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 commissionand subject to a 30-day reviewno sooner than 30 days after the contract or other agreement is submitted tobythe Joint Legislative Budget Committee for reviewbefore 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