BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 825| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 825 Author: Rendon (D) and Mark Stone (D) AmendedAmended:9/1/15 in Senate Vote: 21 SENATE ENERGY, U. & C. COMMITTEE: 11-0, 7/7/15 AYES: Hueso, Fuller, Cannella, Hertzberg, Hill, Lara, Leyva, McGuire, Morrell, Pavley, Wolk SENATE APPROPRIATIONS COMMITTEE: 5-0, 8/27/15 AYES: Lara, Beall, Hill, Leyva, Mendoza NO VOTE RECORDED: Bates, Nielsen ASSEMBLY FLOOR: 79-0, 6/3/15 - See last page for vote SUBJECT: Public Utilities Commission SOURCE: Author DIGEST: This bill proposes a suite of reforms of the California Public Utilities Commission (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, increased transparency of electric utilities' procurement, among others. ANALYSIS: Existing law: AB 825 Page 2 1) Establishes the CPUC with five members appointed by the Governor and confirmed by the Senate and empowers it to regulate privately-owned public utilities in California. Specifies that the Legislature may prescribe that additional classes of private corporations or other persons are public utilities. (Article XII of the California Constitution; Public Utilities Code §301 et seq.) 2) Requires the CPUC to provide copies and publish the agenda and related items prior to the start of any voting meeting of commissioners. (Public Utilities Code §311.5) 3) Provides that no information furnished to the CPUC by a public utility, or any business which is a subsidiary or affiliate of a public utility, or a corporation which holds a controlling interest in a public utility, except those matters specifically required to be open to public inspection by this part, shall be open to public inspection or made public except on order of the CPUC, or by the CPUC or commissioner in the course of a hearing or proceeding. (Public Utilities Code §583) 4) Establishes the office of the public advisor and requires the CPUC to appoint a public advisor, with a separate office in Los Angeles, in order to assist members of the public and ratepayers who desire to testify before or present information to the CPUC in any hearing or proceeding. Provides that the CPUC can employ staff as necessary to carry out the duties of the office of public advisor. (Public Utilities Code §321) 5) Requires the CPUC to determine whether a proceeding requires a hearing and whether it is quasi-legislative, adjudication or ratesetting. Provides rules governing each type of proceeding, including prohibiting any substantive communication between a decision maker and a party in adjudicative cases. (Public Utilities Code §§1701.1 and 1701.2) This bill: 1) Requires the California State Auditor to appoint an Inspector General for the purposes of providing oversight of AB 825 Page 3 the CPUC at the direction of the State Auditor, including conducting audits, investigations, and reports on the policies, practices, and procedures of the CPUC. 2) Requires each public utility that submits an application to change its rates to include in its application a summary of the application that can be understood by the utility's ratepayers. Requires that this summary and the application be posted on the CPUC's Internet Web site and, if the utility has an Internet Web site, to be posted on the utility's Internet Web site. 3) Provides that if in a proceeding before the CPUC, a public utility, or subsidiary, affiliate, or holding company, seeks to file a pleading, report, or other document with the CPUC that preserves the confidentiality of information contained therein, it would be required to file a public version of the pleading, report, or other document that contains sufficient information for any other party to the proceeding to understand the nature of its contents. 4) Authorizes any party to the proceeding to file a motion to make public a pleading, report, or other document filed under a claim of confidentiality. Requires an administrative law judge assigned to the proceeding or the assigned commissioner to hold a hearing on the motion and determine whether the pleading, report, or other document should be made public 5) Adds legislative findings and declarations relative to improving the transparency of CPUC regulatory activities. 6) Requires the public advisor to be responsible for ensuring that the activities of the CPUC are transparent to the public consistent with these legislative findings and directions, the California Public Records Act, the Bagley-Keene Open Meeting Act, and other specified matter. 7) Requires the public advisor to have independent responsibility for overseeing the CPUC's Internet Web site and would require the CPUC to post on its Internet Web site a summary of all electricity procurement contracts entered into by an electrical corporation during the previous three years, with specific requirements. AB 825 Page 4 8) Requires the public advisor to update, maintain, and post the CPUC's service-of-process lists on the CPUC's Internet Web site in an electronic form that may be used by any party to complete service of process. 9) Requires the CPUC to open a proceeding to reexamine a specified decision relative to confidentiality of electric procurement data. 10) Requires the assigned commissioner to a proceeding to convene an all-parties meeting as soon as practicable after the parties in a proceeding are known to discuss the substantive matter to be decided in the proceeding and prospects for resolving issues that would otherwise be litigated. 11) Requires an assigned commissioner to attend all hearings in a proceeding. 12) Prohibits an attorney that is prosecuting a matter before the CPUC from meeting with any commissioner regarding the matter that the attorney is prosecuting unless all parties are present. Background The CPUC quasi-independent, but still accountable to the legislature. The CPUC was established by constitutional amendment as part of the sweep of progressive reforms in the early 1900's. Article XII of the California Constitution grants the CPUC authority to regulate public utilities "subject to control of the Legislature" and grants the Legislature "plenary power" to confer authority and jurisdiction upon the CPUC, with the intent that the CPUC be accountable to the Legislature. Fatal explosion in San Bruno. On September 9, 2010, a natural gas pipeline owned by Pacific Gas and Electric Company (PG&E) exploded in residential neighborhood in the City of San Bruno. Eight people died, dozens were injured, 38 houses were destroyed and many more were damaged. The investigations by the National Transportation Safety Board (NTSB) and an independent review panel appointed by the CPUC found that PG&E mismanaged their pipeline over decades, failed to adequately test the strength of AB 825 Page 5 the pipeline and, more generally, valued profits over safety. These same investigations also noted the CPUC's inadequate oversight of PG&E. Emails demonstrate "Culture of Conversation." During the summer and fall of 2014, PG&E, bowing to legal pressure from the City of San Bruno, began to release a growing number of emails between the utility and CPUC officials. PG&E released 65,000 emails from over a five-year period that PG&E says it believes "violated CPUC rules governing ex parte communications." The initial release of emails revealed efforts by PG&E executives to influence the CPUC's assignment of the administrative law judge to the San Bruno proceeding. Many of the other emails exposed regular, private, familiar communications between PG&E and certain CPUC commissioners, including former CPUC President Michael Peevey and current commissioner Peter Florio, as well as senior CPUC officials. Criminal investigations opened. Since PG&E's initial release of the emails, both the state Attorney General and the United States Department of Justice have opened investigations into communications between the CPUC and regulated entities. PG&E has fired three senior executives. A senior CPUC official has resigned, while other top CPUC officials - including longtime CPUC President Michael Peevey and Executive Director Paul Clannon - have retired under pressure. Investigators working with the Attorney General's Office have raided the CPUC offices and the homes of former CPUC Commissioner President Peevey and PG&E former-Vice President Brian Cherry. San Onofre Nuclear Generating Stations (SONGS). In early February, after a newspaper published details of the search warrant, Southern California Edison disclosed a meeting that occurred two years prior in Warsaw, Poland between then-CPUC President Peevey and a utility executive in which they discussed how to resolve the shutdown plans for SONGS. The facility had a failed steam generator that required SONGS to be permanently retired. In November 2014, the CPUC approved a settlement agreement between utilities and ratepayer advocates that split the costs of retiring the facility and the associated replacement power, with ratepayers shouldering $3.3 billion of the $4.7 billion total costs. Some parties to the proceeding who were not parties to the agreement, filed multiple lawsuits against the agency and also requested public records related to AB 825 Page 6 the deal. Audits reveal CPUC's efforts are lacking. In recent years, the CPUC has undergone a number of audits related to its budget, transportation program, natural gas pipeline safety program and others. The findings of these audits have raised concerns about the ability of CPUC to manage even some of its core functions. A March 2014 audit by the State Auditors found that "the CPUC lacks adequate processes for sufficient oversight of utility balancing accounts to protect ratepayers from unfair rate increases." The NTSB San Bruno investigation report and subsequent audits, have found that CPUC's oversight of natural gas pipeline safety efforts by the utilities needs improvements. Internal auditor. In response, the CPUC recently established an Internal Audit Unit, overseen by a Chief Internal Auditor, which performs audits of the CPUC's internal controls and management, oversees organizational risk assessment and enterprise risk management, and provides consulting services as requested to assist CPUC operations. Internal Audit Unit reports directly to the CPUC, with the Chief functionally reporting to the commissioners through its Finance and Administration Committee, and operates under a charter approved by the CPUC on May 21, 2015. Role of the public advisor. The Public Advisor's Office provides procedural information and advice to individuals and groups who want to participate in formal CPUC proceedings. Additionally, the Office is required to inform the CPUC of barriers that prevent effective public participation. The Public Advisor's Office also provides programs and services to educate and assist the public, including special accommodations and interpreter services. NOTE: See Senate Energy, Utilities, and Commerce Committee analysis for a full discussion of this bill. Prior/Related Legislation SB 48 (Hill, 2015) proposes a suite of reforms of the CPUC, including modifying the role of the president, meeting location requirements, and other reforms. The bill is currently under consideration on the Assembly Floor. AB 825 Page 7 SB 215 (Leno, 2015) proposes a suite of reforms of the CPUC related to governance and operations, including disqualification of commissioners to proceedings, modifying the role of the president, modifying ex parte rules, and other reforms. The bill was held in the Senate Committee on Energy, Utilities and Communications after merging much of its contents with SB 660. SB 660 (Leno/Hueso, 2015) proposes a suite of reforms of the CPUC focused on ex parte communications rules, addressing the disqualification of commissioners in proceedings, modifying the powers of the president, and others. The bill is currently under consideration on the Assembly Floor. FISCAL EFFECT: Appropriation: No Fiscal Com.:YesLocal: Yes According to the Senate Appropriations Committee: Cost pressures of $200,000 annually (special*) for the CPUC commissioners to hold office hours at least once a month in San Francisco or Los Angeles. Ongoing costs of approximately $170,000 (special*) to increase the amount of information available on the CPUC website. Ongoing costs of approximately $200,000 (special*) for the public advisor to have independent responsibility over the CPUC website. Unknown costs (special*) to post the transcripts of documents, evidence, testimony, and proceedings online. One-time costs of $157,000 annually for two years (special*) for a proceeding to reopen its confidentiality practices. Ongoing costs of $626,000 annually (special*) for hearings to consider motions to make confidential documents public. Unknown costs (special*) to require that the assigned commissioner attend all hearings in a proceeding. Ongoing costs between $450,000 and $850,000 (special*) to appoint an inspector general from the State Auditor's office to the CPUC. Ongoing costs of $220,000 annually (special*) to provide legal staff at the public advisor's office to ensure compliance with the Public Records Act and the Bagley-Keene Open Meeting Act. These costs may be offset by reduced workload in other CPUC division to oversee compliance. * Public Utilities Commission Utilities Reimbursement Account. AB 825 Page 8 SUPPORT: (Verified8/28/15) California Newspaper Publishers Association California Teamsters Public Affairs Council County of San Diego 2nd Supervisorial District, Dianne Jacob County of San Joaquin Engineers & Scientists of California IFPTE Local 20 AFL-CIO Sierra Club California Utility Workers Union of America, AFL-CIO OPPOSITION: (Verified8/28/15) None received ARGUMENTS IN SUPPORT: Recent media reports have revealed a lack of transparency in decisions by the CPUC. Transparency in how public agencies make decisions remains a longstanding and fundamental principle in California law and government. AB 825 increases CPUC transparency in three ways: (1) requires disclosure of information on the web and requires other CPUC actions to help Californians participate in the CPUC process; (2) provides a process for challenging confidentiality of documents; and (3) provides for independent oversight, by an Inspector General in the State Auditor's office. ASSEMBLY FLOOR: 79-0, 6/3/15 AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Ting, Wagner, Waldron, AB 825 Page 9 Weber, Wilk, Williams, Wood, Atkins NO VOTE RECORDED: Thurmond Prepared by:Nidia Bautista / E., U., & C. / (916) 651-4107 9/1/15 21:51:40 **** END ****