that the EWGs must comply with in order to satisfy the complementary, but different, policy concerns of the state and federal governments; (2) it will allow multiple, complementary regulatory purposes to be satisfied by a single set of standards, thereby promoting governmental efficiency and simplifying the job of the regulated community; and (3) it will encourage and support the important principle of collaborative federalism, under which the state and federal governments recognize and respect, and to the extent possible seek to harmonize, their respective regulatory purposes and the mechanisms they employ to achieve these purposes. In this last regard, we note that there are numerous areas of law and regulation (including, but certainly not limited to, environmental protection and criminal law enforcement) where the federal government and the states have adopted a collaborative approach. Although done for differing regulatory purposes, we see the adoption of identical standards relating to generator maintenance and operation by this Commission and by FERC both as a way to improve relationships and enhance collaboration and cooperation between the two agencies, and as an important step forward on the path to creating a stronger and better regulatory paradigm that serves everyone more efficiently and more effectively.

3.3.2. Federal Law

EWGs assert that they are regulated under federal law and federal law preempts state law. For example, WCP says "some of the generators (the nonutility EWGs) are, under applicable precedents, beyond the jurisdictional reach of the Commission for the relevant purposes." (WCP Comments, April 8, 2003, page 6.) In support, WCP cites a Commission statement that "regulation of EWGs would directly conflict with Federal jurisdiction over wholesale power rates." (WCP Comments, April 8, 2003, page 6, footnote 10, citing D.95-12-006, 62 CPUC2d 517, 537, Conclusion of Law 17.)

To the contrary, WCP's citation is to a conclusion that addresses rate regulation. We are not engaging in rate regulation here. Rather, we are implementing and enforcing a limited and specific component of operation and maintenance standards. In any case, no such pronouncement by the Commission could control the action of the Legislature in otherwise extending Commission jurisdiction. (Southern California Gas v. PUC, (1979), 24 Cal. 3d 653, 658-59.)

The Legislature specifically noted the distinction between (a) rate regulation and (b) implementation and enforcement of operations and maintenance standards by saying: "Nothing in this section authorizes the commission to establish rates for wholesale sales in interstate commerce from those facilities..." (§ 761.3(c).) At the same time the Legislature directly required Commission implementation and enforcement of operation and maintenance standards with regard to electrical corporations, notwithstanding the specific provisions that might otherwise exclude EWGs. (§ 761.3(a).)19

In fact, FERC's regulation of transmission and sale of electric energy at wholesale rates in interstate commerce extends "only to those matters which are not subject to regulation by the States."20 California regulates 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," and the Commission must implement and enforce operation and maintenance standards. (§ 761.3(a).) Moreover, the Commission must "enforce the protocols for the scheduling of powerplant outages of the Independent System Operator."21 (§ 761.3(a).)

By applying operation and maintenance standards to the generating assets of EWGs, our regulatory role is within the authority reserved to the states by Congress with respect to electric generating facilities. At the same time, our implementation and enforcement of these standards does not disturb FERC's ratemaking regulation of wholesale market transactions in interstate commerce.

3.4. New Facilities

The Legislature did not limit the statute to existing facilities. As a new plant becomes operational and is maintained, it is similarly covered.

3.5. Out-of-State and Joint Ownership

SCE contends the Commission should make clear that implementation and enforcement neither extend to out-of-state facilities, nor to facilities that are owned by multiple owners.

We note that whether or not this Commission's jurisdiction to implement and enforce generator maintenance and operations standards extends to out-of-state facilities, the Commission does have jurisdiction over facilities owned and operated by an electric utility, such as SCE, to the extent that those facilities serve that utility's retail customers in California. Commission jurisdiction includes SCE's operation of the Mohave Generating Station. (See D.94-03-048, 53 CPUC2d 452, in Investigation 86-04-002.) Mohave is located outside of California, and is owned by several entities.22

Accordingly, even though Mohave is physically located outside of California, we have the ability to direct SCE to comply with the substance of the Logbook Standards we are adopting today (as well as such other generator maintenance and operations standards that we may also adopt) in its operation of the Mohave plant. However, if SCE can demonstrate that there are compelling reasons why the substance of such standards should not be applicable to SCE's operation of the Mohave plant, SCE may file an application with the Commission seeking an exemption from such standards in connection with its operation of that plant.

3.6. Conclusion on Covered Thermal Facilities

Committee-adopted Logbook Standards for thermal powerplants apply to each facility used to generate electricity by the use of thermal energy that is owned by an electrical corporation or located in California, with limited exceptions. The standards apply to electric generation facilities of electrical corporations, including EWGs. The Standards apply to existing and new facilities. Logbook Standards for thermal powerplants do not apply to hydroelectric facilities. The Standards also do not apply to facilities specifically exempted by § 761.3 (e.g., nuclear, QFs, self-generation, publicly owned, incidental to water provision or wastewater treatment, owned by a city and county public utility).

7 At its meeting on April 1, 2003, the Committee directed staff to develop Logbook Standards for hydroelectric facilities. Those proposed standards were circulated for comment on May 9, 2003, with comments served May 19, and reply comments served May 23. At its meeting on June 3, 2003, the Committee deferred action on hydroelectric Logbook Standards to a subsequent meeting pending additional staff work. The Committee adopted Logbook Standards for Hydroelectric Generating facilities at its meeting on April 7, 2004. 8 The Committee adopted Resolution No. 1 on May 2, 2003, and filed it with the Commission on May 16, 2003. Resolution No. 1 identifies the facilities to which Committee-adopted General Duty Standards for Operation and Maintenance (GDS) apply. In error, Resolution No. 1 states "city or county" regarding the sixth excluded type facility. Here, we adopt "city and county" consistent with § 761.3(h)(3), and as correctly stated in Committee Resolution No. 3, adopted June 3, 2003. 9 The Public Utilities Code defines EWGs as: "The term `exempt wholesale generator' has the same meaning as found in Section 79z-5a of Title 15 of the United States Code, and regulations enacted pursuant thereto." (Section 228.5(c).) 10 Exceptions are where electricity is generated on or distributed by the producer through private property solely for the use of its tenants and not for sale or transmission to others. (§ 218(a).) Exceptions also include a corporation or person employing (a) cogeneration technology or producing power from other than a conventional power source for specific purposes, (b) landfill gas technology for the generation of electricity for specific purposes, (c) digester gas technology for the generation of electricity for specific purposes, or (d) cogeneration technology or power production from other than a conventional power source for the generation of electricity physically producing electricity prior to January 1, 1989 and furnishing that electricity to immediately adjacent real property for use thereon prior to January 1, 1989. (§ 218(b) - (e).) These exceptions are generally already within the exceptions covered by §§ 761.3(d) and (h). We separately state these exceptions in Attachment A, however, to identify specific plants that might be excluded in addition to those already listed. 11 WCP asserts that § 761.3 cannot include EWGs because EWGs are not public utilities. Rather, public utility status requires that the entity hold itself out as a public utility with dedication to serve the public, according to WCP. (WCP Comments April 8, 2003, page 12, footnote 16.) We disagree. Public utility status is not required to be subject to § 761.3. The Commission is obligated to implement and enforce standards for the operation and maintenance of facilities for electricity generation by "an electrical corporation." (§ 761.3(a).) Similarly, WCP and others claim that the Commission regulation is limited to public utilities. To the contrary, the PU Code provides the Commission with specific regulatory responsibility and authority over several entities. For example, energy service providers (ESPs) must comply with requirements implemented and enforced by the Commission. (Section 394 et seq.) This includes an ESP submitting to an investigation by the Commission (including access to accounts, books, papers and documents), and paying compensation, including reparations, upon the Commission granting such an award in a complaint proceeding. Similarly, load-serving entities must comply with Commission orders. (See Decision 04-01-050.)

12 We note the State's authority over power producers, including EWGs, pursuant to Cal. Const. Article XII, Section 3, which provides, in pertinent part, that:


"Private corporations. . . .that . . . .operate. . . .a plant ... . for. . . .the production, generation. . . of. . . power. . . . directly or indirectly. . . are public utilities subject to control by the Legislature."

13 Cal. Const. Article XII, Section 5; County of Inyo v. PUC (1980) 26 Cal. 3d 154, 164. The only limitations on the Legislature's power are that the legislation must expressly extend the Commission's authority (County of Inyo, supra, at 165-66) and the additional authority conferred by legislative enactment must be "cognate and germane to the regulation of utilities." (Morel v. Railroad Commission of California (1938) 11 Cal. 2d 488, 492; People v. Western Airlines (1954) 42 Cal. 2d 621, 634.)

14 18 U.S.C. § 824(b)(1). 15 Section 201(b) of the Federal Power Act provides that "The commission ...shall not have jurisdiction ... over facilities for the generation of electric energy." Section 201(a) of the Federal Power Act confirms existing state authority in this regard. 16 In that Decision, we pointed out that although AB 1890 empowered the California ISO to operate the transmission grid and to carry out certain reliability-related functions, AB 1890 did not deprive the Commission of its related safety jurisdiction or of its continuing jurisdiction over reliability. Thus, in the wake of AB 1890, the jurisdiction of the ISO and the Commission with respect to system reliability overlap. Where there is an apparent conflict between two statutes, the courts will attempt to harmonize them by giving effect to both statutes. San Diego Gas & Electric Company v. City of Carlsbad (1998) 64 Cal.App.4th 785, 793. Moreover, where the jurisdiction of two agencies overlaps, jurisdiction is concurrent. In such cases, subject to judicial review, an entity subject to the jurisdiction of both agencies must comply with the rules and regulations of both agencies. See, Orange County Air Pollution Control District v. Public Utilities Commission (1971) 4 Cal.3d 945, 950-51. 17 SDG&E appears not to have any powerplants now subject to § 761.3 by reporting that it "currently does not operate any generation facilities, but SDG&E has a direct interest in the rules adopted in this proceeding as a utility regulated by the California Public Utilities Commission (`Commission') and if SDG&E acquires generation facilities in the future." (SDG&E Comments on Logbook Standards dated April 8, 2003, page 1.) 18 See, Order Amending Market-Based Rate Tariffs and Authorizations, 105 FERC ¶61,218, November 17, 2003, in which, inter alia, FERC approved a Market Behavior Rule requiring EWGs to operate and schedule generation facilities and undertake maintenance in a manner complying with FERC-approved regulations of the applicable power market. We note that in adopting this Order, FERC clarifies that the Rule in question is not intended to serve as an independent basis to impose any new obligations on sellers or to further regulate bilateral markets. 105 FERC ¶61,218, at para. 21. In other words, this rule in no way expands FERC's existing regulatory authority, and leaves fundamental regulatory authority over power plant maintenance and operations where the Federal Power Act so clearly placed it, namely, in the hands of the states. 19 WCP similarly cites a U.S. District Court opinion (which dismissed a number of California Attorney General lawsuits against various EWGs for alleged violations of California's Unfair Business Practices Law) saying: "The Court held that state law was preempted by the filed rate doctrine, and stated, `it is clear that Congress intended the FPA [Federal Power Act] to preempt state law claims in the field of interstate wholesale electricity rate-setting, including practices affecting such rates.'" (WCP comments April 8, 2003, page 11 at footnote 15 citing People ex rel. Lockyer v. Mirant Corporation, No. C-01-1787-VRW (N.D.Cal. March 25, 2003), p.23.) We do not engage in rate-setting here, but in the implementation and enforcement of operation and maintenance standards. 20 16 U.S.C. § 824(a). 21 Powerplant outages are often related to operations and maintenance. 22 Mohave is located in Laughlin, Nevada. According to SCE, it is owned by the Los Angeles Department of Water and Power, the Salt River Project Agricultural Improvement and Power District, the Nevada Power Company, SCE and others. We also note that SCE has interests in at least one other out-of-state fossil-fueled plant, the Four Corners Generating Station located in San Juan County, New Mexico. However, SCE is not the operator of that plant; Arizona Public Service Company is the operator of the Four Corners plant.

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