78 1 SAN FRANCISCO, CALIFORNIA, JANUARY 24, 2003 - 9:08 A.M. 2 * * * * * 3 COMMISSIONER WOOD: Good morning. I'll call to order 4 the meeting of the California Electricity Generation 5 Facilities Commission Standards Committee. At some point 6 I'll actually memorize that name so I don't have to read it. 7 I am Commissioner Carl Wood, Chair of this 8 Committee. Seated to my right is California ISO Chairman 9 Michael Kahn, also a member of the Committee. Seated to my 10 left is Glenn Bjorkland, who is the third member of this 11 Committee. 12 I think that the agenda for this meeting has been 13 circulated, so people should have that available to them. I 14 don't have any opening remarks other than to note that we 15 received a proposal and, I think, supporting comments from 16 various parties to change the format of these meetings or at 17 least this meeting to more of a roundtable kind of 18 arrangement, and I'm going to rule against that. 19 We want to maintain a certain level of reserve in 20 this. It's a proceeding that's antecedent to a rulemaking 21 process, which, in turn, will lead to the possibility of 22 enforcement actions, and I think it's necessary to maintain 23 a certain level of formality there. 24 However, we do recognize that it's important in 25 receiving comments, receiving verbal comments from 26 participants and parties, that we do have a certain level of 27 informality in the give and take. And so when we have that 28 and when we hear from staff comments and that parties wish PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 79 1 to respond or discuss that, I'm going to try to invite 2 people to come forward at the front table, and then we can 3 have something of a less formal give and take, which 4 hopefully will accomplish some of the same purpose. 5 Anyway, that's all I have to say. 6 Mr. Kahn. 7 STATEMENT OF MR. KAHN 8 MR. KAHN: Good morning. I have a couple of 9 observations to make. 10 I have read the submissions, and I appreciate all 11 the efforts that were involved in them. I must confess that 12 I perceived the faint -- the faint aura of a stiff arm, and 13 I wanted to share with you my perspective on what we're 14 doing here. 15 This is a legislatively mandated process. The 16 Legislature is going to look at us and not ask us about the 17 rules and regulations. They're going to ask us about the 18 output of what we've done here and our ability to tell the 19 citizens of California that the problems the Legislature has 20 perceived have been addressed. 21 And what I would like to respectfully request a 22 little more of in your presentations is a recognition of the 23 goals of the Legislature in enacting 39 and addressing how 24 we can say what we've done legitimately meets those goals 25 and gives California the satisfaction it needs. 26 If we don't do that here, if, for example, you 27 folks succeed in talking us into not doing standards and 28 making vague pronouncements and doing things that don't have PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 80 1 any teeth in it, there will be no doubt that the Legislature 2 will simply do to you what all of you in your submissions 3 said please don't have us do to you. 4 So I'm inviting you in this process to work with 5 us to try to be able to craft solutions that we can go to 6 the Legislature and the Governor and say: The problems you 7 perceived have been addressed and dealt with in this regard. 8 That's what this enterprise is about. And if we are unable 9 to do that with you, we'll have to struggle a way to do it 10 without. 11 But my first preference is that you address the 12 goals of the Legislature and the Governor and that you help 13 us craft solutions in which we can legitimately say that 14 we've done so. 15 And the other observation I'll make -- and I 16 think I owe it to you to be candid -- the day of "Trust me" 17 or "It works fine" or "Everything's been okay" is long gone. 18 This legislation was not enacted in the spirit of 19 happiness and joy about the way the world was working. This 20 legislation was enacted after a great amount of teeth 21 gnashing and a very high level of distress about perceived 22 problems in this industry. 23 I can tell you for myself, I had nothing to do 24 with this legislation even though it kept passing under my 25 nose, and I'm pretty sure Carl and Glenn didn't either. So 26 we're sort of stuck with this situation. 27 But I think you should understand that if we go 28 back to the Legislature and say, "Well, these are all really PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 81 1 good, responsible people and, what the heck, they're going 2 to do the right thing, trust them," that's not going to be 3 satisfactory to the people that we are responsible to. 4 So I just think that if we're going to have a 5 reasonable process, we ought to begin it in a candid way, 6 and I thought I owed it to you all to be candid. 7 I did not detect in the filings that I saw -- let 8 me state it this way: I detected in the filings I saw very 9 good lawyering, very traditional thinking, but I did not 10 detect any sentiment of an understanding of what this 11 process was borne of. And that's just not going to be 12 acceptable for the people we're dealing with. And this will 13 not end here. 14 Either we're going to solve a problem and 15 convince the Legislature we've done so, or they will simply 16 move on and solve it themselves in ways that at least the 17 ISO and the PUC think would be a less satisfactory format. 18 COMMISSIONER WOOD: Thank you. I better correct one 19 point in what you said because some of the people here know 20 the situation: 21 I was, in fact, involved in the legislative 22 process that led to this bill, and I consulted with many, 23 many legislators, including the authors of the legislation. 24 But by the same token, that means that I'm very familiar 25 with the Legislative intent and the purpose of this bill. 26 And I think that Chairman Kahn has stated it very precisely. 27 MR. BJORKLAND: Well, an electronic mail is certainly 28 wonderful. I was able to review and read all of PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 82 1 the comments and highlight them, and I second so sincerely 2 what Michael Kahn stated on the impression I got from the 3 comments that were received. And maybe perhaps later we can 4 highlight some of those. 5 But our job here is to develop the standards, and 6 all we can say is, yes, we did read all the comments and, 7 yes, we do understand. 8 COMMISSIONER WOOD: Thank you. 9 And with that, we will move to the public comment 10 section. In the interest of trying to be efficient about 11 our use of time, let me suggest that if you have comments 12 that will appropriately come up during the review of 13 comments and replies that were served on the Committee, why 14 don't you hold them for then. It will be more relevant for 15 that discussion, and all parties will have an opportunity to 16 participate in that. 17 Are there any public comments? 18 Mr. Blue. 19 STATEMENT OF MR. BLUE 20 MR. BLUE: Hi. My name is Greg Blue, 21 B-l-u-e. I'm with Dynegy Generation. 22 And I, first of all, want to thank the Committee 23 for granting the one-week extension for the comments. We 24 made -- certainly made use of it. And I also would like to 25 thank the Committee for a modified roundtable discussion. I 26 think it's going to be very beneficial. 27 Reacting to Mr. Kahn's comments briefly -- and I 28 know this isn't on point -- but I think we are here to work PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 83 1 cooperatively with this Committee. I think we are looking 2 to work cooperatively with California on a going-forward 3 basis. 4 I realize -- I was here as well during the 5 crisis, and I understand what was -- how this -- the 6 Legislature, how this was borne, the 39 XX. 7 I think that we -- as we stated in our comments, 8 we agree with the goal of what, maybe that's what we need to 9 talk about: What is the goal? We think the goal is 10 maintaining adequate generation when it's needed by the 11 customers. And I understand all this, but we are here 12 working cooperatively. 13 With me today I brought Ernie Soczka, who's with 14 NRG Energy. NRG is the operator of our power plants, and 15 Ernie has over 30 years of plant operation experience, so 16 he's going to be our main participant in the roundtable 17 discussion. 18 As I said before, we are here to work 19 cooperatively with this Committee. We do want to come out 20 with a product. We just want to get a little what I call 21 reality into the program, as well as not from me, but from 22 the operators. I'm not at the plant. It's the operators 23 who have to do this. 24 So I hope you listen to what some of the 25 operation -- there's other professional folks here today 26 too, so I hope you all listen to them today. Thanks. 27 COMMISSIONER WOOD: Any further public comments? 28 (No response) PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 84 1 COMMISSIONER WOOD: Okay. Let's move on to review of 2 the comments. 3 I think although it's not laid out here in the 4 agenda this way, it might be appropriate first to turn to 5 staff and find out if staff wants to make any introductory 6 remarks. 7 Mr. Clark. 8 STATEMENT OF MR. CLARK 9 MR. CLARK: Generally speaking, Mr. Pettingill and I 10 haven't had an opportunity to meet and discuss what the 11 comments were that we received from the parties, the 12 interested parties in the proceeding. But we have discussed 13 here very briefly the alternative seat, the alternative 14 proposals that one of the parties made in terms of the 15 capacity unavailability factor being the appropriate 16 measure. 17 And Mr. Pettingill is of the opinion -- I'll let 18 him express it here more clearly than I can -- that perhaps 19 the solution to that issue is to have a penalty that 20 attaches for outages that occur during peak periods. 21 Other than that, that's the sum and the substance 22 of my comments at this point. 23 COMMISSIONER WOOD: Mr. Pettingill? 24 STATEMENT OF MR. PETTINGILL 25 MR. PETTINGILL: Let me add a little clarification: 26 In terms of our review, I think a number of the 27 comments were potentially helpful. However, I guess I would 28 make some of these observations, specifically the point that PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 85 1 Mr. Clark just shared. 2 We had a discussion in our last meeting about 3 whether the performance metric should potentially be changed 4 and modified towards peak periods. And I've had a chance to 5 think about that some more, and I think we saw that in some 6 of the comments, that this performance metrics should not 7 cover the whole year, that we ought to focus on exactly when 8 the energy is required. 9 And I guess what I would suggest to you as a 10 possibility is to look at how to accommodate when the energy 11 is required through what would be the sanction and/or 12 penalty mechanism so that what we're doing is still looking 13 at performance across the whole year, all 12 months. 14 But in the event there are -- there's performance 15 in a quarter that is a peak period for operations and that 16 the energy is necessary to ensure system reliability, then 17 there may be a modification in terms of a sliding scale, if 18 you will, for what's the penalty and/or sanction for having 19 energy unavailable during those peak periods. 20 But I think we all should remember that it was in 21 December 2000 and sort of the starting point of this whole 22 topic, as Michael Kahn has shared with us, where that would 23 historically have not been considered a peak period and yet 24 that's when we were having the blackouts. 25 So that was my observation in regards to focusing 26 on the economic realities of generators wanting to have 27 their generator available during peak periods, and if that's 28 the case, then let's appropriately look at sanctions and/or PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 86 1 penalties that would say let's make sure that that incentive 2 is met. 3 Otherwise, I think the comments in some cases are 4 misfounded on looking at the CUF, the availability measure, 5 because the availability measure, the way we've designed it, 6 does appropriately focus on different technology types. 7 It does focus on different age and so forth, 8 because the way we've solved that problem is to focus on a 9 per-unit basis so you're looking at a generator comparing 10 its performance over time. And only in the case of a brand- 11 new generator do we talk about comparing it against some 12 sort of peer group and only for that first period of time 13 until we have the initial series of data. And what was 14 proposed here was five years. 15 So my sense of it was in many ways what we're 16 talking about is needing to help folks ramp up and 17 understand how this would work. Understand that we did hear 18 them almost two years ago when we initially designed this 19 performance metric, and we've tried to accommodate some of 20 the concerns that we're hearing about again in some of the 21 write-up. 22 That would be my introductory remarks. Thank 23 you. 24 COMMISSIONER WOOD: I would just make a comment that 25 it struck me initially when I saw the initial draft of the 26 maintenance standards that not to recognize the particular 27 importance of peak periods in setting some kind of standards 28 was a mistake. And I continue to believe that. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 87 1 On reflecting, however, it seems to me that there 2 are two goals here. There are two dimensions of what we're 3 trying to do. One is to assure reliability, just to make 4 sure that the lights don't go out. That concern is focused 5 on peak periods, because absent peak periods unless there's 6 really, really widespread outages -- which actually we 7 experienced at the height of the crisis two years ago. But 8 except in pretty exceptional circumstances, it's the peak 9 periods that we would be concerned about. 10 The other concern is about the price distortions 11 that are introduced not out of a normal working of a fully 12 competitive market in which market participants are blind to 13 each other's activities and each market participant does not 14 have the ability by itself to influence prices in the 15 market. 16 In fact, I think what we've learned in California 17 is that market power appears to be intrinsic in this 18 industry and it's just the nature of -- it's the size of the 19 units that are involved and the fact that even a single 20 operator with a few units can have very significant impacts 21 on price. ] 22 I'm not sure how much that can be addressed 23 through maintenance standards. 24 It may be that a coordination of approach towards 25 maintenance standards and operation standards is a way to 26 get there; perhaps bolstered on top of that by effective 27 FERC enforcement, which is something that we didn't see 28 through the crisis. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 88 1 But I think I would just suggest that we keep in 2 mind that there are the two dimensions to this, there's the 3 reliability dimension and the price dimension, and it 4 certainly was the intent of the Legislature and it's 5 certainly the intent of this Public Utilities Commission 6 that both of those issues be addressed and be addressed 7 effectively in order to protect the consumers and the 8 economy of the State of California. 9 Anyway, with that, I would invite commenters who 10 wish to participate in this discussion to come forward. 11 It looks like we only have -- there are five 12 empty chairs up front here -- actually, probably we could 13 pull a few more, we could maybe get six or eight people up 14 here, if you'd like to come forward, and we'll do -- if 15 there are more parties than that, we'll do a little 16 rotation. 17 Okay. Well, we don't have a lot of takers right 18 now. 19 If people feel -- if the spirit moves you during 20 the discussion and you wish to come forward, then as long as 21 we have some empty spots up here, feel free to do that. And 22 when you do, please identify yourself for the court 23 reporter. 24 As soon as we get settled down, I'm going to ask 25 each participant to identify him or herself. 26 Okay. We have a full table. Why don't we start 27 from my left here, your right. 28 MR. CRAGG: I'm Brian Cragg. I am an attorney PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 89 1 representing West Coast Power. 2 MR. SOCZKA: I am Ernie Soczka. The last name is 3 spelled S, as in Sam, -o-c-z, as in zebra, -k-a, General 4 Manager for West Coast Power. 5 MR. WALKER: My name is Brian Walker, and I work with 6 Reliant Energy. 7 COMMISSIONER WOOD: Okay. The other side of the 8 table. 9 MR. ROMESBERG: Tom Romesberg. I'm here with the 10 La Paloma Generating facility. 11 COMMISSIONER WOOD: Romesberg? 12 MR. ROMESBERG: Yes. 13 ALJ WOOD: Could you spell that? 14 MR. ROMESBERG: R-o-m-e-s-b-e-r-g. 15 COMMISSIONER WOOD: Thank you. 16 MR. HUHMAN: Hi. I'm Steve Huhman with Mirant. That 17 name is spelled H-u-h-m-a-n. I am the Director of 18 Regulatory Affairs for West Region. 19 COMMISSIONER WOOD: Okay. 20 Yeah? 21 MR. KERNER: Thank you, Commissioner. 22 Douglas Kerner, Duke Energy - North America. 23 MS. LODUCA: Janet Loduca from Pacific Gas and 24 Electric, L-o-d-u-c-a. 25 MR. HANSCHEN: Peter Hanschen, representing AES and 26 AES -- 27 THE REPORTER: I'm sorry. And -- 28 MR. HANSCHEN: And AES. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 90 1 COMMISSIONER WOOD: Can you spell your last name, 2 please. 3 MR. HANSCHEN: H-a-n-s-c-h-e-n. 4 THE REPORTER: And, I'm sorry, your Appearance is 5 for, again? 6 MR. HANSCHEN: AES. 7 MR. VANCE: David Vance representing San Diego Gas & 8 Electric Company. 9 THE REPORTER: And spell the last name? 10 MR. VANCE: V-a-n-c-e. 11 MS. SHERIFF: Nora Sheriff, S-h-e-r-i-f-f, 12 representing Midway-Sunset Cogeneration Company. 13 COMMISSIONER WOOD: Okay. Does someone want to 14 start? Otherwise I'll just -- I'll start over here with 15 Mr. Cragg. 16 STATEMENT OF MR. CRAGG 17 MR. CRAGG: Well, I may offer a bit of a response to 18 some of the comments of Mr. Kahn. 19 It might be helpful at this point if we could 20 come on -- come to some sort of agreement on what our vision 21 of the final product of this Committee would be. And I 22 realized, as I was sitting here, that I think, at least 23 among the discussions we've had with, you know, West Coast 24 Power, we've developed a vision sort of implicitly, and I'd 25 like to maybe take a minute or two just to try to make that 26 a little more explicit and see if there's some sort of 27 agreement on where we're headed. 28 And I think if we come to some sort of agreement PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 91 1 on where we're going, it will be much easier to figure out 2 how to get there. 3 I think the vision that West Coast Power has out 4 of the product of this Committee is that we would develop 5 cooperatively some standards that are adequate for the 6 purposes of -- of their legislation and the Committee, and 7 also flexible and practical enough that the plant operators 8 can actually put them into effect. 9 I think the Committee should ensure that each 10 plant operator has adequate maintenance plans and procedures 11 in place, that those plans are modified and amended as 12 necessary to fit changing procedures or changing times, 13 changing circumstances; we should develop a good metric of 14 performance, one that we can agree actually reflects 15 maintenance or has something to do with the maintenance 16 standards themselves; and then there should be some sort of 17 follow-up in response to showings under that metric that 18 there has been an outage, and that can take any -- any 19 number of forms. 20 If that's where we're headed, I think we're 21 actually a long ways there. 22 For its part, West Coast Power expressed its 23 substantial agreement with the standards as stated in the 24 report, not 100 percent agreement, but for the most part we 25 thought those were workable standards. 26 We had less -- less agreement with the specific 27 assessment guidelines and in Appendix A that were presented 28 in connection with those standards. We felt those were, in PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 92 1 some cases, too specific, in some cases much too vague to 2 actually serve as a basis for this -- for something we can 3 actually work with. 4 We have adequate plans and procedures, we 5 believe, in place, and we're willing to share those with the 6 Committee if you want to plough through them -- we have 7 books and books of maintenance procedures. 8 We think it's reasonable to have follow-up along 9 the lines of the subsequent assessment reports every two 10 years or so as to show that those plans are still in place 11 and are adequate and have responded to changing conditions 12 both in the market environment and at the plant. 13 We have some concerns about the metric that the 14 Commission has proposed, as we mentioned in our comments, 15 and we think it's reasonable for some sort of follow-up. 16 Actually, our current process is that every day 17 the plant operators contact both the ISO and the PUC. 18 If there is any sort of outage, planned or 19 unplanned, we make another call to the PUC and the ISO. 20 The PUC inspectors are -- have come to the plant 21 to investigate the outages. So far that process has worked 22 well. We've had no problems; we haven't heard any 23 complaints from the PUC that we know of about the outages 24 that they have investigated, and that process seems to be 25 working, as far as we can tell, pretty well for both 26 parties. 27 I think that sort of process, if that's where 28 we're going, if that's the goal -- I think, again, we're PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 93 1 largely there. It would be a matter of refining the 2 standards perhaps in a couple of respects, clarifying the 3 process for presenting the plans, modifying the plans, 4 coming to some sort of agreement on an appropriate metric, 5 and then figuring out what the appropriate response to the 6 results of that metric are. 7 So if -- again, I think we're largely there if 8 that's the goal; and if there's a different goal, I think it 9 would be good to identify that now so we can figure out how 10 to achieve that goal. 11 COMMISSIONER WOOD: Mr. Soczka, do you want to add to 12 that? 13 STATEMENT OF MR. SOCZKA 14 MR. SOCZKA: I guess that I don't have large comments 15 to the bulk of the thing because I'm again talking a little 16 bit more from a practical standpoint of at the plants, and 17 the deal there is that we work with the ISO and they have a 18 way with procedure so to say whether they need you or not. 19 And if they say, No, you can't go down this weekend, or, You 20 can't go down this week to fix something, then we don't, to 21 the ability that you can. 22 We try to plan ahead so that, you know, I have 23 a -- a gas valve that's leaking through on the skid and I 24 have to shut the units down to fix it, and so I would like 25 to get permission, let's say, to go down Friday night, when 26 the peak load is over, and have it back up and running by 27 Monday morning when the load comes back up again. 28 And to the extent that the ISO can either PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 94 1 accommodate it or don't accommodate it, we work with that. 2 We have a measure called In-Market Availability, 3 in other words, we have to be there when you need it. 4 Now, the people with the plant, that's their sole 5 purpose in life is to have that unit running. So they're 6 not thinking any other way. They're trying to make sure 7 that we're there when it's needed; and they get measured by 8 that metric, and they get, hopefully, paid some for that -- 9 achieving those goals. 10 So there are flaws with the Capacity 11 Unavailability Factor. 12 I understand the reasons why -- I should say "we" 13 because I was on the Committee with Mr. Pettingill and so 14 forth trying to figure some way out of it, and we wanted to 15 figure some way that was easy to figure, and -- but I don't 16 think -- I didn't agree then and I don't think now that it 17 adequately measures what you're trying to achieve to be 18 there when the power's needed, whether it's in the peak or 19 it's in December. 20 I mean, you can back -- back in December of 2000 21 we had an outage scheduled for an FCR, and something even 22 worthy like that, we put it off for a year to get over the 23 hump. 24 We had a unit at El Segundo, an outage, starting 25 in November that was intended to go for a month, and we 26 shortened the outage to, quick, slap it back together to get 27 it running because you needed the power then. I mean, 28 that's the way it works, which I agree with what we can do. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 95 1 There is a concern, when we talked about in the 2 Committee, with the audits and the paperwork required. 3 We talked about, well, the goal being really to 4 have the units running when they're needed. 5 There are different ways you can go. 6 Some people are convinced that you could throw 7 money at the problem and make the problem go away. 8 It doesn't always work. Otherwise the 49ers 9 would be in the Super Bowl. 10 (Laughter) 11 MR. SOCZKA: So, when we talked in Committee, we had 12 a pretty experienced group of fellows there, and I had no 13 problem with the people in the Committee talking about the 14 intent of making the plant run and making sure you've got a 15 program in place and so forth, and that you're doing the 16 right things. 17 But what happens is in the translation we've kind 18 of lost the intent language to say that the real intent is 19 to have that unit running. And we focused in the -- in the 20 audit and inspection portion on little details about having 21 a piece of paper or something. 22 Now, that would be still okay if you had somebody 23 that knew their business when they came into the plant, but 24 I would have to say that my opinion is that the people that 25 come for inspection, et cetera, are not experienced plant 26 people; their experience level is low or it is not in the 27 field that they were pressed into service to do that. 28 And so I think if we had a comfort level with the PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 96 1 expertise of the people coming in, fine; but we don't. 2 And so then a person would be looking at the 3 prescribed document, the written word, because that's all 4 they'd have to go by. They didn't have the benefit of being 5 in the Committee with us or talk about intent and wouldn't 6 know if one path is an acceptable manner versus another. So 7 we have some concerns with the language -- the specific 8 language of the inspection part. 9 And, I mean, we go through that type of thing 10 with other, you know, governmental rules and regulations. 11 We have lots of them that we have to abide by, and it's just 12 a -- it's just tough to deal with that, so that's why our 13 concern is to try and clarify whatever rules there are to 14 make sure that we don't get hung up with doing it in some 15 inspector's way based on his interpretation of the rules, so 16 that's why we spend a little time trying to do the word 17 review. 18 MR. KAHN: I have a question. 19 COMMISSIONER WOOD: Sure. 20 MR. KAHN: Go ahead. 21 COMMISSIONER WOOD: I just want to know which plants 22 West Coast operates? 23 MR. SOCZKA: We operate the El Segundo plant in El 24 Segundo, a plant in Long Beach, which was I guess the 25 original -- 26 COMMISSIONER WOOD: The old Edison steam plant. 27 MR. SOCZKA: Yes, below the plant. 28 COMMISSIONER WOOD: I know it very well. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 97 1 MR. SOCZKA: And it's a -- well, I guess I think it's 2 beautiful, but anyway -- 3 (Laughter) 4 MR. SOCZKA: It's pretty old. 5 COMMISSIONER WOOD: It's fun watching the boats go by 6 overhead. 7 MR. SOCZKA: Yeah, right. 8 (Laughter) 9 MR. SOCZKA: -- and the Encina plant in Carlsbad, and 10 we have a number of gas turbines in the San Diego area at 11 various substations and so forth to support the voltage and 12 so forth and they are peaking units. 13 COMMISSIONER WOOD: Okay. Thank you. 14 MR. KAHN: Mr. Cragg, you said that your company has 15 great big manuals and -- and your operation, which is 16 described. 17 I have a question. One of the intents of this 18 legislation and this process is to try to ensure good faith 19 and to avoid manipulation; and the fear is that manipulation 20 of the maintenance is an opportunity to create scarcity and 21 to result in price manipulation, among other things. 22 How do we get at that problem of taking all your 23 manuals and your statements of good faith and understanding 24 that some of us will believe that you are motivated by good 25 business but there'll be other skeptics who say that, where 26 there's opportunity, it becomes irresistible; so how do we 27 deal with that? ] 28 MR. CRAGG: If I understand your question correctly, PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 98 1 you can have all these manuals describing the procedure but 2 if in a certain circumstance somehow maintenance is 3 manipulated, it could still create market problems. 4 MR. KAHN: Your manuals create an opportunity for 5 manipulation. 6 MR. CRAGG: In the sense that -- I'm not sure I 7 understand the question. 8 MR. KAHN: In the sense you can create scarcity and 9 manipulate prices by saying you are invoking some of the 10 procedures while you are not really invoking them in good 11 faith. So how do we get at that problem? 12 MR. CRAGG: I think -- there are some checks on that 13 right now. One is that it requires a waiver from their ISO 14 of the most-offered requirement in order to plan 15 maintenance, any sort of maintenance. If there is an 16 unplanned maintenance -- well, in either case, when the 17 plant goes down, we make calls to the ISO and to the PUC. 18 The PUC inspectors I guess, as I understand it, often come 19 out right away and check out the outage, the reason for the 20 outage and the procedure. 21 I guess the question is does the outage really 22 require six hours and we took eight hours, or something 23 along those lines; is it stretched out. It may be a little 24 bit hard to actually get a handle on that, other than 25 recognizing that, at least for West Coast Power, there is a 26 high incentive that is built in in the form of the bonuses 27 paid to the employees to maintain in-market availability, to 28 be available when the market demand is there. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 99 1 On the price side we also now have, as a result 2 of the ISO's efforts, the automatic mitigation procedure, I 3 believe should put some -- if there is a situation where the 4 price would have a tendency to spike, that should control 5 the price spikes. 6 Also just the elimination of the market clearing 7 price at the PX and the mandatory buy/sell has created a 8 little bit of a different market structure. So that -- what 9 I mean by that is in the old days, if you were in the PX, 10 whatever you bid, if your power was taken, you get the 11 market clearing price. So an individual generator didn't 12 have any control over the price it was paid. If the price 13 was high, in a way they got a windfall. 14 Now we have a little bit of a different situation 15 where there is more contract-based pricing, which I think 16 will help stabilize the market. You have the automatic 17 mitigation procedure, which will safeguard against price 18 spikes in those circumstances. So I think there are a 19 number of incentives that can combine to provide a little 20 bit more assurance than we had two or three years ago that 21 outages are kept to a minimum, and are timed at a time when 22 the market is less likely to need a particular unit. 23 MR. KAHN: Let's focus on the plan and unplanned 24 outages. 25 Obviously one check could be, as you've 26 indicated, where there are planned or unplanned outages to 27 send inspectors out to verify and go through the 28 verification process. That is expensive and intrusive. And PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 100 1 if you don't think our inspectors are well trained now, just 2 wait until we hire 20 times as many. You won't be happy at 3 all with those folks. But that is what we would do is tie 4 lots and lots of inspectors to check overoutage. 5 Another way to do it would be to abandon the 6 check outages, but have a very high penalty for catching 7 somebody cheating. So the notion being you know that you 8 are not going checked but once and a while, but if you are 9 checked and you are caught, you are going to be really 10 heavily penalized. 11 As between those two persuasive checks or much 12 more random high penalty, do you have a preference? 13 MR. SOCZKA: I guess my opinion as the plant guy is 14 that you are assuming the worst of plant operators. The 15 plant operators aren't manipulating prices the -- 16 MR. KAHN: Sir, let me say this: I think we're not 17 going to get anywhere in this proceeding if we don't assume 18 the worst. That is what we are here for. We lost $40 19 billion. The Legislature and the Governor assumes the 20 worst. 21 The days we say we assume the best is over -- 22 that is why we are here. If we were here to assume the 23 best, we wouldn't need this committee. We're here because 24 the worst did happen, and the newspapers are full of 25 examples of manipulation. And none of us are smart enough 26 to figure out among the thousands of you which 990 are 27 really honest and terrific people and which ones are the 28 scoundrels. You don't look like a scoundrel to me; I'm not PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 101 1 the tester. So we're going to have to proceed on the basis 2 that any one of you could be the one out of a thousand who 3 is the scoundrel. 4 So my question is: How do I deal with that? 5 MR. SOCZKA: My answer to that would be from 6 experience with, let's say, cogenerations, we had a bonus 7 system in place during peak hours. Now, it wasn't a lot, 8 but it was for high availability during peak hours when 9 power was needed in California. 10 And I want to tell you that the plant operators 11 and the people there did everything in their power to make 12 sure that that plant was running. It didn't always work, 13 but they hustled the most they could because it was 14 rewarded. 15 So in -- we talk about penalties, and that is 16 certainly one way to deter behavior, it is widespread in 17 government, everything from speeding tickets and so forth. 18 But there is also the fact that if you properly reward or 19 incent for the behavior that you are wishing for, like say 20 we have an incentive for being available. So that is 21 basically how you get by. 22 You could say that this book of procedures is eye 23 wash or so forth, but you have things -- things do happen. 24 I mean they came off -- if my memory serves back in that 25 time frame, they came off an extensive outage at the nuclear 26 plant then the unit failed to start up. So those things -- 27 MR. KAHN: Let me interrupt you, sir. We're not 28 going to accept the notion that you're economically incented PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 102 1 to do the right thing. The reason we're not going to do 2 that is because we just went through two years of industry 3 approving that they're a lot smarter than we are. And they 4 figured out many, many ways to make money in this 5 environment that we don't understand. 6 And the fact that an individual plant may be 7 motivated by an individual bonus structure to make more 8 money by being on line doesn't mean that there aren't all 9 kinds of arrangements about the net cost of the energy, the 10 net sales of the energy, that would result in a better 11 result for the company overall if the plant went down 12 anyway. 13 We started with the premise -- and probably I sat 14 in a room with every one of your bosses where they looked 15 and sat around the table and told us that in a million years 16 nobody would manipulate anything. I don't remember Shorty 17 being in the room. In a million years they would never have 18 the economic incentive to do all the things that later on we 19 found out they were doing. The Governor and the Legislature 20 won't accept the idea that good, honest people like you have 21 incentives to do better. 22 So the question is -- we have to go back to the 23 question of penalties. And the issue that I'm facing, and I 24 haven't got an answer to my question is: Is it a better 25 process to have pervasive inspections and penalties, and the 26 method being that we'll catch you every time you do it, and 27 therefore low penalties or high penalties? 28 One thing that is not acceptable is the traffic PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 103 1 model. Everybody drives 70 miles an hour in the 55 zone, 2 because most of the time you don't get caught; and if you 3 do, the penalty isn't very great. That is not a 4 particularly attractive model for this environment. 5 It is fair if you don't want to answer the 6 question, but that is what I'm interested in in terms of 7 crafting a model. 8 MR. CRAGG: I have had a little bit of a chance to 9 think about it. I think as between those two choices, the 10 pervasive investigation and penalty as sort of getting 11 caught on the spot as opposed to the more random higher 12 penalty, I think conceptually the random check with the 13 higher penalty is preferable, primarily for the reason that 14 the individual inspections, even though they've worked 15 pretty well so far, do get in the way a little bit. There 16 is sort of -- you have extra people around the plant so it 17 may interfere with operation. And given the choice between 18 someone extra being there a lot or someone extra being there 19 a little, I think most plant operators would prefer a 20 little. 21 Now, the challenge to that approach, the random 22 inspection, is coming up with a clear understanding of when 23 there has been a violation. In other words, there has to be 24 some sort of reasonable and enforceable and objective 25 standards that can help you determine when there has been a 26 violation. 27 The question of penalties always raises, first of 28 all, the jurisdictional problems. But putting that aside PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 104 1 for now, usually when there are penalties assessed or some 2 sort of notion of due process, there should be some sort of 3 give and take. If plant operators are accused of unduly 4 expending an outage or calling an improper outage or 5 something like that, and the penalties are high, there 6 should be a fair process to respond to that and show that 7 no, in fact we did the best we could under the 8 circumstances. 9 MR. KAHN: I agree with much of what you said. I 10 also am very mindful of the desire to not -- from the 11 state's perspective, we don't want to have a whole police 12 force, and we also don't want to interfere with the 13 operations of the plant. 14 I would want to address just one person's view on 15 the question of jurisdiction. Let me just tell you my view 16 of the jurisdiction issue. 17 I think you are very, very sadly mistaken if any 18 of you invoke that. Because if we don't have jurisdiction, 19 that is not a problem. We'll just have the Legislature do 20 something. If the Legislature doesn't have jurisdiction, 21 we'll change the laws in some way to make it. There is a 22 will here. 23 Nobody in Sacramento or the Governor thinks that 24 the energy crisis has been solved. There is going to be a 25 lot more legislation, there is going to be a lot more things 26 done. Either you are going to cooperate and help us do 27 this, or you are going to say, well, you don't have 28 jurisdiction. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 105 1 From my perspective, having lived through this 2 business, we don't have jurisdiction to buy power either, we 3 don't have jurisdiction to do a whole lot of things we did 4 in the emergency situation, and we'll fix those things. 5 If the consensus here of you folks, hopefully, 6 but if you and us together is that we need certain things 7 done, it is going to be really counterproductive to lawyer 8 this up. Because all I'm going to do is go to the Attorney 9 General and go to the Governor's legal affairs people and 10 say let's assume they are right. Let's make it as onerous 11 as we can to be sure that we have jurisdiction. And that 12 will, I think, invoke kinds of regulation and kinds of 13 jurisdictions that you don't want, we don't want. 14 So I think the best way for us to deal with 15 this -- it seems to me from a distance to be a pretty 16 moderate solution to this problem, of this environment. But 17 if the net net of it is going to be well, don't you dare do 18 these things to us because we'll challenge the jurisdiction, 19 I'm going to recommend the Governor and Legislature don't 20 bother with that. Let's find something that is bulletproof 21 and we'll rewrite 39X and take the product and stick it with 22 some other form. 23 These days -- I mean I'm getting along with FERC 24 personally. If we can't do it here, we will do it at FERC. 25 We'll do it. So let's focus on what is the doing of it. 26 The rest of what you said, I do agree with that, and we're 27 struggling to get to that. You asked about what our goals 28 are, we're struggling to get to that. But we have to answer PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 106 1 the question always: How do we deal with someone who is 2 dealing in good faith -- not dealing in good faith. What do 3 we do about that? And my view is that that will be a very, 4 very small number. But those are the people that you read 5 in the front pages of the newspaper. 6 COMMISSIONER WOOD: Let me -- that wasn't a question. 7 I want to move through other participants here because we're 8 hopeful that this meeting isn't going to drag on real long 9 today. ] 10 MR. WALKER: I have no comments at this moment but 11 would like to reserve the right to come back. 12 COMMISSIONER WOOD: Sure. 13 Mr. Romeserg. 14 STATEMENT OF MR. ROMESBERG 15 MR. ROMESBERG: I think mine will be very quick. My 16 name is Tom Romesberg. I'm the general manager at the 17 La Paloma generating plant, which is a new facility, 1100 18 megawatts, near Bakersfield. 19 We're in the process of last stages of 20 commissioning, taking units commercial. This is a large 21 advanced technology, gas-turbine type plant. 22 And I had a very simple -- just one comment, 23 really, in terms of the standards. And it's more of a big 24 factor in the world that we operate in -- and I've been 25 involved with these type of facilities for seven years -- in 26 regards to maintenance and major maintenance is the timing 27 of it. 28 And one of our challenges is many of the PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 107 1 operators, many of the facilities are under what are called 2 long-term service agreements. They are maintenance 3 agreements. And what it boils down to is when I take -- my 4 major outage depends on how many hours I've run, and it's 5 factored whether we've had trips and how we run. 6 And that sets the clock, and I have to -- I 7 thought it was a very important point to raise on this as 8 far as the timing just that folks understand that. I have 9 to take a unit down for a certain type of outage. It 10 depends on your type of machine. It could be 6,000, 8,000 11 equipment operating hours, 12,000. There's different 12 intervals in different inspections. 13 And so we have -- you know, we're looking at how 14 do you do your scheduling, and when you fully don't -- when 15 you fully don't know, you're looking a year advance and 16 trying to understand what's your dispatch, some of it will 17 depend on contracts, market. So that's an important factor 18 to us because it mandates when we come down. 19 I don't think it's a big issue, but it's 20 important to understand. Because I can't totally control 21 that and if folks understand that in this process, I think 22 it will be helpful because it's fairly common with the newer 23 technology to have to follow these maintenance requirements. 24 And I have to -- to finish up on it, I have to 25 take an outage at a certain interval. I have some 26 discretion here. There's some plus or minus on those hours, 27 and if I don't have do that, I could void my insurance in 28 all those factors. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 108 1 MR. BJORKLAND: How much discretion do you have? 2 MR. ROMESBERG: Well, these are all -- well, 3 basically there's a -- you know, it's like on a car: You 4 have a 50,000-mile service interval, and it will depend on 5 the type of units and technology. But you have a plus or 6 minus band and you have to take it down and do a certain 7 amount of things at that time. 8 COMMISSIONER WOOD: Have you suggested any 9 modifications of the proposed rules that would accommodate 10 plants with different operating characteristics or -- 11 MR. ROMESBERG: I think there needs to be recognition 12 of that in the standards that, you know, the timing of these 13 certain maintenance activities, you know, are controlled by, 14 you know, other factors. 15 It's not -- it's not in my discretion as an 16 operator to say I can't do that outage. If I can't -- if I 17 can't do that outage within that window, I lose my insurance 18 and I shut down and I can't generate. 19 So I don't think this is a big obstacle to 20 addressing it, but it's just an attribute of some of these 21 newer technologies and newer plants that need to be 22 addressed in requirements. 23 MR. CLARK: Isn't that a matter of outage 24 coordination with the ISO rather than maintenance standards? 25 And that's really a separate issue and is 26 addressed in the outage coordination protocols at the ISO as 27 I understand it. 28 MR. PETTINGILL: I guess I would also make the PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 109 1 comment that I think we have tried to deal with this 2 situation as you described it in the standards. Again, it 3 may need to be fleshed out in terms of some more specific 4 language in here, but we've tried to deal with the fact that 5 if you've got a new generator and certainly a generator that 6 is new technology as you've described, what we've tried to 7 do is recognize that you do have these required outage 8 windows, you do have this particular maybe proscriptive 9 outages that you have to have. 10 And so what we've asked you to do is be 11 up front about that. I think it goes to the point that 12 Mr. Kahn was making: Tell us what that needs to be. Give 13 us that pro forma and then we're going to hold you 14 accountable for what you said you have to do. 15 So we've tried to accommodate the fact that new 16 technology may have different clearance windows. But be 17 up front with us; tell us what those are. 18 COMMISSIONER WOOD: Mr. Huhman. 19 STATEMENT OF MR. HUHMAN 20 MR. HUHMAN: I think I would echo most of what my 21 colleagues have said here. And I might emphasize that from 22 Mirant's perspective, what we would like to see is to 23 minimize bureaucracy and maximize focus on actual 24 substantive results. 25 We've recommended that Sections 1 and 3 of the 26 proposed standards be chucked completely. We don't think 27 they have anything to do with maintenance. We think they're 28 human resources standards and irrelevant to the whole thing. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 110 1 I think where we would like to go with this thing 2 is without stating an opinion on whether the CUF is the 3 right metric to go or not, I think we ought to emphasize 4 metrics, and I think we ought to emphasize inspections. 5 In answer to Mr. Kahn's question about infrequent 6 and high penalties or frequent and low, I think I would echo 7 my colleague's preference for infrequent and high for a 8 couple of reasons. 9 As he said also, we don't want to have the people 10 in the plants to any great degree because that does cause 11 problems and it distracts people from what they need to be 12 doing. It's a safety issue. 13 But also secondarily, as someone else said, 14 having highly trained inspectors that really understand 15 plant operation is very important. And, obviously, it's 16 going to be easier to have highly trained inspectors if you 17 have relatively few of them making relatively few 18 inspections. 19 And if the price we have to pay for that is a 20 higher penalty when something is found to be wrong, I think 21 we would rather take that risk. 22 COMMISSIONER WOOD: Rich? 23 MR. CLARK: I'd just like to make a couple comments: 24 I have a little problem juxtaposing the position of each of 25 these plants, each of these units as unique. And you want 26 our inspectors to be familiar with that, and the standards 27 should reflect that also. But at the same time, nobody 28 wants the people in the plants very frequently. And I can PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 111 1 understand that people might get in the way and that sort of 2 thing. 3 But I think one of the reasons -- one of the 4 reasons that we got here where we are today in terms of this 5 is the lack of transparency of what's been going on at the 6 plants. 7 And although Mr. Cragg had said that the 8 inspections have gone well and we haven't found anything, I 9 wouldn't necessarily agree with that. 10 And one of the reasons that in my view the 11 inspections haven't gone all that well is because of the 12 lack of transparency. We request copies of documents. We 13 have to wait for them to go to the lawyers, get 14 Bates stamps, get sent to someplace, and then they have to 15 all get conformed and the inspectors don't have the 16 opportunity to review the documents in time proximate to the 17 time when the inspection was done. 18 So that has been a real problem in terms of being 19 able to have access to people to interview with respect to 20 outages in some plants. That's been a problem also. 21 So although, you know, we don't want to run the 22 plants, we don't want to micromanage them, I think it is 23 important for our people to understand the peculiarities of 24 each one of the particular units at each one of the plants. 25 And frequency of being there, being involved in 26 the process, knowing the individuals and that sort of thing, 27 I think, makes for a more fluid inspective effort, as well 28 as to have a more appropriate penalty that's attached to PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 112 1 aberrant behavior when or if we detect that sort of an 2 outage. 3 So we might have a different view. I think we do 4 have a different view than the other folks who've expressed 5 their view in terms of the frequency of inspections. 6 MR. HUHMAN: I might say from Mirant's perspective 7 that while I expressed a preference, I don't think we have a 8 big problem with frequency of inspections and lower 9 penalties, particularly if the people who come and conduct 10 the inspections are well trained. That's probably not a big 11 issue for us. 12 Mr. Kahn asked for a preference, so I gave one, 13 but I don't see it as a big issue. Either one is probably 14 comfortable. 15 Again, our biggest desire in this thing is just 16 to minimize the bureaucracy, minimize documentation, make 17 sure that we have real maintenance standards, not human 18 resources standards, which is what Sections 1 and 3 are. 19 So send anybody to come and ask all the questions 20 you want, send them to come look at anything they want. 21 That's fine with us. Don't ask us to fill out tons of 22 paperwork. Don't ask us to conduct self-audits that we 23 don't have the staff or the training for. 24 We're open for transparency. We'll show you guys 25 anything you want to come see. What we want to do is 26 minimize the kinds of bureaucratic sorts of stuff that 27 doesn't add anything to maintenance standards. It just adds 28 cost and just adds work. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 113 1 COMMISSIONER WOOD: Mr. Hanschen? 2 MR. HANSCHEN: I'd like to address that a little bit 3 more myself -- 4 COMMISSIONER WOOD: Why don't you come forward, if 5 you would, and get a little closer to the court reporter, 6 maybe use a mike. 7 MR. BJORKLAND: Could I ask, what power plants do you 8 represent? 9 MR. HANSCHEN: AES on the Huntington plant, 10 Los Alamitos and Redondo Beach. 11 STATEMENT OF MR. HANSCHEN 12 MR. HANSCHEN: First, I'd like to address something 13 that Mr. Kahn said here is that when you're addressing 14 Mr. Cragg and we're talking about -- Mr. Cragg said he had 15 an abundance of manuals. 16 And I think your statement back to him was in 17 some respects manuals are an opportunity to game the system. 18 You can say: We have to follow the procedures of the 19 manual. And yet our review of some of the standards and the 20 guidelines were -- one of our concerns is it calls for more 21 manuals, a plethora of manuals. 22 We think we have the manuals that are necessary 23 and that a reasonable operator would have for a plant. But 24 one of our concerns was just the abundance of paperwork and 25 the additional manuals that would be potentially called for 26 here. 27 So I guess we -- I find kind of a contradiction 28 here because our reading of it was this will lead to more PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 114 1 standards, more and more manuals, more directives, and yet 2 that seems to be one of the concerns, that the manuals 3 themselves are an opportunity to game the system. I think 4 we have to have that illustrated. 5 The other thing that struck us when we were 6 reading through the standards on this is that with the 7 metrics, it seemed to be a focus on a longer-term operating: 8 How are you doing compared to -- the units doing, compared 9 to its historical past in setting standards setting forth in 10 advance so when you think you have to take out a unit, what 11 are the opportunities here. 12 The CPUC -- and we brought this up in our 13 comments -- has asked for the ability -- because this is a 14 longer-term looking benchmark, is the ability to do audits 15 kind of on a spot basis on things. And what we didn't know 16 there, what are the criteria. 17 We talk about when someone's gaming the system or 18 doing something improper here. We don't know what the 19 standards are that the PUC has set on these kinds of 20 shorter-term audits. 21 There seems to be kind of a tension between the 22 longer-term metrics of looking at how the plant is operating 23 versus the shorter term need to audit. And we don't know 24 what's going to happen in those shorter terms of audits. 25 When a person comes in a plant and says, 26 "Something's happening here; this is wrong," does it mean 27 you don't have the manual that you were supposed to have? 28 Does it mean something much more significant than that? PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 115 1 Does it mean they don't think you're going to make the long- 2 term metrics? 3 The short-term criteria aren't spelled out at all 4 here in terms of what is expected in terms of maintaining 5 the maintenance for the plant. 6 So while the metrics for long-term performance 7 are laid out and people can agree or disagree with those, 8 there's nothing that's laid out on how the short term, 9 more -- well, shorter-term audits are going to be performed, 10 what's being looked at. The only thing that's in here is 11 that the guidelines will form the benchmark. 12 In other places in the standards the guidelines 13 are -- they're not prescriptive. They're, you know, what is 14 needed to or what may be needed to fulfill the standards 15 themselves. 16 So while the guidelines are there and we 17 certainly have some problems with just the depth of the 18 guidelines, it seems like the guidelines actually play, 19 perhaps, a higher role in terms of the shorter-term audit 20 than they do in the longer-term views of whether you're 21 satisfying the metrics or not. 22 So that was a tension that we saw here on this. 23 COMMISSIONER WOOD: Let me try to respond to some of 24 your comments and Mr. Huhman's comments as well. 25 I think what they reflect is a misunderstanding, 26 perhaps, what we're up to here. Of course, this Committee 27 is not the Public Utilities Commission, but the law is 28 written in such a way that the rules that come out of this PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 116 1 process will go into a rulemaking process at the Public 2 Utilities Commission and will ultimately result in a set of 3 rules that will then apply to the plants that you represent 4 and operate. 5 I think probably most of the people who are here 6 practice before the Public Utilities Commission and are 7 familiar with the nature of enforcement, and their rules 8 written -- Commission rules are written in such a way as to 9 set standards to set requirements, but also to allow a great 10 deal of discretion by the Commission in how it enforces them 11 and what penalties, if any, it applies to any violations of 12 those rules. And there are a number of standards that are 13 used. 14 But I think one of the basic ones just has to -- 15 goes to what is the scope of the violation. Are we in the 16 business here of trying to tally up a bunch of trivial 17 offenses for $20,000 per fence, or are we looking at trying 18 to correct some kind of behavior? 19 The reason that this whole process that we're 20 involved in today is even necessary is because the 21 restructuring of the electrical industry and, in particular, 22 the separation or divestiture of the generation plants from 23 the bundled utility service and the separation of the plants 24 from an obligation to serve has created different incentives 25 than existed under traditional regulation. 26 In the days when Glenn Bjorkland was overseeing 27 Southern California Edison's generation plants, there was no 28 worse offense than to allow the lights to go out, and PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 117 1 everyone in the system understood that. The company made 2 its money in other ways than selling electricity. That was 3 a component of it. But the basic responsibility was to 4 answer to this Commission and assure a continuous flow of 5 power and continuous service. There was a positive 6 obligation to serve. 7 When AB 1890 in its implementation separated your 8 plants from that obligation to serve because you no longer 9 had an obligation to serve arguably that was explicitly 10 recognized in statute and certainly not before this 11 Commission -- and I hope I haven't stated that so far as to 12 get us in trouble in any litigation that may be going on. 13 But I think certainly the obligation to serve was 14 strongly undermined. You make your money otherwise. You 15 make your money by selling electricity as a commodity, not 16 primarily as a service. 17 The result of that -- and this goes both to what 18 can be as much as criminal misbehavior, but also it can just 19 be rational economic activity in terms of the way you run 20 your plants -- can produce bad results for society. And I 21 think both of those things are criminal activity and simply 22 self-interested operation of the plant contributed to the 23 outages, the price excursions and all the other misfortunes 24 that we suffered during the energy crisis. 25 This law that created this Committee is an 26 attempt to deal with that misalignment of obligations and 27 motivations, but we still have a contradiction there because 28 you are now regulated under the jurisdiction of the PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 118 1 Commission with respect to operation and maintenance 2 standards, or you will be as soon as we have some Commission 3 rules in that respect. 4 As we end up defining, you don't have an 5 obligation to serve that is at the same level that the 6 distribution utilities have. That's where the primary 7 obligation to serve falls. I think a lot of what these 8 rules go to is to reestablishing an obligation to serve, and 9 that's what we're defining here: What is the extent of your 10 obligation to serve? 11 And that doesn't just mean your obligation to 12 make a profit for your shareholders. It means that the 13 Legislature has established for you a positive obligation to 14 provide the availability to your plants and plant output for 15 the benefit of California consumers. That's a different 16 environment than existed under AB 1890 until it was amended 17 and by various laws, including SB 39 2X. 18 That is just something you're going to have to 19 get used to doing business in California, that we are 20 reimposing some measure of an obligation to serve upon you, 21 and that will not -- if there's any comfort to take from 22 this, it's that I'm convinced that the Commission will 23 exercise its authority in a way that is consistent with how 24 it exercises its authority over other utilities that it 25 oversees, which is not to go around trying to tally up 26 offenses and playing gotcha. It's to make sure that the 27 power keeps coming at just and reasonable prices. That's 28 the goal of this whole thing. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 119 1 MR. HANSCHEN: Commissioner, could I address two 2 points on that? 3 First is, without overlegalizing this here, my 4 impression of what the Legislature said here was this 5 Committee was going to draft the standards, and the 6 Commission was going to be the enforcement arm on that. 7 The point that I was making is while their broad 8 standards have been put out, the 18 broad standards here, 9 there's no standards on what the Commission is going to do 10 in its enforcement. 11 There's no standards to direct the Commission on 12 when -- and when it does its intermittent audits, its 13 various audits that are allowed -- when it can find a 14 violation or what is a violation. Is it something that is 15 significant where you're gaming the system? Is it a lack of 16 manuals? We don't know that. 17 The guidelines or the standards are vague on 18 that. They say the guidelines can perform -- be a benchmark 19 on those audits. I don't know what that means, because 20 elsewhere it says you don't have to file the guidelines. 21 The guidelines are to give you an intent of what's 22 encompassed by the standard. 23 So I think part of the job of this Committee then 24 is to draft standards and to draft criteria for the 25 Commission of when is there a violation during this 26 intermittent period? It's not that the Commission can just 27 go in and say: We think there's been a violation, because 28 that then allows the Commission itself to establish a PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 120 1 criteria. And the Legislature has said that is a job of the 2 Committee, not the Commission. That's the first point I 3 make. 4 The second point we also had in our comments and 5 you brought up is that the Commission will be using some of 6 its traditional means of looking at compliance here. And 7 these standards talk about -- we use very, very subjective 8 terms in terms of high standard, best available, best 9 techniques. We listed some of them in the comments. 10 That's never been the Commission's standard for 11 operation. The Commission has always used a reasonable 12 operator standard for the utilities. It is the utilities 13 operating under the conditions that exist with the knowledge 14 that they had or should have had available to them. They're 15 not held up to optimum performance. 16 The Commission has a long history on their 17 reasonableness reviews of establishing those standards. The 18 standards are completely different, as far as I could 19 determine, for that in this instance. 20 And so that would be another thing that we would 21 suggest, that perhaps if we take out some of what I think 22 are subjective words and use words like "appropriate," use 23 "a reasonable man standard" rather than "best rating 24 standards," et cetera. 25 COMMISSIONER WOOD: I'm not sure I've ever heard 26 anybody describe "reasonable" and "appropriate" as not being 27 subjective as well. 28 MR. HANSCHEN: Well, certainly if you couple it with PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 121 1 a reasonable operator standard, give you a better, perhaps, 2 a chance of arriving at consensus of what that could mean 3 rather than "good," "best," "highest," something like that. 4 COMMISSIONER WOOD: I think your point is noted. 5 MR. HANSCHEN: Okay. Thank you. 6 COMMISSIONER WOOD: We have other people who 7 identified themselves earlier. I'll just go through them in 8 the order that people identified themselves, see if you have 9 any comments. 10 Mr. Kerner? 11 STATEMENT OF MR. KERNER 12 MR. KERNER: Thank you, Commissioner or Mr. Chairman. 13 I don't know which is more appropriate. 14 I'll be very quick. I don't have great 15 disagreement with a lot of what has been said. 16 I want to make sure, however, particularly to 17 Mr. Kahn, we are not here to stiff anybody. Duke Energy and 18 North America, as a general matter, thinks that the 19 standards the ISO has come up with are pretty good. We 20 comply with them already. 21 The only points that we had tried to emphasize or 22 encourage you to view is to focus on standards and avoid 23 prescriptive behavior because -- for all the reasons that 24 have been discussed. 25 The individuated nature of the power plants 26 counsels against the practicability of doing that. And 27 we've also expressed significant -- the very specific 28 concern over compliance with the standards and have asked PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 122 1 that you minimize the burden associated with doing that, 2 focus on results rather than on prescriptive behavioral 3 action is what we have said. 4 Many people have pointed out -- and I think the 5 ISO and yourself for that matter have indicated -- 6 identified the capacity unavailability factor as one 7 specific area where we may want to do some reworking to 8 better reflect the importance of peak-power availability 9 rather than, you know, its current, we think, somewhat crude 10 measure of establishing that particular standard. 11 With regard to the audits, inspections and so on, 12 provided that the standards are as unambiguous as we can get 13 them, as I said, we already comply. Less intrusion is 14 better. 15 And I suppose we would leave it at that, whatever 16 makes you more comfortable, I suppose, but from our point of 17 view, if compliance with the standards is being indicated, 18 minimize the burden both of inspections, audits, reporting 19 and recording. And that's primarily where we're coming 20 from. 21 COMMISSIONER WOOD: Okay. Thank you. 22 Ms. Loduca? 23 STATEMENT OF MS. LODUCA 24 MS. LODUCA: Good morning. I represent 25 Pacific Gas and Electric Company. 26 And just as an initial matter, it certainly 27 wasn't Pacific Gas and Electric Company's intent to stiff 28 arm the Committee in its comments. I'm sorry it was taken PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 123 1 that way. 2 I think -- in reviewing the comments from all of 3 the parties, I think what struck me is the concern that 4 generators need to know what standards they're going to be 5 held to. And the current draft standards have a lot of 6 vagueness and inconsistency in identifying what standards 7 are you going to be judged against. Is it the 18 8 performance standards? Is it the assessment guidelines that 9 are attached to those performance standards? Is it the 10 Appendix A? 11 And I think what you've got back was people are 12 very nervous about not putting together a maintenance 13 program, but how are they going to be judged. The auditor's 14 going to come back and how are they going to say: Well, you 15 don't do X, Y and Z, so, therefore, you're not in compliance 16 with the standards? 17 And it's really sort of a basic due process: 18 What are the standards and what are we going to be held to? 19 And a couple of people had suggestions that may 20 make people feel a little bit better, judging based on what 21 did people self-certify? People are going to be required to 22 put together sort of a self-certification: This is our 23 maintenance program. 24 And if the maintenance program is going to be 25 based on these 18 performance standards and we're going to 26 have to identify why we comply or, in some instances, why we 27 think it's an inapplicable standard. And then are you going 28 to be judged based on what you've self-certified or PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 124 1 something else? 2 The one issue that hasn't been raised a lot 3 here -- although, I guess it was brought up -- many 4 commenters identified specific areas where standards are 5 already in place, the ISO standards, outage coordination 6 protocol, for example, and identified areas of either 7 potential conflict or actual conflict. And that's one area 8 that I would encourage the Commission to take a close look 9 at. 10 And you know, for example, on the outage 11 coordination protocol, if generators aren't able to take the 12 kind of maintenance that they have planned for whatever 13 reason, it's a system emergency, then that needs to be taken 14 into account if something breaks down later. 15 People can only do what they are allowed to do. 16 And the ISO certainly exercises control now over when 17 generators can take maintenance outages and when they can't. 18 So I think an acknowledgment of that somewhere in the 19 standards is important. And that's just one example. 20 It would be very helpful for the Committee in 21 adopting the standards to acknowledge that there are a 22 number of other standards and protocols already in place, 23 and somehow these are going to have to work together. 24 If I could just say a word about procedure: This 25 is an interesting process because this Committee is brand 26 new. Its not like an established agency like the CPUC 27 that's got procedures for how do you rehearing, 28 reconsideration, that kind of thing. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 125 1 So I think it would be helpful for the 2 Commission -- the Committee to think about and identify 3 specifically what procedures is it going to be governed by. 4 The statute not only grants the Committee the 5 authority to adopt these standards, but also to revise them, 6 and so that's something that I haven't seen yet. How does 7 the Committee intend to go about that process of revising 8 and what opportunities will there be for revising? 9 One obvious choice is the rulemaking procedures 10 of the Administrative Procedures Act. But I think it would 11 be helpful to the parties to know what that process is going 12 to be. 13 If there's a need to revise -- a perceived need 14 to revise, how do you go about doing that? Is the Committee 15 going to hold regular meetings? You don't have offices. 16 How do we contact you? ] 17 All of those things are going to be important 18 down the road, as well as, for example, rehearing. If 19 people disagree with standards that come out, how do we go 20 about seeking rehearing on specific issues. 21 So I'd encourage that the Commission -- the 22 Committee to come up with not only the substantive standards 23 but also to think a little bit more about process. 24 Thanks. 25 COMMISSIONER WOOD: Thank you. 26 MR. KERNER: Commissioner? 27 COMMISSIONER WOOD: Yes? 28 STATEMENT OF MR. KERNER PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 126 1 MR. KERNER: With your permission -- I'm sorry to 2 take a second turn, and I'll be fast -- but pertinent to the 3 comments you just heard, a major step forward, probably, or 4 an improvement that you may want to consider, which would 5 alleviate the concerns here, is to make clear that in the 6 event of an audit which results in an apparent violation, 7 that we have a dispute-resolution mechanism built into this 8 process. That will -- inherent ambiguity and uncertainty 9 over precisely what standards are going to be involved can 10 be alleviated substantially if there's a process for 11 consideration. 12 COMMISSIONER WOOD: My initial reaction to that is 13 that unfortunately it's going to be the job of the Public 14 Utilities Commission, and the standards may be established 15 here and adopted by the Commission, but whatever enforcement 16 procedures there are will be established by the Commission. 17 And I think it's -- it probably would be presumptuous and 18 ultimately to no effect if this Committee were to establish 19 enforcement procedures because the Commission would in any 20 case have to decide for itself how it was going to go about 21 enforcing the standards. 22 I don't know if my colleagues have any different 23 views on that, but that is my guess. 24 Mr. Vance? David Vance? 25 Can you come to the microphone, please. 26 STATEMENT OF MR. VANCE 27 MR. VANCE: Thank you. 28 I represent San Diego Gas & Electric. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 127 1 San Diego Gas & Electric doesn't own any power 2 plants or operate any, but one of these days we might be 3 back in the business, so we thought our comments were 4 relevant here. 5 Keeping that in mind, one of our concerns was 6 this jurisdictional issue, and so we wholeheartedly agree 7 with what you said, Mr. Kahn. 8 We'd like to see a level playing field. 9 The last thing we want to see is performance 10 standards apply to utilities but not to municipalities or 11 not to merchants. 12 So, having said that, to get to the meat of the 13 standards here, really I'd like to echo what one of the -- 14 one gentleman said before: It's our wish that you emphasize 15 availability results and to not mandate how we run the power 16 plants. 17 The results -- the way to do that might be with 18 your performance metrics and CUF, although we think that 19 needs some fine tuning, and associated penalties. 20 As you say, incentive hasn't been -- hasn't 21 worked in the past two years, so maybe, unfortunately, some 22 penalties are necessary. 23 But the maintenance standards themselves and the 24 associated audit process we have had a lot of distrust with. 25 What you are trying to do here, as we've talked 26 about already, is police the plant operators; with this 27 system you are going to attempt to tell them how to run 28 their maintenance programs, and you're going to -- that's PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 128 1 going to impose a very large administrative workload on the 2 plant operators and on the State. And it seems to be coming 3 full circle from the days before deregulation when one of 4 the goals, prior to deregulation, was to minimize the 5 State's administrative burden in running the power industry. 6 So again, we would endorse hold -- hold the 7 operators accountable for availability, and if penalties are 8 part of that, so be it, but minimize telling them how to run 9 their maintenance systems. 10 This is a very prescriptive document, and we had 11 a lot of -- a lot of indigestion with that. 12 (Laughter) 13 MR. VANCE: It reminds me a little bit of how nuclear 14 plants are run. 15 In nuclear plants you have to tell nuclear 16 operators how to run their maintenance facilities because of 17 safety concerns. 18 Well, safety concerns aren't the issue -- primary 19 issue with fossil plants; it is availability, so you need to 20 make your oversight program cost-effective. 21 And that's about it. 22 In answer to your -- Commission Kahn, you said do 23 we prefer pervasive inspections with low penalty or 24 versus -- or minimal oversight with high penalty. 25 Well, that would take some more thought, but we'd 26 probably lean toward -- toward the latter. 27 Thank you. 28 COMMISSIONER WOOD: Okay. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 129 1 Nora Sheriff 2 MS. SHERIFF: Good morning. 3 STATEMENT OF MS. SHERIFF 4 MS. SHERIFF: Good morning. 5 I represent Midway-Sunset Cogeneration Company, 6 and we believe the standards represent a commendable attempt 7 at defining how generating resources should be operated; 8 however, we do seek clarification from the Committee on a 9 few issues. 10 First, the generating-unit capacity must be 11 clearly defined for data-reporting purposes. 12 Which of the three measurements, Gross Maximum 13 Capacity, Net Maximum capacity, or Gross Dependable Capacity 14 does the ISO intend to use as units in PMAX for comparison 15 and benchmarking purposes. 16 Second, Ambient Derate should not be counted 17 against a unit's availability factor. Although this is 18 clear ISO policy, it's unclear in the metrics. 19 Third, the benchmarking of performance must 20 consider the unique operating characteristics of the 21 generating asset. Failure to do this could result in a real 22 disincentive to improve capacity in California for, by 23 example -- resulting in delays in equipment maintenance, 24 upgrades, or replacements. 25 And last -- and as some of the other participants 26 here have mentioned -- there is a need for a due process in 27 terms of when a penalty is assessed. 28 We believe any assessments of a penalty should PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 130 1 occur only after a fair hearing and only for intentional 2 conduct. 3 No penalty should be assessed without 4 demonstrating an intentional wrongdoing, and prior to any 5 penalties' assessment there should be a hearing convened and 6 appropriate due process. 7 Thank you. 8 COMMISSIONER WOOD: I have to respond to your last 9 comment, and that is that I'm quite certain that what we 10 come out of here is not going to allow inadvertent errors to 11 go unnoticed because there's going to be a positive 12 expectation placed on generators that they do their job, 13 that they meet standards, and whether it's deliberate or 14 simply careless or negligent, I think negligence is going to 15 be a basis for finding violations. That's certainly my 16 expectation. 17 Do any of my colleagues have any questions? 18 Comments? 19 MR. BJORKLAND: No. 20 ALJ THORSON: Are there any further comments from the 21 parties here? 22 Okay. Mr. Walker. 23 STATEMENT OF MR. WALKER 24 MR. WALKER: Yes. Thank you for letting me return 25 and make some comments here. 26 First, I'd just like to echo -- this will be very 27 brief -- I would just like to echo some of the things that 28 have been said here. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 131 1 I need to have a definition of "due process" when 2 a penalty has been or a -- a -- when the penalty is proposed 3 to be assessed to a generator. 4 We also -- like the comments from the gentleman 5 from San Diego Gas & Electric, we are concerned that these 6 standards would apply to a subset of generators within the 7 State of California and not all. 8 And also -- I believe it was the lady from 9 Midway-Sunset talked about having a process that we all can 10 participate in when these standards are revised going 11 forward, and we think that's very important to have in place 12 and defined prior to adopting these standards. 13 Putting the penalty section and audit portion 14 aside for a moment -- there's the -- we received a lot of 15 discussion this morning -- I had a question really for the 16 Committee which, when we went through these guidelines, we 17 literally went through line by line with our operations 18 staff and read the guidelines. 19 We are concerned that, as you read these 20 guidelines, there is sort of a continuum, if you will, of 21 how a maintenance -- suggested maintenance practice could be 22 implemented with some of the subjective language that's 23 used, that it could be read to -- by one person to apply 24 minimally; it could be read by another person to apply to 25 the complete opposite end of the continuum and be applied 26 very prescriptively. 27 We share the goal, Mr. Kahn, of what you and 28 other members of the Board have said, which is making sure PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 132 1 our units are available when they are needed in the 2 marketplace. 3 We are concerned , though, that the standards can 4 be read to -- to imply a level of maintenance practices that 5 could be, for no other -- lack of better explanation or 6 expression, it could cause the gold plating of certain 7 units, and we would like to ask the Committee how we can 8 work together with you to create a set of standards that 9 ensure availability but also strike a balance with the 10 economic reality of operating the power plants and not 11 incurring increased overhead administrative costs to 12 document things that might not need to be documented as well 13 as discuss standards, as the specific practice is suggested 14 in here, that -- that would not be needed to truly increase 15 the availability of the unit. 16 I don't think -- that was one of our goals of 17 seconding Dynegy's request for a roundtable workshop, was to 18 discuss that. 19 I think that would require some discussion with 20 our operations folks at length about which specific examples 21 might or might not fall into these categories, but I don't 22 feel that we have broached that subject in depth here at 23 this roundtable; and I'm curious, in the spirit of working 24 with the Committee, how we can find a way to still achieve 25 the goal, which is increasing availability, but yet having a 26 set of standards that are not directing us to incur a set of 27 costs that don't really achieve that goal necessarily. 28 With that said, Reliant said in its comments and PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 133 1 I echo here, that we believe we achieved most, if not all of 2 the performance standards as they are described in the 3 document. 4 Our concern comes in with the detail expressed 5 and the subjectivity expressed in the assessment guidelines. 6 But that's -- that's all I have. 7 STATEMENT OF MR. SOCZKA 8 MR. SOCZKA: I would just like to sum up the earlier 9 comments I made on about four major points. 10 One is that we think that there should be some 11 credit given in the standard for being available when it's 12 needed, and you can work that with an ISO waiver or some 13 other measure to give you credit for doing plant outages and 14 having high availability when the -- when it's -- when the 15 units are needed. 16 We have a concern about the overload of paperwork 17 that is nonproductive and take people away from their real 18 task, and a concern with the inspections, to -- you know, I 19 guess when you get the rules done, we're happy to go by the 20 rules because we're interested in getting some stability to 21 convince people that we are doing the right thing, and 22 hopefully someday, then, somebody will loan us money to 23 update the plant or build a new one. 24 (Laughter) 25 COMMISSIONER WOOD: Okay. 26 I'm going to close this agenda item today and 27 move on to the rest of the agenda. 28 Thank you, all, very much for your comments. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 134 1 And I think some of us tried to address some of 2 the issues that you raised. I don't think you expected to 3 hear everything addressed by the members of the Committee 4 today, but all of the comments you've made verbally as well 5 as, of course, in writing are going to be considered, and in 6 one way or another addressed, either -- either by not 7 addressing them or by changing something. 8 (Laughter) 9 COMMISSIONER WOOD: But they are being read and 10 studied and considered by staff and by the members of the 11 Committee. 12 Yes? 13 MR. WALKER: I just had one procedural question. 14 The meeting has been noticed for February the 15 3rd; will it be a formal meeting like this, or will you 16 adopt the standards and mail goes out? 17 I am curious as to the process for the 18 February 3rd meeting? 19 COMMISSIONER WOOD: What is the second part of your 20 question? 21 MR. WALKER: Well, my question is what is the format 22 for the February the 3rd meeting? 23 COMMISSIONER WOOD: Okay. Well, the format will be 24 that the proposed standards as revised in light of the 25 comments and further study are going to be presented to the 26 Committee for adoption, and the Committee may, and likely 27 will, adopt the standards at that meeting. 28 There will be the usual opportunity for public PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 135 1 comment. I'm not sure that it would be real useful to have 2 this extent of the discussion at that point, but certainly 3 there will be opportunity for public comment. 4 MR. WALKER: Okay. And will the standards be -- 5 revised standards be published before that meeting so we 6 have an opportunity to read them? 7 COMMISSIONER WOOD: I believe that will happen. 8 Mr. Clark? 9 MR. CLARK: Well, we haven't crossed that bridge yet, 10 but we can certainly do that, yes, if that's what the 11 Committee wants us to do. 12 COMMISSIONER WOOD: I think that's probably 13 appropriate. 14 MR. BJORKLAND: Okay. Yeah, right. 15 COMMISSIONER WOOD: They are going to have to be 16 available for the Committee members in advance, and since -- 17 now, I don't know that we're going to follow the precise 18 same rules that the Commission follows that -- that the form 19 that is voted on has to be precisely what was noticed 20 previous to that, but I think, for the most part, as best as 21 we can, the draft that is available some period of time -- 22 and I'll discuss this with the Administrative Law Judge -- 23 but some time in advance of the meeting we'll make those 24 available. 25 MR. WALKER: Thank you. 26 COMMISSIONER WOOD: Okay. Are there any additions or 27 subtractions to the service list? 28 ALJ THORSON: Mr. Chairman, I have two here that we PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 136 1 can just note for the record. 2 Gina Dixon from San Diego Gas & electric. 3 Nora Sheriff, Rod Aoki, and Michael Alcantar. 4 MS. SHERIFF: -- Alcantar, yes. 5 ALJ THORSON: -- and they will be noted on the 6 Service List. 7 COMMISSIONER WOOD: Any others? 8 Yes? 9 MR. COPE: Your Honor, Larry Cope, Southern 10 California Edison Company. 11 COMMISSIONER WOOD: Okay. Have you signed -- 12 MR. COPE: I have not. I'll talk to the 13 Administrative Law Judge. 14 COMMISSIONER WOOD: Okay. Please do that before you 15 leave today. 16 The next meeting date and agenda we have 17 previously proposed and I think established that it will be 18 February 3rd of 2- -- is that fine with the other Committee 19 members -- 20 MR. BJORKLAND: Yeah. 21 MR. KAHN: Yeah. 22 COMMISSIONER WOOD: Yes. 23 And so it's noted that the Committee is in 24 unanimous agreement with that as the date. 25 The agenda that has been proposed is, besides the 26 usual items, such as opening remarks and public-comment 27 session, is adoption of the final maintenance standards. 28 Second, to direct staff to issue a draft PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 137 1 generating facility log book requirement for comment. 2 And I think maybe a more precise description of 3 this document would be log book and recordkeeping 4 requirements. There may be other records besides the log 5 book that are implicated here. 6 And staff is looking at possibly setting up a 7 workshop within 15 days and receiving comments within 20 8 days, and then a series of reply comments. 9 That is not a final order at this point. We're 10 considering the -- we'll consider the workshop and comment 11 schedule and issue an order subsequently. 12 MR. BJORKLAND: Excuse me. 13 COMMISSIONER WOOD: Yes? 14 MR. BJORKLAND: Will the log-book requirement draft 15 be given at the next meeting, the February 3rd meeting, or 16 will it be sent out ahead of time? 17 COMMISSIONER WOOD: My expectation is that we will as 18 soon as it's ready to be sent out, so we won't necessarily 19 wait until the meeting. 20 MR. CLARK: Okay. 21 COMMISSIONER WOOD: Mr. Clark? 22 MR. CLARK: Whatever is the will of the Committee we 23 will do. 24 COMMISSIONER WOOD: Yeah. We might expedite this 25 process. If the parties see it and have the opportunity to 26 digest it and react to it, then we might accelerate the 27 comment schedule. So -- 28 MR. BJORKLAND: In draft form. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 138 1 COMMISSIONER WOOD: And it may even be, in fact, that 2 the -- and perhaps we should allow for discussion -- for 3 public discussion of this at the February 3rd meeting if the 4 draft has been sent out in adequate time that parties have 5 comments on that. 6 MR. BJORKLAND: Yeah, I would like that. 7 COMMISSIONER WOOD: I'd also like to add a possible 8 item which is to open the process for dealing with operation 9 standards. 10 I'm not sure that we're going to be ready to do 11 that, but I want to put it on the agenda so that we publicly 12 noticed it in case we are. 13 And then setting the date of the next meeting, 14 the proposal is March 10th, that is a Monday. 15 You can't do it on the 10th? Okay. 16 MR. KAHN: The 17th. 17 MR. BJORKLAND: I am flexible in March. 18 COMMISSIONER WOOD: Yeah. Well, let's set it for -- 19 does staff have a problem with March 17th? 20 MR. CLARK: Not that I know of. 21 MR. PETTINGILL: I don't believe so. 22 COMMISSIONER WOOD: All right. Then let's set that 23 for March 17th, and it will be at 9:00 o'clock as well, as 24 will be the meeting on February 3rd. The location will be 25 here in the Commission auditorium. 26 Any further business? 27 Comments by Committee members? 28 MR. BJORKLAND: No. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 139 1 COMMISSIONER WOOD: Okay. Thank you all for your -- 2 yes, a question? 3 MS. DIXON: The log book -- 4 COMMISSIONER WOOD: Can you please come forward to 5 the -- 6 STATEMENT OF MS. DIXON 7 MS. DIXON: Gena Dixon, San Diego Gas & Electric. 8 My question is just clarification regarding the 9 log book. 10 Is that related to maintenance, then, and not 11 operations, or is that an operations log book? 12 COMMISSIONER WOOD: Well, the -- this will be defined 13 in the draft, but in general log books, as I am familiar 14 with them, are typically main- -- the main responsibility is 15 with the operators, but, in fact, they also report 16 maintenance activity as well; so it's a matter of 17 documentation which may -- which will be relevant to 18 oversight and enforcement for both operations and 19 maintenance. 20 MS. DIXON: Okay. So there will be a separate 21 operation standards and then this log book will be adopted 22 first? 23 COMMISSIONER WOOD: That's right. 24 MS. DIXON: Okay. 25 COMMISSIONER WOOD: Well, assuming that that happens. 26 I can't predict where we'll land on anything that we haven't 27 voted on yet, but the intent here is to at least get 28 something moving on this fairly narrow issue of certain PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 140 1 types of recordkeeping. 2 MS. DIXON: (Nodding head) 3 MR. BJORKLAND: The log book is the shift-supervisor 4 log book and the control-operator log book. 5 MS. DIXON: Okay. 6 COMMISSIONER WOOD: Okay. Seeing no questions or 7 comments, this -- 8 Mr. Blue? 9 STATEMENT OF MR. BLUE 10 MR. BLUE: Thank you. 11 I would just like to make one closing comment. 12 I think the spirit of cooperation is there, I 13 think I've seen it from the Committee, I think you've seen 14 it from our side, and I really want to encourage that. 15 And I said privately at the last meeting to 16 Mr. Wood, Mr. Bjorkland -- and I'll tell you, Mr. Kahn -- to 17 the extent that we can cooperatively come up with something, 18 on this and others, our level of opposition on the 19 jurisdictional issue goes away. 20 So I'm going -- I'm really hopeful that we can 21 continue this. And it is a new day. The past was there, 22 and hopefully we can -- you know, we want to -- we want 23 to -- I'm a Californian as well. Our power plants' ZIP 24 Codes start with 9. We are Californians, and we all want to 25 work together. 26 Thank you. 27 MR. BJORKLAND: Good. 28 COMMISSIONER WOOD: Okay. Seeing no further PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA 141 1 comments, this meeting is adjourned. 2 Thank you. 3 (Whereupon, at the hour of 10:47 a.m., 4 this workshop was concluded.) 5 * * * * * 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA SAN FRANCISCO, CALIFORNIA