BILL ANALYSIS                                                                                                                                                                                                    



                                                                    AB 1266


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          CONCURRENCE IN SENATE AMENDMENTS


          AB  
          1266 (Gonzalez)


          As Amended September 4, 2015


          Majority vote


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          |ASSEMBLY:  |      | (June 3,      |SENATE: |24-14 | (September 10,  |
          |           |48-28 |2015)          |        |      |2015)            |
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          |           |      |               |        |      |                 |
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          Original Committee Reference:  U. & C.


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


          The Senate amendments redefine excess compensation as over $1  
          million, clarify that restriction on excess compensation applies  
          to five years after a triggering event, and make other technical  
          changes.


          EXISTING LAW:  


          1)Gives the CPUC regulatory authority over public utilities,  
            including electrical corporations and gas corporations, as  








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            defined.  (Public Utilities Code Sections 218 and 222)


          2)Requires the shareholders of a public utility to bear any  
            expenses resulting from a bonus paid to an executive officer  
            of a public utility that has ceased to pay its debts in the  
            ordinary course of business, and prohibits any expense from  
            being recovered in rates.  (Public Utilities Code Section  
            451.5)


          FISCAL EFFECT:  According to the Senate Appropriations  
          Committee, this bill would have unknown ongoing costs,  
          potentially $200,000 annually, to the Public Utilities  
          Reimbursement Account for proceedings and review of excess  
          compensation.


          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."
          2)Background:  The CPUC requires regulated utilities to go  
            through a General Rate Case to request funding for  
            distribution and generation costs.  The General Rate Case  
            examines the utility's revenues and expenses, including  
            executive compensation, and provides a detailed forecast of  
            how they will structure their operations and make investments  
            for the next three years.  Furthermore, CPUC General Order No.  
            77-M requires the utility to file a statement showing the  
            names, titles, and duties of all employees with a base salary  
            of at least $125,000 annually.  


          3)Closure of San Onofre Nuclear Plant:  In 2012, Southern  
            California Edison (SCE) announced that it was closing the San  








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            Onofre Nuclear Generating Station (SONGS) after a leak was  
            discovered in a steam generator tube installed in 2010 that  
            transported radioactive water from one of the reactors.  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 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. 


            This bill prohibits an electrical or gas corporation from  
            recovering expenses for excess compensation from ratepayers  
            for five years following a triggering event unless the utility  
            obtains approval from the CPUC, as specified.


          Analysis Prepared by:  Edmond Cheung / U. & C. / (916) 319-2083   
            FN: 0002268