BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                      SB 18  


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          Date of Hearing:  July 8, 2015


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                                 Jimmy Gomez, Chair


          SB 18  
          (Hill) - As Amended May 21, 2015


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          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  








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          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  








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            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. 










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          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:
           









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              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