BILL ANALYSIS Ó
AB 1266
Page 1
ASSEMBLY THIRD READING
AB
1266 (Gonzalez)
As Amended May 4, 2015
Majority vote
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|Committee |Votes |Ayes |Noes |
| | | | |
| | | | |
|----------------+------+--------------------+----------------------|
|Utilities |10-5 |Rendon, Bonilla, |Patterson, Achadjian, |
| | |Burke, Eggman, |Dahle, Hadley, |
| | |Cristina Garcia, |Obernolte |
| | |Roger Hernández, | |
| | |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 | |
| | | | |
| | | | |
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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,
AB 1266
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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