BILL ANALYSIS Ó
AB 2120
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Date of Hearing: April 20, 2016
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Mike Gatto, Chair
AB 2120
(Weber) - As Introduced February 17, 2016
SUBJECT: Public Utilities Commission: proceedings: intervenor
fees: customers
SUMMARY: Authorizes compensation for participation or
intervention in proceedings at the California Public Utilities
Commission (CPUC) for a county office of education, on behalf of
any of the local educational agencies (LEA) in whole or part
within the county or on behalf of itself, or for a community
college district.
EXISTING LAW:
1)Provides compensation for reasonable advocate's fees,
reasonable expert witness fees, and other reasonable costs to
public utility customers and representatives of customers for
participation or intervention in formal proceedings of the
commission involving electrical, gas, water, telegraph, and
telephone public utilities, but does not provide that
compensation for local government agencies. (Public Utilities
Code Section 1802)
2)Authorizes intervenors involving electric, water, and
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telephone utilities to be compensated for making a substantial
contribution to proceedings of the CPUC, as determined by the
CPUC. (Public Utilities Code Section 1801.3)
3)Requires intervenor compensation to be awarded to eligible
intervenors in a timely manner, within a reasonable period
after the intervenor has made the substantial contribution to
a proceeding that is the basis for the compensation award.
(Public Utilities Code Section 1801.3)
4)Defines "compensation" to mean payments for all or part, as
determined by the CPUC, of reasonable advocate's fees,
reasonable expert witness fees, and other reasonable costs of
preparation for and participation in a proceeding, and
includes the fees and costs of obtaining an award, as
specified, and of obtaining judicial review, if any. (Public
Utilities Code Section 1802)
5)Defines "customer" to mean any of the following:
a) A participant representing consumers, customers, or
subscribers of any electrical, gas, telephone, telegraph,
or water corporation that is subject to the jurisdiction of
the CPUC;
b) A representative who has been authorized by a customer;
or
c) A representative of a group or organization authorized
pursuant to its articles of incorporation or bylaws to
represent the interests of residential customers, or to
represent small commercial customers who receive bundled
electric service from an electrical corporation. (Public
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Utilities Code Section 1802)
FISCAL EFFECT: Unknown.
COMMENTS:
1)Author's Statement: "Last year school districts in San Diego
County experienced an unprecedented and unanticipated surge in
electricity costs averaging 39%, with 33% of that increased
attributable to utility rate increases alone. It is estimated
that this increase cost San Diego County School Districts over
$25 million in one year. This resulted in an estimated 15% to
20% of the 2014-15 increase in Local Control Funding Formula
(LCFF) Base Grants fund being diverted away from their
intended purpose. A coalition of 40 San Diego County School
Districts and the county Office of Education formed a
coalition dedicated to seeking protection from further drastic
escalation of electricity costs in order to preserve LCFF
funds for their intended purpose. Specifically, one of their
recommendations was to allow schools to participate in the
California Public Utilities Commission intervenor compensation
proceedings."
Due to the fact that the impetus of the bill is to address
intervenor compensation in CPUC proceedings related to energy
rates, the author may wish to consider an amendment to limit
intervenor compensation eligibility for schools to proceedings
related to energy rates only.
2)Background: Under current law, the CPUC is authorized to
compensate intervenors involved in electric, water, and
telephone utilities for making a substantial contribution to a
proceeding. The intervenor compensation program is intended
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to ensure that intervenors such as individuals and groups that
represent the interest of utility ratepayers, have the
financial resources to bring their concerns and interest to
the CPUC at its proceedings, compared to the other major
regulated utilities.
In general, a participating intervenor involved in a
proceeding involving electric, water, or telephone utilities
would submit a claim for intervenor compensation. The CPUC
would determine if the intervenor has made a substantial
contribution to the proceeding of the CPUC and will either
approve or deny the claim. If approved, the CPUC directs the
participating electric, water, or telephone utilities to award
the intervenor a specific amount as determined by the CPUC.
In most cases, the utilities would then recover such claim
payments in their General Rate Cases as they seek CPUC
approval of funds they may be charged from their ratepayers.
3)Background: The program began in the early 1980s to allow
intervenor compensation in electrical, gas, telephone, or
water proceedings where the purpose of the participation was
to modify or influence a rate. SB 4 (Montoya), Chapter 297,
Statutes of 1984, codified the program, defining the customers
eligible for awards and specifying the criteria the CPUC must
consider determining if an eligible applicant is entitled to
an award - substantial contribution and significant financial
hardship. Making an entity eligible for the program is no
guarantee the CPUC will award compensation in any given
proceeding.
The program started with utility rate cases because of the
complex and lengthy proceedings that involve the CPUC acting
much like a court, relying on judges, attorneys, and expert
witnesses before making decisions. The cases involve public
hearings with written and oral testimony, cross examination,
opening and reply briefs, draft decisions with comments from
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parties, and ultimately a final decision.
Participation is complicated, time consuming and expensive.
Utilities are able to fully participate in these cases and
recover their costs in rates. The CPUC's Division of Ratepayer
Advocates is directed by statute to represent customer
interests in virtually all CPUC proceedings involving
electricity, natural gas, telecommunications, and water.
Residential customer interests are represented by individual
customers or organizations who regularly participate in
proceedings, such as The Utility Reform Network (TURN)
representing residential utility customers.
Under the intervenor compensation, customers who couldn't
otherwise afford to participate without "significant financial
hardship" and who have made a substantial contribution to the
case, as determined by the CPUC, are eligible to have their
reasonable expenses covered, including attorney's fees and
expert witness fees. Any award made is paid by the public
utility that is the subject of the proceeding. For utilities
subject to traditional cost-of-service ratemaking (e.g. the
electric utilities), the expense of the intervenor
compensation program is recoverable from ratepayers. Where
the utility is subject to price-cap regulation, or where
prices aren't regulated (e.g. telecommunications utilities)
the utility must manage the cost of the program.
4)Expanded to All Utility Proceedings: Statutory changes in 1992
authorized intervenor compensation in any utility proceeding,
rather than just rate cases, with the award to be paid
proportionately by ratepayer funds from participating
utilities. Thus, an eligible customer could seek an award for
participation in a rulemaking or investigation for the CPUC to
adopt requirements for utilities to adopt energy efficiency
programs or to award funds to subsidize solar and other
renewable energy investments.
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5)Government Agencies Not Eligible: The statute governing
intervenor compensation defines an eligible customer as not
including any state, federal, or local government agency, any
public utility, or any entity formed by a local government
agency for the purpose of participating in a CPUC proceeding.
This exclusion is premised on the fact that government
agencies are funded with public dollars and have the ability
to increase taxes or fees to fund their activities.
Government agencies can participate as a party in any CPUC
proceeding.
This argument may not carry as much weight when considering
the limited funding opportunities available to school
agencies. Schools may raise revenue through parcel taxes or
school facilities bonds; however funding use must be specified
in advance. It is not always foreseeable when CPUC proceeding
intervention may be deemed necessary because rate increases
can be unpredictable. Further, it is not clear that the costs
of intervention would be eligible for facilities bond funding.
Finally, it may difficult to pass a parcel tax increase with
voters if there is no guarantee when the funds will be needed.
According to the author's office, these funding barriers
result in intervention costs being covered by other means such
as supplemental and concentration grants provided through the
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Local Control Funding Formula. These grants are meant to
provide improvements in services to English-learner and
low-income students.
It is unclear how community colleges are differentiated from
other publically funded entities excluded from intervenor
compensation that have the capability to increase taxes or
fees to fund their activities. Community colleges have control
over system wide and campus fees that could be used to cover
the cost of intervenor compensation. Further, community
colleges as opposed to school district are primarily funded by
the State. Therefore, they may request funds for such
activities through the normal state budget process.
The author may wish to consider an amendment to remove
community college eligibility for intervenor compensation in
the bill.
6)Proposal for Education JPA Eligibility: A 1998 CPUC decision
adopted revisions to the intervenor compensation program and
identified proposals for statutory changes, including a
proposal that would authorize limited eligibility for public
schools. The CPUC noted the participation in CPUC proceedings
of School Project for Utility Rate Reduction and Regional
Energy Management Coalition (SPURR/REMAC). SPURR, according
to its Web site, is a joint powers authority (JPA) that
provides energy management and regulatory services to nearly
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4,000 facilities operated by over 200 public K-12 districts,
community colleges, county offices of education, universities,
and other public agencies in California. The CPUC decision
stated:
We believe that local government public education
institutions are to be encouraged to participate in
CPUC proceedings and thereby identify ways to lower
the utility-related operating costs they face.
According to SPURR/REMAC, its member institutions do
not have discretion to allocate funds to the
SPURR/REMAC consumer protection efforts, and the
current SPURR/REMAC funding barely covers the costs
of administering members' natural gas aggregation
programs. We are convinced that local government
public education institutions are a unique and
important customer, whose views, absent the
participation of SPURR/REMAC, are otherwise absent
from our proceedings. We would support a Legislative
amendment to make it clear that local public
education Joint Powers agencies, like SPURR/REMAC,
are customers able to avail themselves of our
intervenor compensation program.
Prior to this bill, SB 1165 (Wright) from 2012 proposed
amending intervenor compensation eligibility to implement this
recommendation before it died in the Senate Appropriations
Committee. Nonetheless, CPUC records indicate SPURR continues
to participate in proceedings, more than 15 years after the
1998 decision without intervenor compensation. No current
information about REMAC was identified.
The general rate cases (GRC) of large energy utilities' are
conducted every three years. There are currently 130 LEAs in
California (58 county offices of education and 72 community
college districts). Therefore, if all of the LEAs intervened
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in their respective energy utility GRCs, the CPUC could expect
to see an average of 43 LEA compensation requests per year.
This does not include possible participation in
telecommunications or water corporation GRCs or other
proceedings in which LEAS would also be eligible for
compensation. It is likely that most LEAs will have similar
perspectives in the impact that rate changes and rate design
have on their school budgets. If LEAs participate in and
request compensation in all energy, telecommunications and
water GRCs affecting them, they could potentially file more
than 130 compensation requests per year. By comparison, during
2015, intervenors filed 98 requests with the CPUC, and the
CPUC issued 158 compensation decisions.
In order to avoid duplication of testimony and effort, the
author may wish to consider an amendment to allow a consortium
of schools or school agencies to become eligible for
intervenor compensation as opposed to individual campuses.
7)2013 State Auditors Report: In July 2013, the State Auditor
issued a report on an audit it conducted on the intervenor
compensation program. The report found that the despite some
administrative weaknesses, the CPUC had a robust process for
determining intervenor compensation. The report identified
the 10 largest intervenors from 2008 to 2012. TURN accounted
for approximately $12.7 million of the awards claimed,
followed by the Utility Consumers Action Network with
approximately $2.9 million, and Disability Rights Advocates
with approximately $1.3 million.
The author may wish to consider an amendment to ensure
advocates on behalf of school agencies eligible for intervenor
compensation do not have a conflict of interest.
8)Arguments in Support: According to the San Diego Office of
Education, one of the bill sponsors, "The 42 school districts
in San Diego County have seen electricity bills rise 39% over
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just a one-year period. During this same one-year period
(fiscal year 2014 - 15) electricity usage only rose by 6%.
This energy rate shock resulted in nearly $30 million being
diverted from educational programs to pay for additional,
unplanned operational costs. Consequently, school districts
must reduce expenditures in other areas in order to mitigate
the impact, thereby negatively affecting educational programs
and services."
1)Suggested Amendments:
SEC. 2.
Section 1802 of the Public Utilities Code is amended to read:
1802. As used in this article:
(a) "Compensation" means payment for all or part, as
determined by the commission, of reasonable advocate's fees,
reasonable expert witness fees, and other reasonable costs of
preparation for and participation in a proceeding, and
includes the fees and costs of obtaining an award under this
article and of obtaining judicial review, if any.
(b) (1) "Customer" means any of the following:
(A) A participant representing consumers, customers, or
subscribers of any electrical, gas, telephone, telegraph, or
water corporation that is subject to the jurisdiction of the
commission.
(B) A representative who has been authorized by a customer.
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(C) A representative of a group or organization authorized
pursuant to its articles of incorporation or bylaws to
represent the interests of residential customers, or to
represent small commercial customers who receive bundled
electric service from an electrical corporation.
(D) (i) Notwithstanding paragraph (2), a county office of
education or a community college district .
(ii) A county office of education consortium of public school
districts or agencies may participate or intervene pursuant to
this article on behalf of any of the local K-12 educational
agencies in whole or part within the county or on behalf of
itself in commission proceedings relative to gas and
electricity rates .
(2) "Customer" does not include any state, federal, or local
government agency, any publicly owned public utility, or any
entity that, in the commission's opinion, was established or
formed by a local government entity for the purpose of
participating in a commission proceeding.
(c) "Expert witness fees" means recorded or billed costs
incurred by a customer for an expert witness.
(d) "Other reasonable costs" means reasonable out-of-pocket
expenses directly incurred by a customer that are directly
related to the contentions or recommendations made by the
customer that resulted in a substantial contribution.
(e) "Party" means any interested party, respondent public
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utility, or commission staff in a hearing or proceeding.
(1) An entity or individual who represents a consortium of
public school districts or agencies in a commission proceeding
shall not have a direct financial interest in the outcome of
the proceeding from two years prior to the filing of comments
at the commission or two years following the resolution of the
same commission proceeding.
(f) "Proceeding" means an application, complaint, or
investigation, rulemaking, alternative dispute resolution
procedures in lieu of formal proceedings as may be sponsored
or endorsed by the commission, or other formal proceeding
before the commission.
(g) "Significant financial hardship" means either that the
customer cannot afford, without undue hardship, to pay the
costs of effective participation, including advocate's fees,
expert witness fees, and other reasonable costs of
participation, or that, in the case of a group or
organization, the economic interest of the individual members
of the group or organization is small in comparison to the
costs of effective participation in the proceeding.
(h) "Small commercial customer" means any nonresidential
customer with a maximum peak demand of less than 50 kilowatts.
The commission may establish rules to modify or change the
definition of "small commercial customer," including use of
criteria other than a peak demand threshold, if the commission
determines that the modification or change will promote
participation in proceedings at the commission by
organizations representing small businesses, without
incorporating large commercial and industrial customers.
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(i) "Substantial contribution" means that, in the judgment of
the commission, the customer's presentation has substantially
assisted the commission in the making of its order or decision
because the order or decision has adopted in whole or in part
one or more factual contentions, legal contentions, or
specific policy or procedural recommendations presented by the
customer. Where the customer's participation has resulted in a
substantial contribution, even if the decision adopts that
customer's contention or recommendations only in part, the
commission may award the customer compensation for all
reasonable advocate's fees, reasonable expert fees, and other
reasonable costs incurred by the customer in preparing or
presenting that contention or recommendation.
9)Prior Legislation:
SB 1165 (Wright) of 2012: Allowed intervenor compensation to
be awarded for participation or intervention in proceedings at
the CPUC for a county office of education, on behalf of any of
the local educational agencies in whole or part within the
county or on behalf of itself, or for a community college
district. Died in the Senate Appropriations Committee.
REGISTERED SUPPORT / OPPOSITION:
Support
San Diego County Office of Education (Sponsor)
San Diego Schools Coalition for Electricity Cost Reduction
(Sponsor)
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California Association of School Business Officials
Opposition
None on file.
Analysis Prepared by:Darion Johnston / U. & C. / (916) 319-2083