BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS
                              Senator Ben Hueso, Chair
                                2015 - 2016  Regular 

          Bill No:          AB 853            Hearing Date:    7/13/2015
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          |Author:    |Roger Hernández                                      |
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          |Version:   |4/30/2015    As Amended                              |
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          |Urgency:   |No                     |Fiscal:      |Yes             |
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          |Consultant:|Nidia Bautista                                       |
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          SUBJECT: Electrical and gas corporations: security of plant and  
          facilities

            DIGEST:    This bill requires an electrical and gas  
          investor-owned utility prior to contracting any work, besides  
          construction and maintenance, to get approval from the CPUC. 

          ANALYSIS:
          
          Existing law:
          
          1)Establishes the California Public Utilities Commission (CPUC)  
            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)Provides the CPUC regulatory authority over public utilities,  
            including electrical corporations and gas corporations, as  
            defined.  (Public Utilities Code §§218 and 222)


          3)Requires the CPUC, after a hearing, if it finds that the  
            rules, practices, equipment, appliances, facilities, or  
            service of any public utility, or the methods of manufacture,  
            distribution, transmission, storage, or supply employed by it,  
            are unjust, unreasonable, unsafe, improper, inadequate, or  
            insufficient, to determine and, by order or rule, fix the  
            rules, practices, equipment, appliances, facilities, service,  







          AB 853 (Roger Hernández)                          Page 2 of ?
          
          
            or methods to be observed, furnished, constructed, enforced,  
            or employed.  (Public Utilities Code §761)

          4)Requires the CPUC to prescribe rules for the performance of  
            any service or the furnishing of any commodity of the  
            character furnished or supplied by any public utility, and, on  
            proper demand and tender of rates, require such public utility  
            to furnish such commodity or render such service within the  
            time and upon the conditions provided in such rules. (Public  
            Utilities Code §761)
          This bill:

          1)Requires, to the extent feasible, electrical and gas  
            corporations to utilize direct employees for any work  
            associated with design, engineering, and operation of its  
            nuclear, electrical, gas infrastructure, including all  
            computer and information technology systems. 

          2)Defines "direct employees" to include employees of a  
            contractor or subcontractor licensed in California for  
            construction and maintenance work and working under the direct  
            supervision of the electrical corporation or gas corporation. 

          3)Requires electrical and gas corporations to obtain approval  
            from the CPUC prior to utilizing non-direct employees. 

          4)Requires the electrical and gas corporation to file a Tier 3  
            advice letter with the CPUC that demonstrates that the work  
            can be performed safely and securely, and without jeopardizing  
            the security of its nuclear, electrical, and gas  
            infrastructure. 

          5)Requires the CPUC to open a proceeding, or expand the scope of  
            a proceeding, to evaluate the advice letter. 

          6)Requires the CPUC to hold not less than one public hearing for  
            the proceeding.

          7)Requires the CPUC to issue a written decision on whether the  
            utility can utilize non direct employees. 

          Background

          Southern California Edison (SCE) layoffs.  In April 2014, SCE  
          announced it would be laying off 400-500 information technology  








          AB 853 (Roger Hernández)                          Page 3 of ?
          
          
          (IT) workers at its Irwindale, California location.  SCE has  
          also stated that an additional 100 employees would be leaving  
          voluntarily.  The 500 lost jobs reportedly represent just over a  
          quarter to a third of the SCE Irwindale facility IT workforce of  
          1,500 to 1,800 employees. 
          Earlier this year, news reports in the Los Angeles Times, and  
          other outlets, surfaced that SCE was replacing laid off workers  
          with outsourced contracted workers from two Indian companies,  
          Infosys and Tata.  Some of these news reports included claims by  
          SCE laid off workers that they were being asked to train their  
          replacements who were in the country on H-1B visas.  SCE has  
          confirmed it is outsourcing IT work to two Indian companies,  
          Tata and Infosys, and that about 70 percent of that work would  
          be completed offshore, but did not know whether or not foreign  
          workers would be brought to the U.S. to complete the remaining  
          30 percent of the work. 
                    
          H-1B Visas.  H-1B visas were introduced by the federal  
          government in 1990, and over the years the annual cap on them  
          has ranged up to 195,000, and currently stands at 65,000 (plus  
          20,000 for individuals with master's degrees).  Under federal  
          law, visa users must have specialized training or a bachelor's  
          degree in the subject for which they are being hired.  The visa  
          holder must be offered the prevailing wage for the work, and  
          they can only take jobs for which employers could not find a  
          qualified American worker.

          Tata and Infosys are reportedly the largest holders of H-1B  
          visas, based on the 2013 figures, with each having 6,000+ H-1B  
          visas.  According to the same list, about 50 percent of the H-1B  
          visas holders are offshore companies.  Employers must file wage  
          data and location information with federal authorities, known as  
          a Labor Condition Application (LCA).  A February 2015 news story  
          in Computer World Magazine noted that "in Irwindale, California,  
          where SCE runs a major part of its IT operations, Tata and  
          Infosys, had as many as 180 LCAs, and in a random check of these  
          applications, every address matched a SCE location." 

          Lawmakers and the public have raised concerns about potential  
          abuses with the H-1B visa program after several news reports  
          have noted the potential widespread abuse of the program by  
          companies who are looking to reduce their costs at the expense  
          of American workers.  Many of these news stories have included  
          claims by laid off employees that they are required to train  
          their replacements who are H-1B visa holders in exchange for  








          AB 853 (Roger Hernández)                          Page 4 of ?
          
          
          their severance or other benefits package, and/or on condition  
          of confidentiality.  In March 2015, the U.S. Senate Judiciary  
          Committee held a hearing on "Immigration Reforms Needed to  
          Protect Skilled American Workers."  The hearing focused on the  
          H-1B visa program, the ability to bring high-skilled workers in  
          the country to help companies compete, but also noted concerns  
          with stories of abuse by employers who are displacing American  
          workers in a manner inconsistent with the requirements or intent  
          of the visa program. 

          Outsourcing as a security risk. AB 853 finds and declares that  
          protecting the security of nuclear, electrical, and natural gas  
          utility systems, as well as the privacy of ratepayers' personal  
          information is a paramount state interest.  This bill declares  
          that electrical and gas corporations should make every  
          reasonable effort to protect their computer systems from  
          unauthorized intrusions and, to do so, the information  
          technology personnel who operate those systems should be direct  
          employees of the utility. 



          CPUC advice letter.  An advice letter is a request by a utility  
          for CPUC approval, authorization, or other relief, including an  
          informal request for approval to furnish service under rates,  
          charges, terms or conditions other than those contained in the  
          utility's tariffs then in effect.  Advice letters are  
          procedurally less formal than other proceedings at the CPUC  
          which require more judicial-type elements of an evidentiary  
          hearing.  Advice letters are classified into three tiers,  
          ranging from Tier 1 to Tier 3.  Tier 1 advice letters generally  
          become effective upon filing of the letter.  However, Tier 3  
          advice letters require commissioners to hear the item and take a  
          vote at a publicly noticed meeting. 

          This bill requires a Tier 3 advice letter for any contracting  
          work done by a utility. Currently, the CPUC handles about 1,000  
          advice letters for the energy sector alone. 
          This bill could compound the number of advice letters that would  
          need to be processed and make the process untenable.  An  
          alternative approach is to address any contracting work in the  
          utility's general rate case (GRC). 

          General Rate Case (GRC).  All utilities that are regulated by  
          the CPUC are required to undergo a GRC to request funding for  








          AB 853 (Roger Hernández)                          Page 5 of ?
          
          
          distribution and generation costs associated with their service.  
           GRCs are major regulatory proceedings and provide the CPUC an  
          opportunity to perform an exhaustive examination of a utility's  
          operations and costs.  Usually performed every three years, the  
          GRC allows the CPUC to conduct a broad and detailed review of a  
          utility's revenues, expenses, and investments in plant and  
          equipment to establish an approved revenue requirement. Through  
          the GRC, a utility forecasts how they will structure their  
          operations and make investments for the next three years.  In  
          consideration of the current volume of advice letters that must  
          be processed by the CPUC and the potential to overwhelm the  
          agency with requests, as noted by the opponents, the author and  
          committee may wish to amend the bill to have the CPUC approval  
          process occur exclusively as part of the GRC proceeding of the  
          utility. 

          Prior/Related Legislation
          
          AJR 12 (E. Garcia, 2015) H-1B Visa Program: investigation of  
          misuse.  The bill urges the United States Department of Labor  
          and the Congress of the United States to investigate alleged  
          misuse of the H1-B Visa program. 

          FISCAL EFFECT:                 Appropriation:  No    Fiscal  
          Com.:             Yes          Local:          Yes


          ASSEMBLY VOTES:


          Assembly Floor                                 (50-25)
          Assembly Appropriations Committee                         (12-5)
          Assembly Utilities and Commerce Committee           (10-4)
            SUPPORT:  

          Coalition of California Utility Workers (source)
          California Labor Federation
          California State Association of Electrical Workers
          California State Pipe Trades Council
          International Union of Elevator Constructors
          Western States Council of Sheet Metal Workers

          OPPOSITION:

          @Business, Inc.








          AB 853 (Roger Hernández)                          Page 6 of ?
          
          
          American Council of Engineering Companies
          California Business Properties Association
          California Chamber of Commerce
          California Manufacturer & Technology Association
          Large-scale Solar Association
          Los Angeles Area Chamber of Commerce
          Los Angeles County Business Federation
          National Gay & Lesbian Chamber of Commerce
          Southern California Edison
          TechNet
          Western Electrical Contractors Association, Inc.

          ARGUMENTS IN SUPPORT:    According to the author, AB 853  
          prohibits an electrical or gas corporation from outsourcing  
          critical nuclear, electrical and gas infrastructure work,  
          including computer and informational technology systems, without  
          first obtaining approval from the CPUC.  The author cites  
          concerns with news reports regarding layoffs of hundreds of SCE  
          employees and the outsourcing of these jobs to contractors from  
          overseas, potentially including H-1B visa holders who would be  
          brought in to replace California workers.  "The part of any  
          computer system most vulnerable to being compromised is the  
          personnel who operate the system.  Unfortunately, recent events  
          have raised concerns about the safety and security of such  
          systems." 
          
          ARGUMENTS IN OPPOSITION:  SCE argues that AB 853 has the  
          potential to jeopardize the safe, reliable operation of the  
          electric service and thousands of California jobs.  SCE further  
          states they currently have a database of 8,000 contract workers  
          in a wide variety of jobs related to operations of the utility.   
          "Work is performed by contract workers in any manner of job  
          duties? to bring expertise that is not a core function of the  
          utility, for urgent projects? This bill could bring utility  
          projects to a stand-still, including interconnections, major  
          projects, and critical emergency response and recovery effort,  
          by requiring each hiring to go through a lengthy public process.  
           AB 853 suggests this [contract] workforce creates questions  
          about the security and safety of the utility, which is unfair  
          and unwarranted."
          
          

                                      -- END --
          








          AB 853 (Roger Hernández)                          Page 7 of ?