Amended in Senate August 31, 2015

Amended in Assembly May 4, 2015

California Legislature—2015–16 Regular Session

Assembly BillNo. 1266


Introduced by Assembly Member Gonzalez

February 27, 2015


An act to add Section 706 to the Public Utilities Code, relating to electrical and gas corporations.

LEGISLATIVE COUNSEL’S DIGEST

AB 1266, as amended, Gonzalez. Electrical and gas corporations: excess compensation.

Under existing law, the Public Utilities Commission has regulatory authority over public utilities, including electrical corporations and gas corporations. Existing law authorizes the commission to fix the rates and charges for every public utility, and requires that those rates and charges be just and reasonable. Existing law requires that any expense resulting from a bonus paid to an executive officer, as defined, of a public utility that has ceased to pay its debts in the ordinary course of business, be borne by the shareholders of the public utility and prohibits any expense from being recovered in rates.

This bill would prohibit an electrical corporation or gas corporation from recovering from ratepayers expenses for excess compensation, as defined, paid to an officer of the utilitybegin insert for a period of 5 yearsend insert following a triggering event, as defined, unless the utility obtains the approval of the commission.begin delete Followingend deletebegin insert The bill would provide that anytime within a 5-year period followingend insert a triggeringbegin delete eventend deletebegin insert event,end insert and prior to paying or seeking recovery of excess compensation, the electrical corporation or gas corporation would be required to filebegin delete a Tier 3 advice letterend deletebegin insert an applicationend insert with the commission containing specified information.begin delete If the electrical corporation or gas corporation sought or received authorization prior to the triggering event to recover excess compensation in rates, the commission would be required to open a proceeding or expand the scope of an existing proceeding to evaluate the advice letter and,end deletebegin insert The bill would require the commission,end insert following a dulybegin delete noticeend deletebegin insert noticedend insert public hearing in thebegin delete proceeding, toend deletebegin insert proceeding to consider the application, toend insert issue a written decision determining whether any expenses for excess compensationbegin delete that the corporation was authorized to recover in ratesend deletebegin insert proposed to be paid by the corporation should be recovered in rates, or if previously authorized to be recovered in rates,end insert should be refunded to ratepayers.

Under existing law, a violation of the Public Utilities Act or any order, decision, rule, direction, demand, or requirement of the commission is a crime.

Because the provisions of this bill would be a part of the act and because a violation of an order or decision of the commission implementing its requirements would be a crime, the bill would impose a state-mandated local program by creating a new crime.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: yes.

The people of the State of California do enact as follows:

P2    1

SECTION 1.  

Section 706 is added to the Public Utilities Code,
2to read:

3

706.  

(a) For purposes of this section, the following terms have
4the following meanings:

5(1) “Excess compensation” means anybegin insert annualend insert salary, bonus,
6benefits, or other consideration of any value, paid to an officer of
7an electrical corporation or gas corporation that is in excess ofbegin delete 10
8times the average compensation paid by the utility to the utility’s
9journeyman linemen.end delete
begin insert one million dollars ($1,000,000).end insert

P3    1(2) A “triggering event” occurs if, after January 1, 2013, an
2electrical corporation or gas corporation violates a federal or state
3safety regulation with respect to the plant and facility of the utility
4and, as a proximate cause of that violation, ratepayers incur a
5financial responsibility in excess of five million dollars
6($5,000,000).

7(b) begin deleteNo end deletebegin insertFor a five-year period following a triggering event, no end insert
8electrical corporation or gas corporation shall recover expenses
9for excess compensation from ratepayersbegin delete following a triggering
10eventend delete
unless the utility complies with the requirements of this
11section and obtains the approval of the commission pursuant to
12this section.

13(c) begin deleteFollowing end deletebegin insertAny time within a five-year period following end inserta
14triggering event and prior to paying or seeking recovery of excess
15compensation, an electrical corporation or gas corporation shall
16filebegin delete a Tier 3 advice letterend deletebegin insert an applicationend insert with the commission that,
17with respect to any officerbegin delete paidend deletebegin insert to whom it seeks to payend insert excess
18compensation, includes all of the following:

19(1) The compensation history for the officer.

20(2) The proposed compensation to be paid to the officer,
21including the compensation recovered from ratepayers and that
22paid solely by shareholders of the utility.

23(3) Whether any of the compensation paid to an officer was
24previously included or proposed to be included in rates and any
25justification for the proposed compensation.

26(4) Any additional information required by the commission.

27(d)  begin deleteIf the electrical corporation or gas corporation sought or
28received authorization prior to a triggering event to recover excess
29compensation in rates, the commission shall open a hearing, or
30expand the scope of an existing proceeding, to evaluate the advice
31letter. end delete
As part of thebegin delete proceeding,end deletebegin insert proceeding to consider the
32application,end insert
the commission shall consider the costs to ratepayers
33of the triggering event. The commission shall hold not less than
34one duly noticed public hearing in the proceeding. The commission
35shall issue a written decision determining whether any expenses
36for excess compensationbegin delete thatend deletebegin insert proposed to be paid byend insert the electrical
37corporation or gas corporationbegin delete was authorized to recover in ratesend delete
38begin insert should be recovered in rates, or if previously authorized to be
39recovered in rates,end insert
should be refunded to ratepayers.

P4    1(e) A person or corporation owning or operating a qualifying
2facility pursuant to federal law or a facility that is an exempt
3wholesale generator is not an electrical corporation due to the
4ownership or operation of that facility. This subdivision is
5declaratory of existing law.

6

SEC. 2.  

No reimbursement is required by this act pursuant to
7Section 6 of Article XIII B of the California Constitution because
8the only costs that may be incurred by a local agency or school
9district will be incurred because this act creates a new crime or
10infraction, eliminates a crime or infraction, or changes the penalty
11for a crime or infraction, within the meaning of Section 17556 of
12the Government Code, or changes the definition of a crime within
13the meaning of Section 6 of Article XIII B of the California
14Constitution.



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