BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 48|
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THIRD READING
Bill No: SB 48
Author: Hill (D)
Amended: 5/6/15
Vote: 21
SENATE ENERGY, U. & C. COMMITTEE: 9-0, 4/27/15
AYES: Hueso, Fuller, Cannella, Hertzberg, Hill, Leyva,
McGuire, Morrell, Wolk
NO VOTE RECORDED: Lara, Pavley
SENATE APPROPRIATIONS COMMITTEE: 7-0, 5/28/15
AYES: Lara, Bates, Beall, Hill, Leyva, Mendoza, Nielsen
SUBJECT: Public Utilities Commission
SOURCE: Author
DIGEST: This bill proposes a suite of reforms of the governance
and operations of the California Public Utilities Commission
(CPUC), including, among others, modifying the powers of the
president, requiring sessions in Sacramento, applying the Code
of Ethics from the Administrative Procedures Act (APA) to
administrative law judges (ALJs).
ANALYSIS:
Existing law:
1) Establishes the CPUC with five members appointed by the
Governor and confirmed by the Senate and empowers it to
regulate privately-owned public utilities in California.
Specifies that the Legislature may prescribe that additional
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classes of private corporations or other persons are public
utilities. (Article XII of the California Constitution;
Public Utilities Code §301 et seq.)
2) Requires the Governor to designate one of the
commissioners as president who is granted with certain
authority not provided to the other four commissioners.
These powers include the ability to direct the executive
director, the general counsel and staff, as well as, preside
over all CPUC meetings, and other powers. (Public Utilities
Code §305)
3) Requires the CPUC to hold at least one hearing per
calendar month in the City and County of San Francisco.
(Public Utilities Code §306)
4) Authorizes the CPUC to appoint a general counsel to
represent the CPUC in all actions, to commence, prosecute or
intervene in proceedings as directed by the president, and
to advise the CPUC and each commissioner on all matters.
(Public Utilities Code §307)
5) Requires the president of the CPUC to annually appear
before the appropriate legislative policy committees.
(Public Utilities Code §321.6)
6) Exempts the CPUC from the APA. (Public Utilities Code
§1701)
7) Provides that the California Supreme Court and the court
of appeal of the CPUC shall be the venues to address appeals
of CPUC decisions. (Public Utilities Code §1701.6)
8) Establishes rules for state agencies to ensure meetings
are open, public and available to all, as noted in the
Bagley-Keene Open Meeting Act. Restricts a majority of
members of a state governing body from meeting without
proper notice, public access, and transparency. (Government
Code §11120)
This bill:
1) Repeals certain powers granted to the president of the
CPUC, including the ability to direct the executive
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director, the general counsel, and other CPUC staff.
2) Requires the CPUC to hold no less than six sessions per
year in the City of Sacramento.
3) Finds it is the intent of the Legislature that the CPUC
should be subject to the judicial review provisions of the
Bagley-Keene Open Meeting Act, including those noted in
Government Code §11130 et seq, which provide for the ability
of the Attorney General and other parties to take legal
action against a governing body who violates the
Bagley-Keene Open Meeting Act.
4) Directs the CPUC to modify their annual workplan report, a
document that is published and provided to the Legislature
by February 1st, to include performance criteria for both
the CPUC and executive director, and annually evaluate the
executive director based on the performance criteria.
5) Requires the CPUC to create a report regarding the cases
before the agency, including timeliness in resolving the
cases, approvals for rehearings, number of scoping memos
issued in each proceeding, number of orders issued, and
other items.
6) Requires the president of the CPUC to report on the
timeliness in resolving cases during the annual appearance
before the appropriate legislative policy committees.
7) Requires the ALJs to adhere to ethics provisions of the
APA for adjudicated proceedings.
8) Requires the CPUC to seek the views of those who are
likely affected by a decision or proceeding, except
adjudicated proceedings, and requires the CPUC to
demonstrate their efforts to engage these residents within
the text of the order.
9) Provides that actions to enforce the requirements of the
Bagley-Keene Open Meeting Act or the California Public
Records Act can be taken to the superior court.
Background
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CPUC in 2015. The CPUC is governed by five full-time
commissioners, appointed by the Governor and confirmed by the
Senate, and staffed by approximately 1,000 individuals who,
together, regulate privately-owned electric, natural gas,
telecommunications, water, railroad, rail transit, and passenger
transportation companies. CPUC staff includes four personal
advisors to each commissioner, except five to the president, as
well as the 42 judges of the Administrative Law Division -
attorneys, engineers, and accountants who prepare the docket for
all CPUC official filings, including maintenance of the official
record of proceedings.
Fatal explosion in San Bruno. On September 9, 2010, a natural
gas pipeline owned by Pacific Gas and Electric Company (PG&E)
exploded in a residential neighborhood in the City of San Bruno.
Eight people died, dozens were injured, 38 houses were
destroyed and many more were damaged. The investigations by the
National Transportation Safety Board (NTSB) and an independent
review panel appointed by the CPUC found that PG&E mismanaged
their pipeline over decades, failed to adequately test the
strength of the pipeline and, more generally, valued profits
over safety. These same investigations also noted the CPUC's
inadequate oversight of PG&E.
Following the investigation, in May of 2013, the Safety and
Enforcement Division (SED) of the CPUC formally recommended the
CPUC to levy fines of $2.25 billion against PG&E, the full
amount of which to be used to enhance safety. PG&E protested,
contending they neither could have nor should have known the gas
pipeline was installed incorrectly and that SED based the amount
of the recommended penalty on "the deeply flawed analysis of one
consultant." The CPUC referred the SED's proposed penalty
against PG&E to the Administrative Law Division for assignment
to an ALJ. The ALJ was to review the recommendation and,
eventually, propose a final decision on the matter, including
how any fines would be allocated among PG&E's shareholders and
ratepayers. Eventually, the five commissioners of the CPUC would
vote on whether to adopt, modify, or reject the ALJ's proposed
decision.
On April 9, 2015, the CPUC approved a decision of $1.6 billion
against PG&E for the San Bruno explosion, specifically a $300
million fine to the General Fund, $850 million assessed on
shareholders for gas pipeline safety improvements, $400 million
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disallowance/bill credit, and an estimated $50 million for
additional remedies for pipeline safety.
Emails demonstrate "Culture of Conversation." During the summer
and fall of 2014, PG&E, bowing to legal pressure from the City
of San Bruno, began to release a growing number of emails
between the utility and CPUC officials. PG&E released 65,000
emails from over a five-year period many of which PG&E says it
believes "violated CPUC rules governing ex parte
communications." The initial release of emails revealed efforts
by PG&E executives to influence the CPUC's assignment of ALJ to
a ratemaking proceeding stemming from the San Bruno explosion.
Many of the other emails exposed regular, private, familiar
communications between PG&E and certain CPUC commissioners,
including former CPUC President Michael Peevey and current
Commissioner Mike Florio, as well as senior CPUC officials.
Criminal investigations opened. Since PG&E's initial release of
the emails, both the state Attorney General and the United
States Department of Justice have opened investigations into
communications between the CPUC and regulated entities. PG&E
has fired three senior executives. A senior CPUC official has
resigned, while other top CPUC officials - including longtime
CPUC President Michael Peevey and Executive Director Paul
Clannon - have retired under pressure. Attorneys in CPUC's
legal division requested CPUC commissioner's direct staff on how
to properly cooperate with ongoing law enforcement
investigations and to ensure CPUC staff preserves evidence
relative to the investigations. Investigators working with the
Attorney General's Office have raided the CPUC offices and the
homes of former CPUC Commissioner President Peevey and PG&E
former-Vice President Brian Cherry. In early February, only
after a newspaper published details of the search warrant,
Southern California Edison disclosed a meeting that occurred two
years prior in Warsaw, Poland between then-CPUC President Peevey
and a utility executive in which they discussed how to resolve
the shutdown plans for San Onofre Nuclear Generating Station.
Interim Executive Director Timothy Sullivan, who described the
emails as "shocking to the organization," is considering
personnel action against CPUC employees. Newly appointed CPUC
President Michael Picker acknowledged the communications have
damaged the public's trust in the regulatory agency and that
changes are needed.
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Audits reveal CPUC's efforts are lacking. In recent years, the
CPUC has undergone a number of audits related to its budget,
transportation program, natural gas pipeline safety program and
others. The findings of these audits have raised concerns about
the ability of CPUC to manage even some of its core functions.
A March 2014 audit by the State Auditor found that "the
commission lacks adequate processes for sufficient oversight of
utility balancing accounts to protect ratepayers from unfair
rate increases." The NTSB San Bruno investigation report and
subsequent audits found that CPUC's oversight of natural gas
pipeline safety efforts by the utilities needs improvements.
The CPUC quasi-independent, but still accountable to the
Legislature. The CPUC was established by constitutional
amendment as part of the sweep of progressive reforms in the
early 1900s. Then-Governor Hiram Johnson pushed for reforms of
the Railroad Commission, which became today's CPUC, as a largely
independent agency that would guard against the corrupting
influence of railroads. In demonstration of its independence,
the CPUC was located in San Francisco, a distance from the state
capitol in Sacramento. Article XII of the California
Constitution grants the CPUC authority to regulate public
utilities "subject to control of the Legislature" and grants the
Legislature "plenary power" to confer authority and jurisdiction
upon the CPUC, with the intent that the CPUC be accountable to
the Legislature.
The CPUC has historically been afforded much independence.
Commissioners are appointed for staggered six-year terms to
limit the potential for a single Governor to appoint a majority
of commissioners within a four-year gubernatorial term. The
Legislature, not the Governor, may remove a commissioner. The
CPUC has been given broad latitude to set its own procedures,
and any review of CPUC decisions has historically been limited
to courts of appeal and the Supreme Court, not trial courts.
Reporting to the Legislature. Current law requires the CPUC to
publish an annual workplan by February 1st and for the president
of the CPUC to appear annually before the relevant legislative
policy committees. SB 48 proposes several amendments to ensure
the CPUC's annual report more accurately reflects the agency's
progress related to timeliness of proceedings and the need to
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ensure the work of the agency is evaluated based on establishing
annual goals and performance criteria. This bill also requires
an annual performance evaluation of the executive director by
the CPUC based on the established workplan.
Changing role of president. Legislation proposed over the
years, and some enacted, has been aimed at improving CPUC
accountability. Concurrent with the 1996 electric
restructuring, a series of procedural reforms were enacted to
improve the accountability of individual commissioners by
requiring each commissioner to spend more time in hearings and
to take "ownership" of draft decisions.
SB 33 (Peace, Chapter 509, Statutes of 1999) attempted to
address a perceived lack of accountability by commissioners by
centralizing more authority with the president. Prior to that
time, the CPUC president was elected by commissioners. The
commissioners, prior to SB 33, also appointed the attorney and
executive director, who performed at the direction of the CPUC.
SB 33 put the executive director and general counsel directly
under the control of the president and authorized the Governor
to appoint the president.
Since then, a series of bills have sought to limit the power of
the CPUC President, but none of those bills were chaptered. The
most recent effort was a bill introduced in 2013, SB 611 (Hill)
which proposed several reforms of the CPUC, including limiting
the role of the president. The bill was subsequently amended and
chaptered with unrelated language.
Public meeting required. The CPUC is subject to the
Bagley-Keene Open Meetings Act, which requires a state body to
take "action" (collective decision or an actual vote) only at a
public meeting following the public posting of an agenda
describing the item for proposed action at least 10 days prior
to the meeting. Any private congregation of a majority of the
members of a state body at the same time and place to hear,
discuss, or deliberate upon any item that is within its
jurisdiction is unlawful. Violations of the Act can result in
members of the state body facing misdemeanor penalties and
action taken rendered invalid, with attorney's fees awarded to
prevailing plaintiffs.
Code of ethics. Most state agencies follow the APA rules and
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requirements for rulemakings and enforcement proceedings.
However, as a quasi-independent agency, the CPUC is exempt from
the APA and instead follows its own rules and procedures. SB 48
proposes to apply the APA Code of Ethics to adjudication
proceedings of the CPUC to align with other state agencies.
Appeals. A party wishing to appeal a decision of the CPUC can
appeal to the CPUC's own court or the California Supreme Court.
This unique limitation to CPUC processes means most decisions of
the agency stand as it is unlikely the Supreme Court will wish
to hear many of these cases. SB 48 proposes to allow any action
related to the Bagley-Keene Open Meetings Act or the California
Public Records Act to be petitioned at a superior court, where
there is greater opportunity to have a case heard.
Affected stakeholders. SB 48 proposes a requirement on the CPUC
to affirmatively seek out the views and input of those impacted
most by a proposed proceeding or investigation. One of the many
criticisms of the CPUC is the challenges of identifying who may
be interested and facilitating their participation as a party in
a proceeding. CPUC processes are legalistic and archaic and can
be off-putting to the average resident who wants to participate.
However, the CPUC should be encouraged to make every feasible
effort to connect with those most affected by their decisions,
whether it is a community affected by increased water rates or
low-income residents who can benefit from public purpose
programs.
Prior/Related Legislation
SB 215 (Leno, 2015) proposed a suite of reforms of the CPUC
related to governance and operations, including disqualification
of commissioners to proceedings, modifying the role of the
president, and other reforms. Many of the provisions of this
bill were amended into SB 660. The bill is currently in the
Senate Energy, Utilities and Communications Committee.
SB 660 (Leno and Hueso, 2015) proposes reforms of the ex parte
communications laws related to ratesetting and quasi-legislative
proceedings, aligns the language related to the powers of the
president so that both SB 660 and SB 48 have the exact same
language, addresses the process for disqualifying a commissioner
from a proceeding, and other reforms of the CPUC. The bill
passed the Senate Appropriations Committee on a vote of 5-2.
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SB 611 (Hill, as amended April 13, 2013) proposed some of the
same changes suggested in SB 48, including repealing some of the
powers of the president. The bill was successfully voted out of
Senate Committee on Energy, Utilities and Communications. It
was subsequently amended numerous times, and ultimately
chaptered into law with unrelated language regarding modified
limousines.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
According to the Senate Appropriations Committee:
Ongoing annual costs in the tens of thousands of dollars and
possibly into the low thousands to the Public Utilities
Reimbursement Account (special) to have at least six meetings
in Sacramento instead of San Francisco.
One-time costs of $160,000 annually for two years followed by
estimated annual costs of $360,000 to the Public Utilities
Reimbursement Account (special) to seek views of interested
persons.
Unknown possible legal costs to the Public Utilities
Reimbursement Account (special) to respond to claims under the
Bagley-Keene Open Meeting Act.
Minor and absorbable costs to the Public Utilities
Reimbursement Account (special) for additional meetings in
order for the CPUC to direct the executive director, attorney,
and staff.
SUPPORT: (Verified5/29/15)
California Newspaper Publishers Association
Communications Workers of America, District 9 AFL-CIO
Sierra Club California
The Utility Reform Network
OPPOSITION: (Verified5/29/15)
Six individuals
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ARGUMENTS IN SUPPORT: The author argues that the current
governance structure, whereby the president of the CPUC is able
to direct the CPUC staff, is not working. The author cites a
string of incidents, including some involving management of
ratepayer money, management staff leadership failures, and
recent scandals, as evidence that the current system is broken.
The author also argues that the CPUC has a large workload that
necessitates a president that will share responsibilities with
other commissioners to ensure the effectiveness of the agency.
Furthermore, the author commends the leadership of the CPUC for
taking some positive steps in recent months. However, he
cautions these changes should not be temporary. Therefore,
permanent changes are needed of the agency.
ARGUMENTS IN OPPOSITION:The opponents expressed concerns that
the current powers of the president should be preserved. They
argue that not having a strong president will result in the ALJ
having dominance in decision-making.
Prepared by:Nidia Bautista / E., U., & C. / (916) 651-4107
5/31/15 11:40:28
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