BILL ANALYSIS Ó
SB 18
Page 1
Date of Hearing: July 8, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
SB 18
(Hill) - As Amended May 21, 2015
-----------------------------------------------------------------
|Policy |Utilities and Commerce |Vote:|13 - 0 |
|Committee: | | | |
| | | | |
| | | | |
|-------------+-------------------------------+-----+-------------|
| | | | |
| | | | |
| | | | |
|-------------+-------------------------------+-----+-------------|
| | | | |
| | | | |
| | | | |
-----------------------------------------------------------------
Urgency: No State Mandated Local Program: NoReimbursable: No
SUMMARY:
This bill requires the Public Utilities Commission (PUC) to
approve any contract for specified outside legal counsel by a
vote of the Commission and subjects the contract to a review by
the Joint Legislative Budget Committee. Specifically, prior to
SB 18
Page 2
entering the contract, this bill:
1) Requires any contract or other agreement for services by
outside legal counsel to represent the PUC in a criminal
investigation initiated by any federal, state, or local agency
to be approved by a vote of the Commission.
2)Requires the Joint Legislative Budget Committee, as part of a
30-day review, to consider all of the following:
a) The funds that the PUC will use to pay for these
services;
b) Whether the PUC has followed all of the laws and
procedures applicable to contracting for legal services;
and
c) Whether, and to what degree, existing programs and
operations of the PUC will be affected.
FISCAL EFFECT:
Minor, absorbable costs, if any.
COMMENTS:
1)Rationale. According to the author, the PUC recently hired
criminal defense attorneys for $5.2 million from funds
authorized by the Legislature for information technology,
strategic planning, and employee training. By diverting
SB 18
Page 3
funds, the PUC bypassed the legislative process and
potentially compromised its ability to fulfill statutory and
Constitutional responsibilities.
To prevent future similar actions, this bill subjects such a
contract to a vote of the commissioners, and an expedited
review by the Legislature.
2)Background. In September 2015, the California Attorney
General's office (AG) opened an independent investigation on
the PUC over issues relating to the 2010 San Bruno pipeline
explosion and the selection of an administrative law judge for
a rate setting case. The AG is investigating whether PUC
officials were influenced by PG&E to select a more favorable
judge to hear a rate setting case involving the 2010 San Bruno
explosion in which the utility sought to pay for $1.3 billion
in pipeline improvements with ratepayer funds.
In October 2014, the PUC requested the AG's office represent
it in the AG's investigation. The AG's office declined the
request based on potential conflicts of interest.
In November 2014, the PUC signed a $49,000 contract with the
law firm of Sheppard Mullin to represent it in the AG's
investigation. The contract was subsequently amended to
increase the contract to $5.2 million in March 2015. Due to
the ongoing criminal investigations on PUC officials and their
relationships with regulated utility officials relating to the
San Bruno explosion, there have been questions on whether or
not it is appropriate for the PUC to use ratepayer funds to
pay for its outside legal counsel defense.
SB 18
Page 4
3)JLBC Review Process. Typically, the JLBC reviews
budget-related changes under a defined time period. If the
JLBC does not comment on the proposed action, the
Administration (usually the Department of Finance) is moves
forward. When the JLBC raises issues or objects to the
proposed action, the Administration usually attempts to
address concerns if possible, and does not move forward.
Since a large number of reviews are performed when the
Legislature is not in session, responses are made by the
Chair, after reviewing the recommendation of the LAO and
conferring with majority and minority fiscal staff from both
houses.
4) Suggested Amendments. To ensure appropriate legislative
review, the author may wish to consider the following
amendments.
a) Any contract or other agreement by the commission for
services by outside legal counsel to represent the
commission in a criminal investigation initiated by any
federal, state, or local agency shall be approved by a vote
of the commission and subject to a 30-day review no sooner
than 30 days after the contract or other agreement is
submitted to by the Joint Legislative Budget Committee for
review before the agreement is entered into .
b) (b) The Joint Legislative Budget Committee, as part of
its review, shall consider all of the following:
SB 18
Page 5
b) Any contract or other agreement submitted to the Joint
Legislative Budget Committee for review and submitted to
the Commission for vote pursuant to this section must
include the following:
(1) The funds that the commission will use to pay for these
services.
(2) Whether the commission has followed all of the laws and
procedures applicable to contracting for legal services.
(3) Whether, and to what degree, existing programs and
operations of the commission will be affected.
Analysis Prepared by:Jennifer Galehouse / APPR. / (916)
319-2081