BILL ANALYSIS                                                                                                                                                                                                    Ó






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          |SENATE RULES COMMITTEE            |                        AB 853|
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                                   THIRD READING 


          Bill No:  AB 853
          Author:   Roger Hernández (D)
          Amended:  9/1/15 in Senate
          Vote:     21  

           SENATE ENERGY, U. & C. COMMITTEE:  7-3, 7/13/15
           AYES:  Hueso, Hertzberg, Hill, Lara, Leyva, McGuire, Wolk
           NOES:  Fuller, Cannella, Morrell
           NO VOTE RECORDED:  Pavley

           SENATE APPROPRIATIONS COMMITTEE:  4-3, 8/27/15
           AYES:  Lara, Beall, Leyva, Mendoza
           NOES:  Bates, Hill, Nielsen

           ASSEMBLY FLOOR:  50-25, 6/2/15 - See last page for vote

           SUBJECT:   Electrical and gas corporations: security of plant  
                     and facilities


          SOURCE:    Coalition of California Utility Workers

          DIGEST:   This bill requires an electrical and gas  
          investor-owned utility to utilize employees of the utility for  
          any work associated with the design, engineering, and operation  
          of its nuclear, electrical and gas infrastructure, unless the  
          utility has prior approval from the California Public Utilities  
          Commission to contract out that work. 

          ANALYSIS: 
          
          Existing law:









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          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,  
            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 electrical and gas corporations that file general  
            rate cases on or after January 1, 2016 with the CPUC to obtain  
            approval from the CPUC prior to contracting out work to  
            non-utility employees for any work associated with design,  
            engineering, and operation of its nuclear, electrical, and gas  
            infrastructure, including all computer and information  
            technology systems

          2)Requires the electrical and gas corporation to file a request  
            with the CPUC to employ persons that are not employees of the  
            utility as part of the general rate case application. 

          3)Requires the utility to demonstrate and the CPUC to evaluate  







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            that the work can be performed safely and securely, and  
            without jeopardizing the security of its nuclear, electrical,  
            and gas infrastructure. 

          4)Requires the CPUC to issue a written decision as part of the  
            general rate case proceeding to determine whether the utility  
            can utilize non-utility employees for the described work.

          5)Exempts contracting for work related to construction,  
            alteration, demolition, installation, maintenance, or repair  
            work on its nuclear, electrical or gas infrastructure from  
            requiring approval by the CPUC.

          6)Exempts standard equipment purchased from an outside vendor  
            from the requirements of this section.

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







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          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  
          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. 

          General Rate Case (GRC).  All utilities that are regulated by  
          the CPUC are required to undergo a GRC to request funding for  
          distribution and generation costs associated with their service.  







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           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.  

          Prior/Related Legislation
          
          AJR 12 (E. Garcia, 2015) urges the United States Department of  
          Labor and the Congress of the United States to investigate  
          alleged misuse of the H1-B Visa program.  The bill is currently  
          under consideration on the Assembly Floor. 

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

          According to the Senate Appropriations Committee, at least  
          $40,000 in one-time costs and at least $144,000 ongoing annually  
          to the Public Utilities Reimbursement Account (special) to  
          consider advice letters or GRC petitions to allow the use of  
          contract works.

          SUPPORT:   (Verified8/31/15)


          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:   (Verified8/31/15)


          @Business, Inc.
          Accu-Bore Directional Drilling
          Advanced Concepts, Inc.
          Agile Sourcing Partners, Inc.
          American Council of Engineering Companies - California 







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          American Truck & Trailer body Co., Inc.
          AREVA
          Barnard Pipeline, Inc.
          Bjork Construction Company, Inc.
          Burns & McDonnell Engineering Company
          Cadence Resource Group
          California Business Properties Association
          California Chamber of Commerce
          California Hispanic Chambers of Commerce
          California Manufacturer & Technology Association
          CANUS Corporations
          CB&I
          CompTIA
          Cupertino Electric Inc.
          EN Engineering, LLC
          Energy Experts International
          ETIC Engineering, Inc.
          Fluor Corporation
          Gas Transmission Systems, Inc.
          Golder Associates
          Granite Construction Company
          Gravity Pro Consulting
          Holtec International
          Hot Line Construction, Inc.
          Information Technology Alliance for Public Sector
          IW Group, Inc.
          J. Givoo Consultants, Inc.
          Large-Scale Solar Association
          Latin Business Association
          Latino Journal
          Los Angeles Area Chamber of Commerce
          Los Angeles County Business Federation
          MGE Underground, Inc.
          National Gay & Lesbian Chamber of Commerce
          OneSource Supply Solutions
          Orange County Hispanic Chamber of Commerce
          Pacific Gas and Electric Company
          ProActive Business Solutions, Inc.
          PS Energy Group, Inc.
          S2S Environmental Resource Management
          Sargent & Lundy Engineers, Ltd.
          Semper Electric, Inc.
          Siemens
          Sierra Utility Sales, Inc.







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          Snelson Companies, Inc.
          Southern California Edison
          Sumitomo Electric USA, Inc.
          TechNet
          Terra Verde Environmental Consulting, LLC
          The Okonite Company
          Underground Construction Co., Inc.
          Utility Tree Service Inc.
          Western Electrical Contractors Association, Inc.
          Wilson Utility Construction Company
          World Wide Technology, Inc.
          Zines, 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."

          ASSEMBLY FLOOR:  50-25, 6/2/15
          AYES:  Alejo, Bonilla, Bonta, Brown, Burke, Calderon, Campos,  
            Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Daly, Dodd, Eggman,  







                                                                     AB 853  
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            Frazier, Cristina Garcia, Eduardo Garcia, Gatto, Gipson,  
            Gomez, Gonzalez, Gordon, Gray, Roger Hernández, Holden, Irwin,  
            Jones-Sawyer, Levine, Lopez, Low, McCarty, Medina, Mullin,  
            Nazarian, O'Donnell, Perea, Quirk, Rendon, Ridley-Thomas,  
            Rodriguez, Salas, Santiago, Mark Stone, Thurmond, Ting, Weber,  
            Williams, Atkins
          NOES:  Achadjian, Travis Allen, Baker, Bigelow, Brough, Chang,  
            Beth Gaines, Gallagher, Hadley, Harper, Jones, Kim, Lackey,  
            Linder, Maienschein, Mathis, Mayes, Melendez, Obernolte,  
            Olsen, Patterson, Steinorth, Wagner, Waldron, Wilk
          NO VOTE RECORDED:  Bloom, Chávez, Dahle, Grove, Wood

          Prepared by:Nidia Bautista / E., U., & C. / (916) 651-4107
          9/1/15 21:34:07


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