BILL ANALYSIS Ó ACA 11 Page 1 Date of Hearing: April 20, 2016 ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE Mike Gatto, Chair ACA 11 (Gatto) - As Introduced March 9, 2016 SUBJECT: Public Utilities Commission SUMMARY: Authorizes the Legislature to reallocate or reassign all or a portion of the functions of the California Public Utilities Commission (CPUC) to other state agencies, departments, boards, or other entities, consistent with specified purposes. Specifically, this constitutional amendment: 1)Repeals the provisions of the California Constitution pertaining to the CPUC effective January 1, 2019. 2)Specifies that a statute that was valid at the time the statute was enacted is not invalid by virtue of the repeal of those constitutional provisions. 3)Authorizes the Legislature to reallocate or reassign all or a portion of the functions of the CPUC to other state agencies, departments, boards, or other entities, consistent with specified purposes. ACA 11 Page 2 4)Directs the Legislature to adopt appropriate structures to provide greater accountability for the public utilities of the state and provide the necessary guidance to the CPUC to focus its regulatory efforts on safety, reliability, and ratesetting and to implement statutorily authorized programs for reducing emissions of greenhouse gases. EXISTING LAW: 1)Establishes the CPUC with jurisdiction over all public utilities. (California Constitution, Article XII) 2)Grants the CPUC certain general powers over all public utilities, subject to control by the Legislature. (California Constitution, Article XII) 3)Authorizes the Legislature, unlimited by the other provisions of the Constitution, to confer additional authority and jurisdiction upon the CPUC that is cognate and germane to the regulation of public utilities, to establish the manner and scope of review of CPUC action in a court of record, and to enable the CPUC to fix just compensation for utility property taken by eminent domain. (California Constitution, Article XII) FISCAL EFFECT: Unknown. COMMENTS: 1)Author's Statement: "ACA 11 will place before the voters an initiative to strike Article 12 from the Constitution, thereby removing the constitutional protections currently enjoyed by ACA 11 Page 3 the CPUC. It will require the Legislature reassign the functions of the CPUC by 2019, when Article 12 will sunset. ACA 11 recognizes that the 21st Century no longer requires the CPUC be enshrined in the California Constitution. It will allow for reforms to the Public Utilities Code to modernize the CPUC, reassign regulation of industries unrelated to the CPUC's core functions to more appropriate state bodies, and provide greater accountability to Californians. The legislation specifies that these reforms shall be in furtherance of consumer protection, public health, environmental protection, increased transparency, public access, and shall preserve the ability of third parties to advocate for and intervene on behalf of those that need advocacy." 2)Background: The CPUC is charged with ensuring the provision of safe, reliable service at reasonable rates. In 1911, the voters established the Railroad Commission in the California Constitution. In 1912, the Legislature passed the Public Utilities Act, expanding the Commission's regulatory authority to include natural gas, electric, telephone, and water companies, in addition to railroads and marine transportation companies. In 1946, it was renamed the California Public Utilities Commission. The CPUC's status as a Constitutionally-authorized agency is unique and has enabled the CPUC to enact and enforce policies and program if it finds the policies and programs cognate and germane. Limitations on the CPUC's broad authority are those that have been enacted by statute. ACA 11 Page 4 Recently, the CPUC's ability to regulate these wide-ranging and diverse industries - from electric and natural gas companies to limousines and transportation network companies - has been called into question. Following the 2010 explosion of a Pacific Gas and Electric gas line that resulted in numerous injuries and deaths in San Bruno, an independent study commissioned by the CPUC found that the CPUC had not been adequately overseeing gas pipeline safety. In December 2011, nearly 500,000 Californians experienced widespread power outages of up to six days in the Los Angeles region due to windstorms. The Assembly Utilities and Commerce Committee's investigation revealed that the CPUC allowed Southern California Edison (SCE) to keep unspent maintenance funds and that the CPUC does not check to make sure that the maintenance work was performed. In January 2012, a leak of contaminated steam was detected at one of the two new replacement generators at the San Onofre Nuclear Power Station (SONGS). In June 2013, SCE decided to permanently shut down SONGS as a result of design flaws affecting the both generators. In a meeting held in Warsaw, Poland in March 2012 between then-CPUC President Peevey and an SCE executive outlined a settlement framework. In November 2014, the CPUC allocated three quarters of the cost of the SONGS generators to be paid by ratepayers "without review of the expenses for the steam generator replacement projects" and consistent with the notes from the Warsaw meeting. The recent gas well leak in Aliso Canyon, which displaced thousands of residents in Porter Ranch, Granada Hills, Bernal Heights, and surrounding communities and resulted in over 87,000 metric tons of methane being pumped into the air, has reinvigorated these concerns. The investigation into the Aliso Canyon gas well leak is still ongoing, but the CPUC's response to the crisis has frustrated many in the community. Californians are not confident that CPUC regulators are able to properly exercise oversight of utilities or act decisively ACA 11 Page 5 to protect communities under the current system, which cannot be changed without this initiative. 3)Related Legislation. AB 825 (Rendon) 2015: Proposes a suite of reforms of the CPUC largely directed at increased transparency of the activities of the agency, including requiring the California State Auditor's Office to appoint an Inspector General within its office for the CPUC, expanding the roles and responsibilities of the CPUC public advisor, specifying additional requirements of commissioners, and increased transparency of electric utilities' procurement, among others. Vetoed by the Governor. AB 895 (Rendon) 2015: Requires proceeds of any claims arising out of the 2000 to 2002 energy crisis to be monetary and deposited into the Ratepayer Relief Fund to be appropriated for the benefit of ratepayers, and provides that actions to enforce the CPUC's process for handling and determining disclosable public records, as well as actions to enforce Bagley-Keene Open Meetings Act requirements, may be taken to the superior court. Vetoed by the Governor. AB 1023 (Rendon): Requires the CPUC to establish and maintain a weekly communications log summarizing all oral or written ex parte communications. Vetoed by the Governor. SB 18 (Hill) 2015: Requires any contract entered into by the CPUC for outside legal counsel services to represent it in a criminal investigation to be submitted to the Joint Legislative Budget Committee (JLBC) for review, with specified information, and approved by a vote of the CPUC no sooner than 30 days after the contract has been submitted to the JLBC. ACA 11 Page 6 Vetoed by the Governor. SB 48 (Hill) 2015: Proposes a suite of reforms of the governance and operations of the CPUC, including, among others, requiring sessions in Sacramento, applying the Code of Ethics from the Administrative Procedures Act to administrative law judges, clarifying and augmenting the information the CPUC must provide the Legislature in its annual report, and others. Vetoed by the Governor. SB 660 (Leno) 2015: Proposes a suite of reforms of the governance, rules, operations and procedures of the CPUC, including: reform of laws and rules related to ex parte communications, criteria and process for disqualification of commissions to a proceeding, and authorizes the Commission to appoint the chief administrative law judge. Vetoed by the Governor. 4)Support and Opposition. Supporters state that the CPUC has proved itself incapable of fairly and effectively regulating charter-party carriers, including limousines and TNCs and has limited enforcement capacity. While there is no formal opposition to ACA 11, one party expressed concern with regard to competition in communication services and that the CPUC is charged with removing "the barriers to open and competitive markets" and promoting "fair product and price competition in a way that encourages greater efficiency, lower prices and more consumer price." They encourage the author to include "preserving and promoting competition" to the list of critical CPUC functions listed in Section 10 (a)(2) of the measure. REGISTERED SUPPORT / OPPOSITION: ACA 11 Page 7 Support San Francisco Taxi Workers Alliance Opposition None on file Analysis Prepared by:Sue Kateley / U. & C. / (916) 319-2083