BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
AB 1266 (Gonzalez) - Electrical and gas corporations: excess
compensation.
-----------------------------------------------------------------
| |
| |
| |
-----------------------------------------------------------------
|--------------------------------+--------------------------------|
| | |
|Version: May 4, 2015 |Policy Vote: E., U., & C. 7 - 3 |
| | |
|--------------------------------+--------------------------------|
| | |
|Urgency: No |Mandate: Yes (see staff |
| |comment) |
| | |
|--------------------------------+--------------------------------|
| | |
|Hearing Date: August 17, 2015 |Consultant: Marie Liu |
| | |
-----------------------------------------------------------------
This bill meets the criteria for referral to the Suspense File.
Bill
Summary: AB 1266 would prohibit an electrical or gas
corporation from recovering expenses for excess compensation, as
defined, from ratepayers if there have been safety violations
that result in over $5,000,000 in ratepayer costs.
Fiscal
Impact: Unknown ongoing costs, potentially $200,000 annually,
to the Public Utilities Reimbursement Account (special) for
proceedings and review of excess compensation.
Background: All CPUC regulated utilities are required to have their rates
approved by the CPUC through a General Rate Case (GRC). These
cases usually are performed every three years and allow the CPUC
to examine the utility's revenues, expenses, and infrastructure
investments, including executive compensation. A utility can
AB 1266 (Gonzalez) Page 1 of
?
request changes to rates outside of the GRC through an advice
letter, which are procedurally less formal than the GRC or other
proceeding. Advice letters are classified into three tiers based
on when and how they become effective. Tier 3 advice letters
require commissioners to hear the item and take a vote at a
publically noticed meeting.
In 2012, Southern California Edison (SCE) temporarily shut down
the San Onofre Nuclear Generation Station (SONGS) after a steam
generator failed and leaked radioactive gas. In 2013, SCE
announced that it could not afford to keep the plant open and
that SONGS would be permanently retired. Under a CPUC approved
settlement, ratepayers will be responsible for paying for $3.3
billion of the $4.7 billion total costs necessary to retire the
facility and supply replacement power. In 2013, SCE's chairman
received $11 million in total compensation in 2013, and less
than three weeks following the SONGS settlement, the president
of SCE cashed out nearly $9 million in stocks.
Proposed Law:
This bill would prohibit an electrical or gas corporation from
recovering expenses for an officer's excess compensation from
ratepayers following a "triggering event" unless the utility
files a Tier 3 advice letter with the following information:
The officer's compensation history.
The officer's proposed excess compensation, delineating
between the compensation requested to be paid by ratepayers
and compensation paid by the shareholders.
Whether the excess compensation was previously included or
proposed prior to the triggering event.
If the excess compensation was previously requested prior to a
triggering event, the CPUC would be require to open a
proceeding, or expand an existing hearing, to consider the
ratepayer costs of the triggering event and whether any
previously-approved expenses for excess compensation should be
refunded to ratepayers.
AB 1266 (Gonzalez) Page 2 of
?
This bill would define "excess compensation" as any salary,
bonus, or benefits paid to an officer of a utility that is more
than 10 times the average compensation paid to the utility's
journeyman linemen.
A "triggering event" would be defined a violation of federal or
state plant and facility safety regulations after January 1,
2013 that result in the ratepayers incurring a financial
responsibility of over $5 million.
Staff
Comments: Costs to the CPUC associated with this bill are
largely unknown because it is unknown how often triggering
events will occur and the bill does not specify how long the
limitations on excess compensation would be imposed. As an
example, assuming that the bill's limitation on excess
compensation be limited to the existing GRC cycle and
California's three largest IOUs all have a triggering event
after receiving authorization to recover excess compensation in
rates, the CPUC would likely need $200,000 annually ongoing in
proceeding costs to consider whether ratepayers should be
refunded costs associated with excess compensations.
Staff notes that the bill defines excess compensation for an
officer of an IOU as any salary, bonus, benefits, or other
consideration of any value, paid to an officer that is more than
10 times the average "compensation" paid by the utility to the
utility's journeyman linemen; however "compensation" for the
linemen is not defined. The Senate Energy and Utilities analysis
on this bill reported that the average annual salary of linemen
is approximately $80,000. However, SCE reported to this
committee that the average annual compensation of its linemen
was $201,626 based on the average lineman's base salary plus
overtime ($162,602) and 24% for benefits. As the definition of
"compensation" would affect when the review required by this
bill would be triggered, staff recommends that compensation be
defined and be specified in annual amounts or, alternatively,
the author may wish to consider setting excess compensation at a
set amount, say $2 million, which would be adjusted annually for
AB 1266 (Gonzalez) Page 3 of
?
inflation.
This bill constitutes a state mandate as it creates a new crime.
However, under the California Constitution, costs associated
with this mandate are not reimbursable.
-- END --