8. Jurisdiction

We have previously addressed jurisdiction, including respondents' concerns regarding hydroelectric facilities, nuclear powerplants, exempt wholesale generators, out-of-state facilities, and others. We have also stated our intention to pursue our responsibilities "in a spirit of cooperation and comity," but not to "concede or limit any authority of the State of California, either directly or indirectly." (See, for example, D.04-05-017, mimeo., at pages 5-21; D.04-05-018, mimeo., at pages 6-11 and 16-21.)

Respondents continue to express reservations about our authority. We are not persuaded to reverse or change our position, but we address several concerns below.

8.1. Redundant Regulations

Calpine recommends elimination of standards that duplicate the responsibilities of other agencies (e.g., safety). To the extent there may be duplications, of any, we decline to do so.

The Committee's duty was to adopt operation and maintenance standards that addressed the public's concern about electric service reliability and adequacy, public health, public safety, effective maintenance and efficient operation. The Committee has done so by adopting a comprehensive set of standards.

We do not seek, and do not intend, to duplicate implementation and enforcement that is undertaken by a sister federal, state or local agency absent a compelling reason to do so. Nonetheless, it is reasonable and necessary to maintain a comprehensive set of standards, and be in a position as necessary to engage in their implementation and enforcement. The legislature has given us that responsibility, and we will not willfully ignore or abandon it.

At the same time, we point out that we have already provided for the mitigation of sanctions based on conflicting or competing requirements imposed on GAOs by other governmental agencies, the CAISO, or others. (GO § 14.2.2.) Similarly, sanctions may also be mitigated based on penalties imposed on GAOs by other governmental agencies. (GO § 14.2.3.) Moreover, our enforcement of any Standard will not modify, delay, or abrogate any deadline, standard, rule or regulation adopted by a federal, state or local agency for the purposes of protecting public health or the environment. (GO § 15.6.)

This is a reasonable balance regarding potentially duplicate responsibilities. As necessary, a GAO should bring potential or actual duplications to our attention during specific implementation and enforcement actions.

8.2. CAISO Tariff

Calpine urges that the Commission reject Operation Standard 22 (Readiness), Operation Standard 23 (Notification of Change in Plant Status), Operation Standard 24 (Changes in Plant Status), and Operation Standard 26 (Planning for Unit Storage). Calpine says these matters are already governed by the CAISO tariff approved by FERC, and Commission adoption of these standards will raise unavoidable federal-state jurisdictional conflicts. Calpine concludes that the Commission should fulfill its obligation by seeking enforcement capability from FERC, and continue to explore matters with FERC.

We have addressed this before, and nothing here convinces us to change our position or approach. We have our own duties, responsibilities, and authority, but, at the same time, we seek a cooperative relationship with FERC and others. (D.04-05-018, mimeo., pages 16-21.) We will continue to embrace a comprehensive approach to implementing and enforcing operation and maintenance standards. We do this to satisfy the legislative goals for California's electricity market: protecting public health and safety; ensuring effective and appropriate maintenance, and efficient operation; and ensuring electrical service reliability and adequacy. (See D.04-05-017, mimeo., page 11.) We do not intend to duplicate efforts of sister agencies, but we will not decline to implement and enforce any Committee-adopted Maintenance or Operation Standard because it might overlap with the duties of another agency. We will continue to explore a cooperative relationship with FERC.

In comments on the draft decision, IEP recommends that the Commission harmonize the requirements of GO 167 with provisions in the CAISO tariff. IEP says a comprehensive set of Operation and Maintenance Standards will inevitably overlap and conflict with other provisions.

We find no conflict that needs our action. The CAISO Chairman was a member of the Committee, and CAISO staff served on the Committee staff. The Committee and its staff developed and adopted a comprehensive set of standards that meet the objectives and requirements of SB X2 39. Neither the CAISO and its staff, nor the Committee and its staff, found any unreasonable conflict with CAISO tariffs. This is true for both Maintenance and Operation Standards. In fact, the CAISO staff reported at the last Committee meeting:

"The ISO staff took the lead in developing the maintenance standards, as Commissioner Wood has described. And those, of course, were passed by this committee earlier in this process.

"On the other hand, the committee staff took the lead in developing the operation standards. And what the ISO has worked diligently to do is to make sure that they are consistent with our role to operate a reliable electric system. And we believe that we have achieved that." (Pettingill, Transcript of Committee Meeting held October 27, 2004, page 8.)

We conclude that there is reasonable and adequate harmonization. Moreover, as stated above, we neither seek nor intend to duplicate implementation and enforcement undertaken by a sister agency absent compelling reason to do so. Also as stated before, we will continue to explore a cooperative relationship with others. At the same time we "emphasize, however, that by this action, we do not, nor do we intend to, concede or limit any authority of the State of California, either directly or indirectly." (D.04-05-018, mimeo., pages 20-21.)

8.3. Consistency With Other Law

Calpine asks that the Commission enforce the Operation Standards without requiring a GAO to act in any manner inconsistent with existing federal, state or local law. Calpine similarly asks that no GAO be required to alter or amend any contractual agreement to comply with the Operation Standards.

We are unable to make such generic statements. We are unaware of any such conflicts in law or contract, and do not anticipate any.

Elk Hills identifies an example of a conflict between Guidelines for Operation Standard 14 (Clearances) and clearance requirements of the California Occupational Health and Safety Administration. Elk Hills asks that we clarify that the Guidelines are not intended to exceed other existing requirements.

As we do above, we note that Guidelines are guides, not Standards. No enforceable conflict exists. No others are brought to our attention needing resolution here.

8.4. Legal Basis for Approving Changes in Long-Term Plant Status

DENA says the Commission must state the legal basis for its authority to approve changes in long-term plant status. According to DENA, SB X2 39 provided for the development of standards for operation and maintenance, but requiring approval for changes in long-term plant status appears to conflict with an owner's property rights. DENA asserts that this flaw is most problematic with respect to Operating Standard 24, but is also applicable to Operating Standards 22 through 26.

The Commission's authority is stated in GO 167. (See GO § 1.0.) Among other sources, the authority comes from SB X2 39. The purpose of this legislation includes: "to protect the public health and safety and to ensure electrical service reliability and adequacy." (SB X2 39, Section 1(d).) The long-term status of a unit directly affects electrical service reliability and adequacy.

Whether, and when, to operate is the most basic decision regarding operation. Nothing more directly affects electric system adequacy than whether and when a unit is retired. It is appropriate that Operation Standards address this most fundamental of operation decisions.

It is premature to conclude here whether or not Operation Standard 24 conflicts with an owner's property rights. Such conclusion must depend upon the facts of a particular case. Those facts could include whether or not a mechanism for compensation is available, what is the level of just compensation, and whether just compensation has been denied.

DENA recommends that Operation Standard 24 not be made operative until a mechanism is provided to compensate the GAO for readiness services. (DENA Supplemental Comments, November 3, 2004, page 6.) This is unnecessary. As DENA says, this is a "condition precedent" to its effectiveness. (Id.) That is, the standard itself already says: "This standard is applicable only to the extent that the regulatory body with relevant ratemaking authority has instituted a mechanism to compensate the GAO for readiness services provided." The facts of a particular case will determine whether or not Operation Standard 24 is applicable, and whether or not a compensation mechanism is or is not in place at the time.

Related to DENA's concern, Mirant contends that taken together Operation Standards 22 and 24 require a GAO to continue operating a unit, and make it fully available to the state's electricity system, until the Commission authorizes the GAO to shut down or retire the unit. Mirant asserts that this exceeds the Commission's authority. In support, Mirant asserts that the Commission's authority is limited to "public utilities."

We disagree. Mirant is incorrect regarding our authority for the reasons we have already stated. (D.04-05-017, mimeo., pages 7-19.)

Mirant continues by arguing that that "[n]othing in Senate Bill 39xx authorizes the Commission-or the Committee-to restrict non-jurisdictional generators..." (Mirant Supplemental Comments, November 3, 2004, page 3.) All generators subject to SB X2 39 are under the jurisdiction of the Committee and the Commission. We are not persuaded by referring to some covered entities as "non-jurisdictional."

Finally, Mirant states that "the Commission is not authorized to regulate the economic decisions of entities that sell power exclusively at wholesale..." (Id.) The Commission is not regulating economic decisions. The Commission is implementing and enforcing operation and maintenance standards, a matter that is within our jurisdiction.

In comments on the draft decision, DENA states a concern that the "public interest" standard (discussed above in § 7.4 "Independent Business Judgment") may be used to require a GAO to keep a powerplant in operation even if the asset is unsuccessful in the marketplace (e.g., does not have a contract with a Load Serving Entity (LSE); does not have a reliability must run contract with the CAISO). DENA asks that the Commission remove any such implication. We clarify as follows.

We will take all material and relevant facts that are brought to our attention into account when implementing and enforcing Operation Standard 24. For example, we expect to consider whether the GAO has a contract with an LSE or the CAISO for its output, whether the resource has been addressed in the Commission's long term procurement proceeding, or whether the resource is addressed in the Energy Action Plan or other state-adopted plan. Further, we will consider all material and relevant facts presented by the GAO or any party.

8.5. Transfer of Ownership

DENA also asserts that Operation Standard 25 needs to provide more flexibility regarding notice of a transfer of ownership. That is, Operation Standard 25 requires that the GAO notify "the Commission and the Control Area Operator in writing at least 90 days prior to any change in ownership." DENA states that a GAO may not know whether a transfer will in fact occur within the contemplated timeframe. DENA recommends that "the GAO not be considered out of compliance as long as the information is relayed as quickly as legally possible." (DENA Supplemental Comments, November 3, 2004, page 6.)

DENA's recommendation is reasonable. We will not refer the Standard back to the Committee for amendment, however, given that the Committee expires on January 1, 2005. We might, however, after January 1, 2005, entertain a petition for modification of this order that includes a proposed modification of Operation Standard 25 regarding this provision. We will consider the merits of any such petition at that time. In the meantime, however, we will direct CPSD to enforce Operation Standard 25 with reasonable flexibility, as long as the notice "is relayed to the Commission as soon as legally possible."

DENA also says that standard commercial practice is to hold negotiations for such transfer in confidence until such time as the transaction is finalized. DENA states that whether the transfer is initiated by the buyer (such as through a solicitation) or the seller, the Commission should avoid impeding commercial transactions through the implementation and enforcement of this standard.

We generally agree. We will take reasonable steps to avoid impeding commercial transactions. Confidentiality, however, is not a valid defense for not notifying the Commission. The GAO may submit such notification consistent with confidentiality provisions of the GO (e.g., GO § 15.4). As such, the notice must be at least 90 days prior to any change in ownership, or as soon as legally possible.