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) SB 900 Page 2 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 SB 900 Page 3 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 SB 900 Page 4 321(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 theeconomic effects or otherconsequences 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 SB 900 Page 5