BILL ANALYSIS Ó
SB 48
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Date of Hearing: June 29, 2015
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Anthony Rendon, Chair
SB
48 (Hill) - As Amended May 6, 2015
SENATE VOTE: 39-0
SUBJECT: Public Utilities Commission.
SUMMARY: 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). Specifically, this bill:
1)Declares the intent of the Bagley-Keene Open Meeting Act is
that actions of state agencies be taken openly and that their
deliberations be conducted openly,
2)Repeals certain powers granted to the president of the CPUC,
including the ability to direct the executive director, the
general counsel, and other CPUC staff,
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3)Requires the CPUC to hold no less than six sessions per year
in the City of Sacramento,
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 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,
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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,
10)Provides that actions to enforce the CPUC's process for
handling and determining disclosable public records requests
can be taken to the superior court,
11)Requires the CPUC to publish and maintain public versions of
all prepared written testimony in the docket card,
12)Requires the CPUC to post information online about ways the
public can access the CPUC's ratemaking process, and on the
operation and role of the public advisor, and
13)Requires the CPUC to annually publish and update a
description of outreach activities to solicit input from
customers from diverse regions of the state, report the
effectiveness of this process, and post the report in an
accessible area of its website.
EXISTING LAW:
a)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.
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(Article XII of the California Constitution; Public Utilities
Code Section 301 et seq.)
b)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 Section 305)
c)Requires the CPUC to hold at least one hearing per calendar
month in the City and County of San Francisco. (Public
Utilities Code Section 306)
d)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 Section 307)
e)Requires the president of the CPUC to annually appear before
the appropriate legislative policy committees. (Public
Utilities Code Section 321.6)
f)Exempts the CPUC from the APA. (Public Utilities Code §1701)
g)Specifies CPUC as the first venue for rehearing a decision and
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that if rejected by the CPUC allows the California Supreme
Court to hear appeals of CPUC decisions. (Public Utilities
Code Section 1701.6)
h)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
Section 11120)
FISCAL EFFECT: Unknown.
According to the Senate Appropriations Committee:
a)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.
b)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.
c)Unknown possible legal costs to the Public Utilities
Reimbursement Account (special) to respond to claims under the
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Bagley-Keene Open Meeting Act.
d)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.
COMMENTS:
1)Author's Statement: "Recent scandals at the California Public
Utilities Commission (CPUC) have highlighted the need for more
visibility in the interactions between Commissioners and
regulated utilities, and a series of embarrassing audits of
the CPUC's mismanagement of public funds poor safety oversight
point toward poor management of the organization."
SB 48 would reform the CPUC's governance structure, more
clearly outlining the roles and responsibilities of the
Commissioners and staff, and require the CPUC to reach out to
communities affected by CPUC decisions instead of only
regulated utilities."
2)Background History and Structure of CPUC: The CPUC was
established by a constitutional amendment which was part of a
sweep of progressive reforms starting in the early 1900s. The
Governor at the time, Hiram Johnson, was pushing to limit the
influence that the railroad industry had on politics, leading
to the establishment of the Railroad Commission, which later
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became today's CPUC. To separate the influence of the
railroads from Commission that regulated them, the agency was
located in San Francisco. Article XII of the California
Constitution grants the CPUC authority to regulate public
utilities, "subject to the 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 is governed by five full-time commissioners appointed
by the Governor and confirmed by the Senate. Commissioners
are appointed for staggered six-year terms to limit the
potential that a single Governor appoints a majority of
commissioners within a four-year gubernatorial term. To
additionally balance the power of the Governor, the
Legislature, not the Executive branch, has the power to remove
the commissioners. The CPUC establishes its own procedures
and review of CPUC decisions has historically been limited to
courts of appeal and the Supreme Court, not to trial courts.
The CPUC is 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 4
personal advisors to each commissioner, 5 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.
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The CPUC is subject to the Bagley-Keene Open Meeting Act,
which requires state entities take "action" only at a public
meeting following public posting of an agenda describing the
item for proposed action. Any private gathering 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.
3)Ex Parte Communication Rules: "Ex-parte" communication is any
substantive communication outside of the public record that
occurs between any decision-maker and a party with an interest
in a CPUC proceeding. California law recognizes that ex parte
communications can conflict with the need for transparency and
public decision-making at the CPUC, and directs the CPUC to
adopt regulations and reporting requirements for this type of
secluded communication. The regulations are to require the
interested party report the communication within three working
days of the communication to parties participating in the
proceeding on the topic that was discussed in the
communication. This law does not apply to the CPUC itself, so
the burden of reporting is solely on the interested party.
Though the CPUC is not required to report ex parte
communication, the CPUC has still adopted related regulations.
The regulations prohibit ex parte communications in
adjudicatory proceedings, and allow them without restriction
in quasi-legislative proceedings. The regulations also
explicitly prohibit ex parte communications regarding the
assignment of ALJs to cases.
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4)San Bruno Explosion and Criminal Investigation Opened: 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, thirty-eight houses were destroyed, and
many more were damaged. The National Transportation Safety
Board (NTSB) and an independent review panel appointed by the
CPUC opened investigations and found that PG&E had been
mismanaging their pipeline for decades. PG&E had failed to
adequately test the strength and durability of the pipeline,
and essentially valued profit over the safety of their
infrastructure. PG&E was able to do this because of the
CPUC's complete lack of oversight, exploiting a very lax
system of regulation and review.
Following the investigation, the Safety and Enforcement
Division (SED) of the CPUC formally recommended that the CPUC
levy fines of $2.25 billion against PG&E, and that the full
amount be used to enhance safety practices and oversight.
PG&E protested this recommendation, arguing that they neither
could have nor should have known about the pipeline's safety
issues. 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 propose a
final decision on the matter, which the CPUC would later vote
to adopt, modify, or reject.
5)Emails Reveal Relationship between CPUC and PG&E: Beginning
in the summer and fall of 2014, PG&E began releasing emails
between utility executives and CPUC officials. PG&E released
over 65,000 emails from a five-year period, revealing
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discussions on subjects the CPUC was deliberating within a
number of proceedings, many of which arguably violated "CPUC's
rules governing ex parte communications." Many of the emails
exposed regular, private, familiar communications between PG&E
and certain CPUC commissioners, including former CPUC
President Michael Peevey, current Commissioner Mike Florio,
and other senior CPUC officials.
The release of these emails sparked the California State
Attorney General and United States Department of Justice to
open investigations into communications between the CPUC and
the entities it regulates. PG&E fired three senior
executives, a senior CPUC official resigned, CPUC President
Michal Peevey and Executive Director Paul Clanon retired.
6)Audits demonstrate CPUC's internal deficiencies: The CPUC has
recently undergone a number of audits related to its budget,
transportation program, natural gas pipeline safety program,
among other internal functions. The findings of these audits
have raised questions about the CPUC's ability to manage even
some of its core functions. An audit by the State Auditor in
March of 2014 found that "the commission lacks adequate
process for sufficient oversight of utility balancing accounts
to protect ratepayers from unfair rate increases."
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A recent report<1> commissioned by the CPUC found that ex
parte communications are "frequent, pervasive, and at least
sometimes outcome-determinative in CPUC ratesetting cases. In
general, these practices have the unavoidable effect of moving
actual governmental decision-making out of the public eye.
And we found that these practices are fundamentally unfair to
the parties, who are not adequately informed by opposing
parties' disclosures of what was said ex parte and are
sometimes prevented from having ex parte meetings of their own
by their adversaries scheduling their meetings at the
last-minute. "
The same report goes on to say: "The evidence also supports
the claim that present ex parte practices systematically favor
the interests of utilities and other well-funded parties."
7)Addressing the problem: accountability, CPUC, and the
Legislature: Legislation proposed over the years aimed at
improving accountability at the CPUC. 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 the CPUC's
decisions.
--------------------------
<1>
Report to the California Public Utilities Commission Regarding
Ex Parte Communications and Related Practices, , M. Strumwasser
and B. Grossman Palmer, Strumwasser and Woocher LLP, June 11,
2015
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In 1999, the State passed SB 33 (Peace, Chapter 509, Statutes
of 1999) which attempted to address a perceived lack of
accountability among commissioners and centralized power by
increasing the president's authority. Prior to SB 33, the
president was elected by commissioners, and commissioners also
appointed the attorney and executive director who served at
the direction of the CPUC. SB 33 reorganized the leadership,
putting the executive director and general counsel directly
under the control of the president. The bill additionally
authorized the governor to appoint the president of the CPUC,
further decreasing the ability of the CPUC to hold the
president and the position accountable.
A number of bills have since attempted to limit the power of
the CPUC president, but none of those bills were chaptered.
Most recently, SB 611 (Hill) in 2013 proposed several reforms
of the CPUC presidency, yet was amended and chaptered with
unrelated language.
8)Comments on SB 48: APA Code of Ethics: Most state agencies
follow the Administrative Procedures Act for rulemakings and
enforcement proceedings. However, because the CPUC is exempt
from the APA, it follows its own rules and procedures. SB 48
proposes to apply the APA Code of Ethics to adjudication
proceedings of the CPUC to align its process with other state
agencies. This will provide ALJs with an established code of
ethics to reference and use when engaging with CPUC officials.
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Appeals: Appeals of CPUC decisions are addressed by the CPUC
itself (the CPUC determines whether to reopen its decision and
consider revisions to its decision or reject the appeal).
Following a rejection of a request for a rehearing before the
CPUC, the petitioner is entitled to seek relief before
California Supreme Court. The Court review is restricted from
receiving new evidence and the court is limited in the scope
of its determining on whether to reverse a CPUC decision.
Most CPUC decisions are upheld. SB 48 proposes to allow any
action related to the Bagley-Keene Open Meetings Act of the
California Public Records Act to be petitioned at a superior
court, where there is greater opportunity to have a case
heard.
Impacted Stakeholders: The CPUC has historically been
criticized for excluding and misidentifying interested parties
and not facilitating their participation. SB 48 proposes a
requirement that the CPUC actively seek out the input of those
impacted most by a proposed proceeding or investigation at the
agency. This provision in SB 48 will encourage the CPUC to
engage with communities that their processes and decisions
inevitably affect.
9)Related Legislation:
AB 1494 (Eng) revised the "serial meeting" provision of the
Bagley-Keene Open Meeting Act to prohibit members of a state
body from using intermediaries to discuss business. The bill
was in response to an appellate decision (Wolfe v. City of
Fremont (2006) 144 Cal. App. 4th 533) that opined that
existing law only prohibited serial meetings if they were to
gain concurrence on a voting item. Chaptered by the Secretary
of State - Chapter 150, Statutes of 2009.
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SB 1234 (Shelley) stated legislative intent to reject a
California Supreme Court decision (Regents of University of
California v. Superior Court (1999) 20 Cal. 4th 509) in which
the Court held that the only remedy under the Bagley-Keene Act
for an action taken in violation of that Act is to bring a
lawsuit to nullify the action within 30 days. Chaptered by
the Secretary of State - Chapter 393, Statutes of 1999.
SB 779 (Calderon) called the Calderon-Peace-McBride Judicial
Reform Act of 1998, included transparency provisions and
expanded judicial review of CPUC decisions by allowing
decisions to be reviewed by not only the Supreme Court but
also the courts of appeal, and by allowing them to review
decisions made in ratesetting and quasi-legislative
proceedings. Chaptered by the Secretary of State - Chapter
886, Statutes of 1998.
SB 33 (Peace) centralized the functioning of the CPUC under
its president by putting the CPUC's executive director and
general counsel directly under the control of the president.
It also made the president more directly accountable to the
Governor by allowing the Governor to appoint the president.
Chaptered by the Secretary of State - Chapter 509, Statutes of
1999.
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SB 532 (Kopp) revised procedures for administrative procedures
by, among other things, requiring that all state adjudicative
proceedings adhere to an "administrative adjudication bill of
rights," which would promote greater due process, fairness,
accessibility, objectivity, and consistency in adjudicative
proceedings. This bill exempted the CPUC from its
requirements. Chaptered by the Secretary of State - Chapter
938, Statutes of 1995.
SB 960 (Leonard) among other things, prescribed separate
procedures for proceedings that the CPUC determines to be
quasi-legislative, adjudicative, or ratesetting cases,
including ex parte rules. Chaptered by the Secretary of State
- Chapter 856, Statutes of 1996.
AB 1157 (Ruskin, 2007) provided that the president of the CPUC
be elected by the members of the CPUC, rather than be
appointed by the Governor. Held in Assembly Committee on
Appropriations.
AB 1973 (Ruskin, 2008) required Senate confirmation of the
Governor-appointed president of the CPUC, and had the
executive director and attorney take direction from the CPUC
rather than the president. Failed in the Assembly, on
Concurrence.
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10)Support and Opposition:
Supporters argue SB 48 addressees long-needed reforms and will
assist the CPUC in carrying out its mission to serve the
public interest and hold the CPUC more accountable at a time
when it is being scrutinized for its secrecy and coziness with
the companies it is supposed to regulate.
There is no opposition on file.
REGISTERED SUPPORT / OPPOSITION:
Support
California Newspaper Publishers Association
Communication Workers of America
The Utility Reform Network
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Opposition
None on file.
Analysis Prepared by:Allegra Roth / U. & C. / (916)
319-2083