Amended in Senate September 4, 2015

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 utility for a period of 5 years following a triggering event, as defined, unless the utility obtains the approval of the commission. The bill would provide that anytime within a 5-year period following a triggering event, and prior to paying or seeking recovery of excess compensation, the electrical corporation or gas corporation would be required to file an application with the commission containing specified information. The bill would require the commission, following a duly noticed public hearing in the proceeding to consider the application, to issue a written decision determining whether any expenses for excess compensation proposed to be paid by the corporation should be recovered in rates, or if previously authorized to be recovered in rates, 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:

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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 any annual salary, bonus,
6benefits, or other consideration of any value, paid to an officer of
7an electrical corporation or gas corporation that is in excess of one
8million dollars ($1,000,000).

9(2) A “triggering event” occurs if, after January 1, 2013, an
10electrical corporation or gas corporation violates a federal or state
11safety regulation with respect to the plant and facility of the utility
12and, as a proximate cause of that violation, ratepayers incur a
13financial responsibility in excess of five million dollars
14($5,000,000).

P3    1(b) For a five-year period following a triggering event, no
2electrical corporation or gas corporation shall recover expenses
3for excess compensation from ratepayers unless the utility complies
4with the requirements of this section and obtains the approval of
5the commission pursuant to this section.

6(c) Any time within a five-year period following a triggering
7event and prior to paying or seeking recovery of excess
8compensation, an electrical corporation or gas corporation shall
9file an application with the commission that, with respect to any
10officer to whom it seeks to pay excess compensation, includes all
11of the following:

12(1) The compensation history for the officer.

13(2) The proposed compensation to be paid to the officer,
14including the compensation recovered from ratepayers and that
15paid solely by shareholders of the utility.

16(3) Whether any of the compensation paid to an officer was
17previously included or proposed to be included in rates and any
18justification for the proposed compensation.

19(4) Any additional information required by the commission.

20(d) As part of the proceeding to consider the application, the
21commission shall consider the costs to ratepayers of the triggering
22event. The commission shall hold not less than one duly noticed
23public hearing in the proceeding. The commission shall issue a
24written decision determining whether any expenses for excess
25compensation proposed to be paid by the electrical corporation or
26gas corporation should be recovered in rates, or if previously
27authorized to be recovered in rates, should be refunded to
28ratepayers.

29(e) A person or corporation owning or operating a qualifying
30facility pursuant to federal law or a facility that is an exempt
31wholesale generator is not an electrical corporation due to the
32ownership or operation of that facility. This subdivision is
33declaratory of existing law.

begin insert

34(f) In every decision on a general rate case, the commission
35shall require all authorized executive compensation to be placed
36in a balancing account, memorandum account, or other
37appropriate mechanism so that this section can be implemented
38without violating any prohibition on retroactive ratemaking.

end insert
39

SEC. 2.  

No reimbursement is required by this act pursuant to
40Section 6 of Article XIII B of the California Constitution because
P4    1the only costs that may be incurred by a local agency or school
2district will be incurred because this act creates a new crime or
3infraction, eliminates a crime or infraction, or changes the penalty
4for a crime or infraction, within the meaning of Section 17556 of
5the Government Code, or changes the definition of a crime within
6the meaning of Section 6 of Article XIII B of the California
7Constitution.



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