BILL ANALYSIS                                                                                                                                                                                                    ”



                                                                      AB 1266


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          ASSEMBLY THIRD READING


          AB  
          1266 (Gonzalez)


          As Amended  May 4, 2015


          Majority vote


           ------------------------------------------------------------------- 
          |Committee       |Votes |Ayes                |Noes                  |
          |                |      |                    |                      |
          |                |      |                    |                      |
          |----------------+------+--------------------+----------------------|
          |Utilities       |10-5  |Rendon, Bonilla,    |Patterson, Achadjian, |
          |                |      |Burke, Eggman,      |Dahle, Hadley,        |
          |                |      |Cristina Garcia,    |Obernolte             |
          |                |      |Roger HernŠndez,    |                      |
          |                |      |Quirk, Santiago,    |                      |
          |                |      |Ting, Williams      |                      |
          |                |      |                    |                      |
          |----------------+------+--------------------+----------------------|
          |Appropriations  |12-5  |Gomez, Bonta,       |Bigelow, Chang,       |
          |                |      |Calderon, Daly,     |Gallagher, Jones,     |
          |                |      |Eggman,             |Wagner                |
          |                |      |                    |                      |
          |                |      |                    |                      |
          |                |      |Eduardo Garcia,     |                      |
          |                |      |Gordon, Holden,     |                      |
          |                |      |Quirk, Rendon,      |                      |
          |                |      |Weber, Wood         |                      |
          |                |      |                    |                      |
          |                |      |                    |                      |
           ------------------------------------------------------------------- 









                                                                      AB 1266


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          SUMMARY:  Prohibits an electrical or gas corporation from  
          recovering from ratepayers' expenses for excess compensation paid  
          to an officer of the utility following a triggering event, unless  
          approved by the California Public Utilities Commission (CPUC), as  
          specified.  Specifically, this bill:  


          1)Prohibits an electrical or gas corporation from recovering  
            expenses for excess compensation from ratepayers following a  
            triggering event, unless the utility complies with specific  
            requirements and obtains the approval of the CPUC, as specified.


          2)Defines "excess compensation" to mean any salary, bonus,  
            benefits, stock options, or other consideration of any value  
            paid to an officer of an electrical or gas corporation that is  
            in excess of ten times the average compensation paid by the  
            utility to the utility's journeyman linemen.


          3)Specifies that a "triggering event" occurs if, after January 1,  
            2013, an electrical corporation or gas corporation violates a  
            federal or state safety regulation with respect to the plant and  
            facility of the utility and, as a proximate cause of that  
            violation, ratepayers incur a financial responsibility in excess  
            of $5 million.


          4)Requires an electrical or gas corporation, prior to paying or  
            seeking recovery of excess compensation following a triggering  
            event, to file a Tier 3 advice letter with the CPUC that  
            includes all of the following:


              a)    The compensation history for the officer,


              b)    The proposed compensation to be paid to the officer,  








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                including the compensation recovered from ratepayers and  
                that paid solely by shareholders of the utility,


              c)    Any justification for the proposed compensation, and


              d)    Any additional information required by the CPUC.


          5)Requires the CPUC to open a proceeding, or expand the scope of  
            an existing proceeding to evaluate the advice letter, and  
            consider the costs to ratepayers of the triggering event, and  
            hold at least one duly noticed public hearing for the  
            proceeding.


          6)Requires the CPUC to issue a written decision determining  
            whether and, if so, how much of each officers' compensation  
            shall be recoverable from ratepayers.


          FISCAL EFFECT:  According to the Assembly Appropriations  
          Committee, there would be increased CPUC costs of approximately  
          $150,000 over an 18-month period to conduct one proceeding.  In  
          addition, there would be ongoing annual CPUC costs of  
          approximately $50,000.


          COMMENTS:  


           1)Author's Statement:  "Neither shareholders nor ratepayers played  
            any role in the management missteps that led to the  
            multi-billion dollar disaster that the SONGS shutdown has  
            become.  To reward top executives for successfully passing the  
            buck to everyday ratepayers and stockholders who are trying to  
            build a secure retirement is inexplicable to me, and should face  
            public scrutiny. "








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          2)Background:  In 2012, Southern California Edison (SCE) announced  
            that it was closing the San Onofre Nuclear Generating Station  
            (SONGS) in San Clemente following the discovery of a radioactive  
            leak caused by a faulty steam generator.  In 2014, SCE reached a  
            settlement with the CPUC to allow it to collect $3.3 billion  
            from ratepayers and $1.4 billion from shareholders to fund the  
            cost of the closing SONGS.  The settlement also gave ratepayers  
            a share of the money recovered from litigation against  
            Mitsubishi, the manufacturer of the faulty steam generator, as  
            well as an equal share of any legal settlement with Mitsubishi. 


          3)Executive Compensation:  According to the author, "executive  
            compensation is never the subject of a standalone proceeding  
            where the public can engage ? [In addition,] the [CPUC] has  
            never conducted a proceeding to determine if the compensation  
            for any individual is appropriate or justified, and never  
            considers whether the utility's performance warrants any change  
            in executive compensation.  Not after the San Bruno disaster or  
            the SONGS disaster, not even after SCE was fined $200 million  
            for falsifying performance records and customer satisfaction  
            surveys."


            This bill prohibits an electrical or gas corporation from  
            recovering expenses for excess compensation from ratepayers  
            following a triggering event, unless the utility submits to the  
            CPUC a Tier 3 advice letter, as specified, and the CPUC opens or  
            expands the scope of a hearing to consider the costs to  
            ratepayers of the triggering event.  The CPUC would have to hold  
            at least one publically noticed hearing to consider the cost to  
            ratepayers of the trigger event, and issue a decision on whether  
            and, if so, how much of each officers' compensation shall be  
            recoverable from ratepayers. 




          Analysis Prepared by:                                               








                                                                      AB 1266


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                          Edmond Cheung / U. & C. / (916) 319-2083  FN:  
          0000622