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 ----------------------------------------------------------------- |Author: |Roger Hernández | |-----------+-----------------------------------------------------| |Version: |4/30/2015 As Amended | ----------------------------------------------------------------- ------------------------------------------------------------------ |Urgency: |No |Fiscal: |Yes | ------------------------------------------------------------------ ----------------------------------------------------------------- |Consultant:|Nidia Bautista | | | | ----------------------------------------------------------------- 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 ?