BILL ANALYSIS Ó
SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS
Senator Ben Hueso, Chair
2015 - 2016 Regular
Bill No: AB 2168 Hearing Date: 6/21/2016
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|Author: |Williams |
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|Version: |6/14/2016 As Amended |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Nidia Bautista |
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SUBJECT: Public Utilities Commission Audit Compliance Act of
2016
DIGEST: This bill requires the California Public Utilities
Commission (CPUC) to periodically review balancing accounts of
utilities based on a risk-based approach to ensure transactions
are for allowable purposes. This bill also deletes the
requirement that the reports of the inspections and audits of
utilities be furnished to the State Board of Equalization (BOE).
ANALYSIS:
Existing law:
1)Requires the CPUC to inspect and audit the books and records,
for regulatory or tax purposes, of every electrical, gas heat,
telegraph, telephone, and water corporation serving over 1,000
customers at least once every three years and provide the
inspections and audits to the BOE for the its use in the
assessment of public utilities. (Public Utilities Code
§314.5)
2)Requires the CPUC to review the balancing accounts, not less
than semiannually, of electrical corporations to ensure timely
recovery of prospective procurement costs incurred pursuant to
an approved procurement plan. Until January 1, 2006, the CPUC
shall ensure that any over-collection or under-collection in
AB 2168 (Williams) Page 2 of ?
the power procurement balancing account does not exceed five
percent of the electrical corporation's actual recorded
generation revenues for the prior calendar year excluding
revenues collected for the Department of Water Resources.
Requires the CPUC to determine the schedule for amortizing the
over-collection or under-collection in the balancing account
to ensure that the five percent threshold is not exceeded.
After January 1, 2006, this adjustment shall occur when deemed
appropriate. (Public Utilities Code §454.5(d)((3))
3)Requires the CPUC, whenever authorizing a change in rates
reflecting costs that are passed through to customers, to
require public utilities to maintain balancing accounts that
reflect the costs and revenues, whether negative or positive,
and that the CPUC take into account any adjustment any
positive or negative balance remaining in the balancing
account at the time of a subsequent rate adjustment. (Public
Utilities Code §792.5)
4)Requires the CPUC to periodically audit, or direct that an
independent audit be periodically conducted for, all
significant transactions, as specified by the CPUC, between a
water corporation with more than 2,000 service connections, or
an electrical, gas, or telephone corporation, and every
subsidiary or affiliate of, or corporation holding a
controlling interest in, that water, electrical, gas, or
telephone corporation. The CPUC, in this connection, may
utilize the services of an independent auditor, who shall be
selected and supervised by the CPUC, or may direct a water
corporation with more than 2,000 service connections, or an
electrical, gas, or telephone corporation, to utilize the
services of an independent auditor, who shall be selected and
supervised by that water, electrical, gas, or telephone
corporation. (Public Utilities Code §797)
5)Establishes an Office of Ratepayer Advocates (ORA) to
represent and advocate on behalf of public utility customers
AB 2168 (Williams) Page 3 of ?
with a goal to obtain the lowest possible rate for service
consistent with reliable and safe service levels with a
primary focus on residential and small commercial customers.
(Public Utilities Code §309.5)
This bill:
1)Establishes the Public Utilities Commission Audit Compliance
Act of 2016 and states the Legislature finds and declares the
need to amend statute related to the CPUC in order to
institute the legislative recommendations of the State
Auditor.
2)Requires the CPUC to post reports of the inspections and
audits and other pertinent information on its Internet Web
site.
3)Renames the reserve accounts to balancing accounts of a public
utility.
4)Requires the CPUC to develop a risk-based approach for
reviewing all balancing accounts periodically to ensure that
the transactions recorded in the balancing accounts are for
allowable purposes and supported by documentation.
5)Requires the CPUC to maintain an inventory of the balancing
accounts.
6)Requires the CPUC to require the utility to record all related
costs and revenues in the balancing account.
7)Requires the CPUC to adopt balancing account review procedures
that prioritize the review of balancing accounts meeting
specified criteria.
8)Authorizes the CPUC to forgo the review of a balancing account
if the ORA or an independent auditor plans to review or audit
the balancing account.
Background
Balancing account. A balancing account is a tracking mechanism
used to ensure that a utility recoups from ratepayers costs the
CPUC has authorized and that ratepayers do not pay more than
they should. If a balancing account has a balance - indicating
an over- or under-collection from ratepayers - the utility will
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generally seek periodically to adjust future rates to either
refund or recoup the balance. The CPUC has authorized over 300
balancing accounts, which vary by utility on activities such as
low-income energy efficiency, renewables, enhanced oil recovery,
pension expenses, water revenue adjustment and many others.
State Auditor issues report. In March 2014, the State Auditor
issued a report (2013-109) which concluded that the CPUC lacks
adequate processes to provide sufficient oversight of utility
balancing accounts to protect ratepayers from unfair rate
increases. State law requires the CPUC to review semiannually
certain balancing accounts. However, the Auditor discovered
that the CPUC only reviews some balancing accounts when a
utility requests to incorporate the balance in that account into
future rates as a surcharge or a credit. The Auditor noted the
need to develop more systemic process to review the balancing
accounts.
Risk-based approach. The State Auditor's report included
several recommendations including a recommendation to the
Legislature to amend Public Utilities Code §792.5 to require the
CPUC to develop a risk-based approach for reviewing all
balancing accounts periodically to ensure that the transactions
recorded in the balancing accounts are for allowable purposes
and are supported by appropriate documentation, such as
invoices. The report also included a series of recommendations
to the CPUC in order to provide appropriate oversight of
balancing accounts and better protect the interests of
ratepayers. This bill attempts to incorporate the State
Auditor's recommendations. Utilizing a risk-based approach that
prioritizes review of balancing accounts that may be more at
risk of inappropriate transactions is not full-proof. However,
the proposed schedule and prioritization seems appropriate. In
order to ensure the CPUC follows through with the approach, the
author and committee may wish to amend this bill to require the
CPUC to provide an annual update on the status of reviewing
balancing accounts within its annual report to the Legislature.
Prior/Related Legislation
AB 825 (Rendon, 2015) would have deleted the requirement that
the reports of the inspections and audit of utilities by the
CPUC is furnished to the BOE for use in the assessment of
utilities. The bill was vetoed by the Governor.
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FISCAL EFFECT: Appropriation: No Fiscal
Com.: Yes Local: No
SUPPORT:
California Public Utilities Commission (Source)
OPPOSITION:
None received
ARGUMENTS IN SUPPORT: The author contends that the statutory
change will protect ratepayers by ensuring that the transactions
recorded in balancing accounts are for allowable purposes and
are supported by appropriate documentation, such as invoices.
The author further states, AB 2168 is an outgrowth of the State
Auditor's audit of the CPUC monitoring of utility-related
balancing accounts.
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