BILL ANALYSIS                                                                                                                                                                                                    

                                                                  AB 1315
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          Date of Hearing:   April 27, 2009

                                Felipe Fuentes, Chair
                 AB 1315 (Ruskin) - As Introduced:  February 27, 2009
          SUBJECT  :   Public Utilities Commission.

           SUMMARY  :   Changes the appointment process for the president of  
          the California Public Utilities Commission (PUC) to require the  
          president to be re-confirmed by the Senate, and has the  
          attorney, executive director, and staff report to the commission  
          rather than the President.   

           EXISTING LAW  :

          1)The State Constitution provides the following:

             a)   The PUC consists of 5 members appointed by the Governor  
               and approved by the Senate for staggered 6-year terms.

             b)   Permits both houses of the Legislature to remove a  
               member for incompetence, neglect of duty, or corruption.

             c)   Provides that public utilities are subject to control by  
               the Legislature.

             d)   Permits the PUC to fix rates, establish rules, and  
               impose other regulatory measures for all public utilities  
               subject to its jurisdiction.

             e)   Provides the Legislature plenary power to confer  
               additional authority and jurisdiction upon the PUC, to  
               establish the manner and scope of review of the PUC, and to  
               impose other regulatory authorities. 

          2)The Public Utilities Code provides the following:

             a)   Exempts the PUC from the Administrative Procedures Act  

             b)   Requires the Governor to  designate  a president of the  
               commission from among the members of the PUC.

             c)   Requires the office of the PUC to be in the City and  


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               County of San Francisco, and requires the PUC to hold its  
               sessions at least once in each calendar month in the City  
               and County of San Francisco.

             d)   Provides that the president of the PUC is appointed by  
               the Governor and that the president or vote of the  
               commission directs the actions of the executive director,  
               the PUC attorney, and other staff of the commission, with  
               the exception of Division of Ratepayer Advocate staff.  

             e)   Provides that the attorney for the PUC and the executive  
               director shall operate as directed by the president or by a  
               vote of the PUC. 

           THIS BILL  :  

          1)Requires the PUC to comply with the APA.

          2)Requires the Governor to  appoint  a president, subject to  
            Senate approval.

          3)Requires the PUC to hold at least one session in each calendar  
            month in the City of Sacramento.

          4)Provides that the commission directs the actions of the  
            executive director, the PUC attorney, and other staff of the  
            commission, with the exception of Division of Ratepayer  
            Advocate staff.  

           FISCAL EFFECT :   Unknown.

           COMMENTS  :   According to the author, the purpose of this bill is  
          to reduce the direct intervention of the Governor in the  
          internal workings of the PUC.  This will assist the Legislature  
          and the public with achieving greater independence and  
          accountability from this crucial public agency.  The author  
          states that by having the executive director and the attorney  
          report to the entire commission rather than just the president,  
          this bill will reduce the politicization of internal staffing  
          and procedural decisions, while promoting collegiality and  
          cooperation among commissioners.

          1)   Once upon a time  :   At the turn of the 20th century, public  
          policy was said to have been dictated primarily by the political  
          machine of the Southern Pacific Railroad, the most powerful  


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          corporation in the state. The Southern Pacific then controlled  
          85% of California's railroad mileage. To complete its near  
          transportation monopoly, it owned the bulk of the state's ferry  
          services, local transit companies, and wharf facilities. 

          A three-member Railroad Commission was formed to regulate the  
          rates for transportation, but there was concern that the  
          Southern Pacific used its political and economic clout to avoid  
          effective regulation and maintain its monopoly.  Public  
          exasperation was exemplified by the chaplain opening the first  
          session of the 1911 California Legislature with the plea: "Give  
          us a square deal for Christ's sake."  As part of Governor Hiram  
          Johnson's reform movement, a series of constitutional amendments  
          were enacted, one of which established Article XII that created  
          the second five-member Railroad Commission of the State of  
          California.  In 1912, the Legislature passed the Public  
          Utilities Act, that expanded the commission's regulatory  
          authority to include natural gas, electric, telephone, and water  
          companies as well as railroads and marine transportation  

          2)    The middle ages  :   The PUC has historically been afforded  
          much independence, in keeping with the turn of the century  
          concerns about undue influence by the railroads.  In 1946, the  
          Railroad Commission was renamed the California Public Utilities  
          Commission.  The Governor appoints the 5 commissioners, who must  
          be confirmed by the Senate, for six-year staggered terms to  
          ensure that no single Governor could appoint a majority of  
          commissioners within that Governor's four-year term.  The  
          Governor has no power to remove a commissioner; only the  
          Legislature has that power.  

          Prior to 1998, the president of the PUC was elected by its  
          members.  The commissioners appointed the attorney and executive  
          director, who performed at the direction of the commission. 

          The PUC has historically been granted broad latitude to set its  
          own procedures.  Any review of PUC decisions has historically  
          been limited to review only by the Supreme Court.  Some had  
          viewed the PUC's independence as less of a virtue and more of a  
          vice.  Rather than independent, the PUC had been seen to lack  
          accountability.  Supporters of this view cite a series of  
          decisions made by the PUC over the past 15 years that were  
          contrary to the stated desires of a majority of the Legislature,  
          and in some cases, in contradiction of the desires of the  


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          Governor. Numerous examples include the PUC-initiated efforts to  
          restructure the electric and gas markets, PUC actions during the  
          energy crisis that discouraged wholesale market stability, and  
          current PUC actions that continuously attempt to reopen retail  
          energy markets. 

          SB 33 (Peace) Chapter 509, Statutes of 1999, attempted to  
          address this perceived lack of accountability by the  
          commissioners.  It centralized the functioning of the PUC with  
          its president by putting the PUC's executive director and  
          general counsel directly under the control of the president.  It  
          also made the president more directly accountable to the  
          Governor because the Governor would appoint the president. 

          3)    Happily ever after :   There is concern that by having the  
          Governor appoint the president, and not having the commissioners  
          select their own president, this designation has resulted in a  
          lack of collegiality and the unintended creation of a "super  
          commissioner."  The Governor can re-appoint that same  
          commissioner as president each term, and that president by  
          statute directs the policies and executive director, the  
          attorney, and the over 1,000 staff.  The remaining commissioners  
          can become less significant, especially when the will of  
          individual commissioners differs from the will of the president.  

          The author is concerned that this has resulted in a lack of  
          accountability by the PUC to the Legislature.  Because the  
          Constitution provides "plenary power" to confer authority and  
          jurisdiction upon the PUC, the PUC should be more responsive and  
          accountable to the Legislature.  By requiring the Governor's  
          choice of president to undergo Senate confirmation, this bill  
          attempts to increase accountability to the Legislature.  

          The PUC states that Senate confirmation for the designation of  
          president is redundant. They claim that each of the  
          commissioners is already subject to Senate confirmation when  
          they are initially appointed to the PUC.  

          By having the executive director, attorney, and staff respond to  
          the commission, it may provide consistency with multi-year  
          lawsuits and rulemakings.  A supporter cites an incident where  
          the staff had been involved in a multi-year telecommunications  
          issue.  As soon as a new president was appointed, the attorney  
          was directed to call back the PUC's staff counsels and drop the  


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          case.  Supporters also state that this bill will alleviate  
          current conflicts with the PUC attorney.  The attorney is  
          supposed to represent the entire commission in federal, state,  
          and regional proceedings.  The commission's position may not be  
          consistent with a position taken by the president, and the  
          attorney would be conflicted if they differ.

          Supporters are also concerned that the senior staff at the PUC  
          have become more responsive to the Governor than to other  
          branches of government, the other commissioners, and the  
          Legislature.  The committee may wish to consider whether  
          reinstating the accountability of the executive director and the  
          attorney to the entire commission, rather than to only the  
          president, will change the political dynamics of at the PUC, and  
          whether this change could alleviate current potential conflict  
          and/or increase the PUC's responsiveness to the Legislature.   

          If there is concern that senior staff has become too responsive  
          to the Governor due to the fact that they serve at the  
          discretion of the president, this bill would address that by  
          having those staff members be directed by the commission.

          4)    What would Goldilocks do  :  The previous commissions were  
          not accountable enough, the more recent commission is way too  
          accountable, but only to the Governor.  Because the State  
          Constitution provides "plenary power" to confer authority and  
          jurisdiction upon the PUC, legislative efforts are underway to  
          find the "just right" solution.  

          In the 2007-08 session, AB 1157 (Ruskin) provided that the  
          president of the PUC be elected by the members of the  
          commission, rather than be appointed by the Governor.  Last  
          year, AB 1973 (Ruskin) required Senate confirmation of the  
          Governor-appointed president of the PUC, and had the executive  
          director and attorney take directives from the commission rather  
          than the president.  Neither bill was chaptered.

           This committee may wish to discuss whether to:  (1) have the  
          commissioners choose their President from amongst themselves, or  
          (2) have the Governor choose the President, have that President  
          undergo a second Senate confirmation, and/or set a term limit on  
          the President in that role.
          5)   Why is the PUC currently exempt from APA  :  The APA requires  
          most state departments to provide review of all new regulations  


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          by the Office of Administrative Law (OAL).  The OAL performs a  
          similar quasi-judicial process to review proposed regulations as  
          the PUC does in its proceedings.  For example, the OAL performs  
          a staff review for checklist compliance, returns the proposed  
          regulation back to the agency if it's not compliant, the  
          Department of Finance reviews it, it provides public  
          notification of rulemaking, requires the rulemaking to indicate  
          and include in the rulemaking record the material it relies upon  
          in proposing a rulemaking action, provides a comment opportunity  
          - minimum 45 days to comment in writing, by fax or e-mail,  
          conducts public hearings - optional unless rule proponents  
          enabling statutes require or any interested person makes timely  
          request, requires the agency to consider all relevant matter  
          presented during comment period, and if modifications are made  
          to an initial proposal the OAL allows comment for at least 15  

          The Senate included a provision in AB 1973 that repealed the  
          PUC's exemption from APA, and made all PUC quasi-judicial  
          proceedings to be subject to APA.  The PUC is statutorily  
          mandated to assess economic impacts on jurisdictional industries  
          and the public they serve.  As with OAL, the PUC operates under  
          a legislatively mandated procedural structure - administration  
          of proceedings, hearings, comments, briefing, oral argument,  
          administrative and judicial review that would have to be  
          effectively concluded before PUC "proposed regulations" would be  
          at a point to begin the OAL process. 

          After that, at the end of a PUC "rulemaking" or  
          quasi-legislative proceeding that a proposal would be  
          sufficiently defined and "fleshed out" to be a proposal for the  
          secondary review by OAL.  

          There have been some occasions where the presiding commissioner,  
          after extensive review by an administrative law judge, has made  
          a ruling that's inconsistent with the evidence presented.   
          However, it is unclear whether a secondary review by OAL would  
          minimize those instances.   This committee may wish to discuss  
          whether the PUC needs to, in addition to its adjudicatory  
          process, undergo a secondary APA process.



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          California Association of Competitive Telecommunications  
          Companies (CALTEL)

          California Public Utilities Commission (CPUC)
          California Water Association (CWA)
          Frontier Communications
          Sempra Energy
          SureWest Communications
          Analysis Prepared by  :    Gina Adams / U. & C. / (916) 319-2083