BILL NUMBER: SB 1364 ENROLLED
BILL TEXT
PASSED THE SENATE MAY 29, 2012
PASSED THE ASSEMBLY AUGUST 16, 2012
AMENDED IN SENATE MAY 25, 2012
AMENDED IN SENATE APRIL 30, 2012
INTRODUCED BY Senator Huff
FEBRUARY 24, 2012
An act to amend Sections 314, 454, 587, 797, and 798 of the Public
Utilities Code, relating to water corporations.
LEGISLATIVE COUNSEL'S DIGEST
SB 1364, Huff. Water corporations.
(1) Under existing law, the Public Utilities Commission (PUC) has
regulatory authority over public utilities, including electrical
corporations, gas corporations, telephone corporations, and water
corporations, as defined. The Public Utilities Act authorizes the
PUC, each commissioner, and each officer and person employed by the
PUC at any time to inspect the accounts, books, papers, and documents
of any public utility. This authorization applies to inspections of
the accounts, books, papers, and documents of any business that is a
subsidiary or affiliate of, or a corporation that holds a controlling
interest in, an electrical, gas, or telephone corporation.
This bill would additionally authorize the inspection of the
accounts, books, papers, and documents of any business that is a
subsidiary or affiliate of, or a corporation that holds controlling
interest in, a water corporation that has 2,000 or more service
connections.
(2) Existing law authorizes the commission to fix the rates and
charges for every public utility, and requires that those rates and
charges be just and reasonable. Existing law, with certain
exceptions, prohibits a public utility from changing any rate, except
upon a showing before the commission and a finding by the commission
that the new rate is justified. With certain exceptions, whenever
any electrical, gas, heat, telephone, water, or sewer system
corporation files an application to change any rate for the services
or commodities furnished by it, existing law requires that the
corporation furnish its customers notice of its application to the
PUC for approval of the new rate.
This bill, for a water corporation with more than 2,000 service
connections, would require the notice to include estimated rate
impacts on the various customer classes of the corporation. The bill
would authorize the commission to require the water corporation to
inform customers of the outcome of the general rate case, as
prescribed.
(3) Existing law requires every electrical, gas, and telephone
corporation to annually prepare and submit to the PUC a report
describing all significant transactions between the corporation and
every subsidiary or affiliate of, or corporation holding a
controlling interest in, the electrical, gas, or telephone
corporation. Existing law requires that the report identify the
nature of the transactions and the terms and conditions applying to
them, including the basis upon which cost allocations and transfer
pricing were established for the transactions. Existing law requires
the PUC to periodically audit all significant transactions between an
electrical, gas, or telephone corporation and every subsidiary or
affiliate of, or corporation holding a controlling interest in, that
electrical, gas, or telephone corporation. Existing law authorizes
the commission to utilize the services of an independent auditor, to
be selected and supervised by the commission.
This bill would make these requirements applicable to water
corporations with more than 2,000 service connections. The bill would
authorize the commission to direct a water corporation with more
than 2,000 service connections, or an electrical, gas, or telephone
corporation, to utilize the services of an independent auditor, to be
selected and supervised by that water, electrical, gas, or telephone
corporation.
(4) If the PUC finds and determines that any electrical, gas, or
telephone corporation has willfully made an imprudent payment to, or
received a less than reasonable payment from, any subsidiary or
affiliate of, or corporation holding a controlling interest in, the
electrical, gas, or telephone corporation in violation of any rule or
order of the PUC, and the corporation has sought to recover the
payment in any proceeding before the PUC, existing law authorizes the
PUC, following a hearing, to levy a penalty against the corporation
not to exceed 3 times the required or prohibited payment if the PUC
finds that the payment was made or received by the corporation for
the purpose of benefiting its subsidiary, affiliate, or holding
corporation.
This bill would extend this authority to water corporations with
more than 2,000 service connections.
(5) Under existing law, a violation of the Public Utilities Act or
any order, decision, rule, direction, demand, or requirement of the
commission is a crime.
Because the provisions of this bill would be a part of the act and
certain provisions of the bill would extend existing requirements to
water corporations, the bill would impose a state-mandated local
program by expanding the application of a crime.
The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 314 of the Public Utilities Code is amended to
read:
314. (a) The commission, each commissioner, and each officer and
person employed by the commission may, at any time, inspect the
accounts, books, papers, and documents of any public utility. The
commission, each commissioner, and any officer of the commission or
any employee authorized to administer oaths may examine under oath
any officer, agent, or employee of a public utility in relation to
its business and affairs. Any person, other than a commissioner or an
officer of the commission, demanding to make any inspection shall
produce, under the hand and seal of the commission, authorization to
make the inspection. A written record of the testimony or statement
so given under oath shall be made and filed with the commission.
(b) Subdivision (a) also applies to inspections of the accounts,
books, papers, and documents of any business that is a subsidiary or
affiliate of, or a corporation that holds a controlling interest in,
an electrical, gas, or telephone corporation, or a water corporation
that has 2,000 or more service connections, with respect to any
transaction between the water, electrical, gas, or telephone
corporation and the subsidiary, affiliate, or holding corporation on
any matter that might adversely affect the interests of the
ratepayers of the water, electrical, gas, or telephone corporation.
SEC. 2. Section 454 of the Public Utilities Code is amended to
read:
454. (a) Except as provided in Section 455, a public utility
shall not change any rate or so alter any classification, contract,
practice, or rule as to result in any new rate, except upon a showing
before the commission and a finding by the commission that the new
rate is justified. Whenever any electrical, gas, heat, telephone,
water, or sewer system corporation files an application to change any
rate, other than a change reflecting and passing through to
customers only new costs to the corporation which do not result in
changes in revenue allocation, for the services or commodities
furnished by it, the corporation shall furnish to its customers
affected by the proposed rate change notice of its application to the
commission for approval of the new rate. This notice requirement
does not apply to any rate change proposed by a corporation pursuant
to an advice letter submitted to the commission in accordance with
commission procedures for this means of submission. The procedures
for advice letters may include provision for notice to customers or
subscribers on a case-by-case basis, as determined by the commission.
The corporation may include the notice with the regular bill for
charges transmitted to the customers within 45 days if the
corporation operates on a 30-day billing cycle, or within 75 days if
the corporation operates on a 60-day billing cycle. If more than one
application to change any rate is filed within a single billing
cycle, the corporation may combine the notices into a single notice
if the applications are separately identified. The notice shall state
the amount of the proposed rate change expressed in both dollar and
percentage terms for the entire rate change as well as for each
customer classification, a brief statement of the reasons the change
is required or sought, and the mailing, and if available, the email
address of the commission to which any customer inquiries may be
directed regarding how to participate in, or receive further notices
regarding the date, time, or place of, any hearing on the
application, and the mailing address of the corporation to which any
customer inquiries relative to the proposed rate change may be
directed.
(b) For a water corporation with more than 2,000 service
connections, the notice required in subdivision (a) shall include
estimated rate impacts on the various customer classes of the
corporation. The commission may require the corporation to inform
customers in a separate letter or through a bill insert, at the
corporation's discretion, of the outcome of the general rate case,
within 60 days if the corporation operates on a 30-day billing cycle,
or within 90 days if the corporation operates on a 60-day billing
cycle, of the commission's final decision, including the approved
rates and the approved capital projects that will subsequently be
executed by way of an advice letter.
(c) The commission may adopt rules it considers reasonable and
proper for each class of public utility providing for the nature of
the showing required to be made in support of proposed rate changes,
the form and manner of the presentation of the showing, with or
without a hearing, and the procedure to be followed in the
consideration thereof. Rules applicable to common carriers may
provide for the publication and filing of any proposed rate change
together with a written showing in support thereof, giving notice of
the filing and showing in support thereof to the public, granting an
opportunity for protests thereto, and to the consideration of, and
action on, the showing and any protests filed thereto by the
commission, with or without hearing. However, the proposed rate
change does not become effective until it has been approved by the
commission.
(d) The commission shall permit individual public utility
customers and subscribers affected by a proposed rate change, and
organizations formed to represent their interests, to testify at any
hearing on the proposed rate change, except that the presiding
officer need not allow repetitive or irrelevant testimony and may
conduct the hearing in an efficient manner.
SEC. 3. Section 587 of the Public Utilities Code is amended to
read:
587. Every water corporation with more than 2,000 service
connections, and every electrical, gas, and telephone corporation
shall annually prepare and submit to the commission a report
describing all significant transactions, as specified by the
commission, between the corporation and every subsidiary or affiliate
of, or corporation holding a controlling interest in, the water,
electrical, gas, or telephone corporation. The report shall identify
the nature of the transactions and the terms and conditions applying
to them, including, but not limited to, the basis upon which cost
allocations and transfer pricing were established for the
transactions.
SEC. 4. Section 797 of the Public Utilities Code is amended to
read:
797. The commission shall periodically audit, or direct that an
independent audit be periodically conducted for, all significant
transactions, as specified by the commission, between a water
corporation with more than 2,000 service connections, or an
electrical, gas, or telephone corporation, and every subsidiary or
affiliate of, or corporation holding a controlling interest in, that
water, electrical, gas, or telephone corporation. The commission, in
this connection, may utilize the services of an independent auditor,
who shall be selected and supervised by the commission, or may direct
a water corporation with more than 2,000 service connections, or an
electrical, gas, or telephone corporation, to utilize the services of
an independent auditor, who shall be selected and supervised by that
water, electrical, gas, or telephone corporation. Nothing in this
section prohibits the commission from auditing any transaction
between a water corporation with more than 2,000 service connections,
or an electrical, gas, or telephone corporation, and any subsidiary
or affiliate of, or corporation holding a controlling interest in,
that water, electrical, gas, or telephone corporation, as otherwise
permitted or required by law.
SEC. 5. Section 798 of the Public Utilities Code is amended to
read:
798. (a) Whenever the commission finds and determines that any
water corporation with more than 2,000 service connections, or an
electrical, gas, or telephone corporation, has willfully made an
imprudent payment to, or received a less than reasonable payment
from, any subsidiary or affiliate of, or corporation holding a
controlling interest in, the water, electrical, gas, or telephone
corporation in violation of any rule or order of the commission,
adopted and published by the commission prior to the transaction but
after notice to, and an opportunity to comment by, the affected
corporation, and the corporation has sought to recover the payment in
any proceeding before the commission, the commission, following a
hearing, may levy a penalty against the corporation not to exceed
three times the required or prohibited payment, as the case may be,
if the commission finds that the payment, in whole or part, was made
or received by the corporation for the purpose of benefiting its
subsidiary, affiliate, or holding corporation. This penalty is in
addition to any criminal penalties which may apply.
(b) In determining whether to impose a civil penalty under this
section, the commission may take into consideration multistate public
utility diversification activities involving cross-subsidization
which are permissible in other states or under federal jurisdiction
although in violation of the commission's rules and orders.
SEC. 6. No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.