BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  SB 900
                                                                  Page  1

          Date of Hearing:   June 23, 2014

                    ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
                               Steven Bradford, Chair
                      SB 900 (Hill) - As Amended:  May 27, 2014

           SENATE VOTE  :   35-0
           
          SUBJECT  :   Utilities: rate case application: safety

           SUMMARY  :   Requires the California Public Utilities Commission  
          (PUC) to develop formal procedures to consider safety in a rate  
          case application by an electrical or gas corporation.  
          Specifically,  this bill  :   

          1)Specifies the procedures shall include a means by which safety  
            information acquired by the PUC through monitoring, data  
            tracking and analysis, accident investigation, and audits of  
            an applicant's safety programs may inform the PUC's  
            consideration of a rate application made by an electrical or  
            gas corporation.

          2)States the intent of the Legislature is that the PUC assess  
            the economic effects or other consequences of its decisions as  
            a part of each ratemaking, rulemaking, or other proceeding,  
            and that this be accomplished using existing resources within  
            existing PUC structures.

          3)States the PUC shall not establish a separate office or  
            department for the purpose of evaluating economic development  
            consequences of PUC activities.

          4)States the PUC shall take all necessary and appropriate  
            actions to assess and mitigate impacts of its decisions on  
            customer, public, and employee safety.

           EXISTING LAW  : 

          a)Requires that the PUC and each gas corporation place safety of  
            the public and gas corporation employees as the top priority  
            and further requires that PUC take all reasonable and  
            appropriate actions necessary to carry out safety as a  
            priority consistent with the principle of just and reasonable  
            cost-based rates. (Public Utilities Code § 963)









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          b)Requires, in any ratemaking proceeding in which the PUC  
            authorizes a gas corporation to recover expenses for the  
            maintenance and repair of transmission pipelines, that the PUC  
            require the gas corporation to establish and maintain a  
            balancing account for the recovery of those expenses. (Public  
            Utilities Code § 969)

          c)Defines quasi-legislative proceedings as those that establish  
            policy including rulemakings and investigations which may  
            establish rules affecting an entire industry. (Public  
            Utilities Code § 1701.1)

           FISCAL EFFECT  :   Unknown.

           COMMENTS  :   According to the author, "though for at least two  
          years the Commission has recognized the need to scope safety  
          into its proceedings, the development of effective procedures  
          for doing so has been slow.  

          The CPUC is moving in the right direction in its proceeding to  
          include safety into rate cases but needs to ensure that it  
          informs those rate case decisions with safety information is  
          collects through its audits, safety investigations, and other  
          surveillance means.

          As the Commission has yet to incorporate risk management tools  
          into the scoping of its policy-making proceedings, it cannot  
          claim to have an effective means by which to examine safety  
          considerations.  The purpose of this legislation is to ensure  
          that the CPUC incorporates safety risk management procedures in  
          determining if and to what extent safety needs to be included in  
          proceedings and determining the appropriate actions to take to  
          eliminate, reduce, or mitigate the risks, and to have an  
          effective means to monitor the effectiveness of any risk  
          controls incorporated into a decision."

           1)Safety in PUC rate cases  : In response to the San Bruno gas  
            pipeline explosion, the PUC established The Independent Review  
            Panel that studied the explosion and found in a June 2011  
            report that safety had not been effectively included in PUC  
            decision making, particularly in general rate cases (GRC).   
            The report opined that the PUC should "consider a more  
            proactive role for the safety staff in utility rate filings."  
            Also noted, it should "improve the interaction between the gas  
            safety organization and the Division of Ratepayer Advocates of  








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            the PUC so there is an enhanced understanding of the costs  
            associated with pipeline safety."

            In response, the PUC held a workshop in January 2012 on this  
            matter and in March 2012 ordered Pacific Gas & Electric (PG&E)  
            to pay for an independent safety review of its GRC  
            application.

            In October 2013 the Senate Subcommittee on Gas and Electric  
            Infrastructure Safety released a report titled "Slow Progress  
            Toward Safety: Improving Performance and Priorities in the  
            Safety Plan of the California Public Utilities Commission"  
            which highlighted the lack of further discussion on the issue  
            despite the imminent filing of the Southern California Edison  
            (SCE) GRC application.

            In November 2013, the PUC opened a rulemaking to integrate  
            safety into rate case proceedings (R.13-11-006). 

            This bill compels the PUC to integrate safety information  
            pertaining to a utility's existing safety performance within a  
            GRC and in its general decision making proceedings.

           2)Incorporating safety into PUC proceedings  :  This bill  
            implements a recommendation in the October 2013 Senate  
            Subcommittee report which states:

               "CPUC decisions and resolutions should include  
               safety-related findings. The record developed to support  
               these findings should be facilitated by including safety  
               considerations in proceeding scoping. Procedures by which  
               to accomplish proceeding scoping should be developed in  
               each industry division with the assistance of Public Policy  
               Division and the risk assessment units. Procedures should  
               be written and readily accessible to staff."

            The policy proposed by this bill is appropriate and largely  
            corresponds with current efforts at the PUC.  As the PUC  
            renders decisions in general proceedings, many times safety  
            implications, appropriate procedures are warranted in order to  
            determine the extent of potential safety risks or to mitigate  
            such risk, and assign responsibility for monitoring and  
            managing that risk.  

           3)Technical amendment  : The bill adds the term "other" into  








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            321(a). If the author is referring to safety, then the  
            committee may wish to strike the phase "economic effects or  
            other," and add the assessment of economic effects and the  
            safety language as subsections to 321.1(a).

            321.1.  (a)  It is the intent of the Legislature that the  
            commission assess the  economic effects or other   consequences  
            of its decisions as part of each ratemaking, rulemaking, or  
            other proceeding, and that this be accomplished using existing  
            resources and within existing commission structures. The  
            commission shall not establish a separate office or department  
            for the purpose of evaluating economic development  
            consequences of commission activities,  The assessment of the  
            consequences of its decisions shall include:
            (1) An assessment of economic effects.
            (2) Assess and mitigate impacts on customer, public, and  
            employee safety.
             (b) The commission shall take all necessary and appropriate  
            actions to assess and mitigate the impacts of its decisions on  
            customer, public, and employee safety.

           4)Support and opposition.  In support, the PUC Office of  
            Ratepayer Advocates states support for efforts to assist the  
            PUC in determining how best to consider safety in its decision  
            making process. ORA further claims information gathered from  
            monitoring, data tracking, audits, investigations, and other  
            PUC activities should be carefully considered in proceedings  
            where utilities request recovery of costs from ratepayers.  
            There is no opposition on file.  
           
           REGISTERED SUPPORT / OPPOSITION  :

           Support 
           
          Office of Ratepayer Advocates (ORA)
           
            Opposition 
           
          None on file.

           Analysis Prepared by  :    DaVina Flemings / U. & C. / (916)  
          319-2083 











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