BILL ANALYSIS Ó Senate Appropriations Committee Fiscal Summary Senator Christine Kehoe, Chair SB 1364 (Huff) - Water Corporations. Amended: April 30, 2012 Policy Vote: EU&C 13-0 Urgency: No Mandate: Yes Hearing Date: May 24, 2012 Consultant: Marie Liu SUSPENSE FILE. AS PROPOSED TO BE AMENDED. Bill Summary: SB 1364 would subject water corporations with more than 2,000 service connections to the same audit powers of the California Public Utilities Commission (PUC) as electrical, gas, and telephone corporations. This bill would also require water corporations with more than 2,000 service connections to include more specific information in its notices to ratepayers regarding potential rate increases. Fiscal Impact: Minor and absorbable costs from the Public Utilities Commission Utilities Reimbursement Account (special fund) beginning in 2013-14 for audit responsibilities. Background: Existing law requires that public utilities notify their customers when it has submitted an application to the PUC for a rate change with certain exceptions. This provision applies to electrical, gas, heat, telephone, water, or sewer system corporations. To ensure that a regulated utility is not using ratepayer funds to subsidize parts of a company's business not related to the utility service, existing law requires that every electrical, gas, and telephone corporation annually submit to the PUC a report describing all significant transactions between the corporation and its subsidiaries or affiliates. The PUC must periodically audit, or ensure that an independent audit has reviewed, all significant transactions.of an electrical, gas or telephone corporation. The PUC may assess penalties for imprudent or unreasonable transactions While existing law does not apply to water corporations, the PUC issued a decision in October 2010 (D. 10-10-019) that subjects water corporations with more than 2,000 service connections to these reporting and auditing provisions, at the water corporation's cost. SB 1364 (Huff) Page 1 Proposed Law: This bill would require that rate change notifications issued by water corporations with more than 2,000 service connections must also include the estimate rate impacts on the various customer classes. The PUC would also be allowed to require that the water corporation also notify the customers of the PUC's decision on its rate change application. This bill would subject water corporations with more than 2,000 service connections to the same reporting and auditing requirements currently imposed on electrical, gas, and telephone corporations. Staff Comments: D. 10-10-019 has slightly different audit requirements than this bill in that this bill requires the PUC to select, manage, and oversee requirements for the audit while D. 10-10-19 places this burden and cost on the water corporations. Under this bill, the PUC will be required to audit two utilities per year (10 water corporations would be affected by this bill) for on-going costs of $226,000 annually. Proposed Author Amendments: Allow the audit costs to be borne by the water corporation instead of the PUC.