BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS
                              Senator Ben Hueso, Chair
                                2015 - 2016  Regular 

          Bill No:          SB 62             Hearing Date:    8/31/2016 
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          |Author:    |Hill                                                 |
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          |Version:   |8/30/2016    As Amended                              |
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          |Urgency:   |No                     |Fiscal:      |Yes             |
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          |Consultant:|Nidia Bautista                                       |
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          SUBJECT: Public Utilities Commission:  Office of the Safety  
          Advocate

            DIGEST:    This bill codifies the Office of Safety Advocate  
          within the California Public Utilities Commission (CPUC), until  
          January 1, 2020, to advocate for the continuous, cost-effective  
          improvement of the safety management and safety performance of  
          public utilities.

          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.   
            (Article XII of the California Constitution; Public Utilities  
            Code §301 et seq.)

          2)Establishes an Office of Ratepayer Advocates (ORA) to  
            represent and advocate on behalf of public utility customers  
            with a goal to obtain the lowest possible rate for service  
            consistent with reliable and safe service levels with a  
            primary focus on residential and small commercial customers.   
            (Public Utilities Code §309.5)

          3)Establishes a division of the CPUC responsible for consumer  
            protection and safety with responsibility for inspections,  
            surveillance, and investigation of the rights-of-way,  
            facilities, equipment, and operations of railroads and public  
            mass transit guideways, and for enforcing state and federal  







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            laws, regulations, orders, and directives relating to  
            transportation of persons or commodities, or both, of any  
            nature or description by rail.  (Public Utilities Code §  
            309.7)

          4)Specifies the CPUC may supervise and regulate every public  
            utility in the state and may do all things, whether  
            specifically designated in this part or in addition thereto,  
            which are necessary and convenient in the exercise of such  
            power and jurisdiction.  (Public Utilities Code § 701)

          5)Requires the CPUC to develop formal procedures to consider  
            safety in a rate case application by an electrical corporation  
            or gas corporation. The procedures shall include a means by  
            which safety information acquired by the CPUC through  
            monitoring, data tracking and analysis, accident  
            investigations, and audits of an applicant's safety programs  
            may inform the CPUC's consideration of the application.   
            (Public Utilities Code §750)

          6) Specifies that whenever the CPUC finds that the rules,  
            practices, equipment, appliances, facilities, or service of  
            any public utility, or the methods of manufacture,  
            distribution, transmission, storage, or supply employed by it,  
            are unjust, unreasonable, unsafe, improper, inadequate, or  
            insufficient, the CPUC shall determine, and, by order or rule,  
            fix the rules, practices, equipment, appliances, facilities,  
            service, or methods to be observed, furnished, constructed,  
            enforced, or employed.  (Public Utilities Code §761)

          This bill:

            1)  Establishes the Office of Safety Advocate within the CPUC  
              to advocate for the continuous, cost-effective improvement  
              of the safety management and safety performance of public  
              utilities.  Requires the office to do all the following:

              a)    Advocate, as a party to CPUC proceedings and on behalf  
                of the interests of public utility customers, effective  
                public utility safety management and infrastructure  
                improvements. 

              b)    Recommend improvements to the CPUC's safety management  
                policy and procedures and its safety culture.









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              c)    Inform the official record on safety-related risks in  
                applicable CPUC proceedings and assist the CPUC in its  
                efforts to hold public utilities accountable for their  
                safe operation.

            2)  Require the Office of Safety Advocate to provide, by  
              January 10 of each year, the chairpersons of the appropriate  
              fiscal and policy committees of each house of the  
              Legislature all of the following information:

              a)    The actions taken by the office to recommend  
                improvements of the CPUC's safety management policy and  
                procedures and its safety culture related to oversight of  
                utilities. 

              b)    The actions taken by the office to recommend  
                improvements to public utility safety management policy  
                and procedures and safety culture.

              c)    The proceedings in which the office participated and a  
                brief description of the testimony filed. 

          3)Requires that this section remain in effect only until January  
            1, 2020, and is repealed, unless a statute deletes or extends  
            that date.

          Background

          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.   

          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.  








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          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. 
           
           Office of Ratepayer Advocates (ORA).  Within the CPUC is an  
          independent ORA to represent and advocate on behalf of the  
          interests of public utility customers and subscribers within the  
          jurisdiction of the CPUC.  ORA's goal is to obtain the lowest  
          possible rate for service consistent with reliable and safe  
          service levels.  For revenue allocation and rate design matters,  
          the office primarily considers the interests of residential and  
          small commercial customers.  ORA has a staff of 147 staff,  
          consisting of engineers, economists, scientists, and auditors  
          with expertise in regulatory issues related to the electricity,  
          natural gas, water, and communications industries in California.  
           ORA's staff performs in-depth review and analyses of regulatory  
          policy issues and utility proposals, for funding that totals in  
          the tens of billions of dollars, in order to determine whether  
          utility requests are in the interest of the ratepayers who fund  
          utility activities through their utility bills. In 2015, ORA  
          participated in 192 CPUC proceedings. 

          CPUC budget proposal.  For the 2016-17 Fiscal Year, the CPUC  
          requested and the State Budget authorized 11 permanent positions  
          and $1.694 million in funding to create a Division of Safety  
          Advocates, an independent division within the CPUC. The CPUC  
          requested establishing a Division of Safety Advocates in  
          response to, according to the CPUC, "unprecedented failures of  
          utility infrastructure over the past five years that threaten  
          the safety of Californians."  According to the CPUC, "Creation  
          of a Division of Safety Advocates would allow the CPUC to have a  
          division dedicated to establishing a safety focus, testifying in  
          hearings, and exclusively prioritizing and advocating for the  
          protection and safety of Californians as a party to CPUC  
          proceedings."


          Why is a bill needed? In 2014, SB 900 (Hill) was signed into law  
          and requires the CPUC to consider safety in electrical and gas  
          general rate cases. However, the CPUC has struggled to ensure  
          safety is a prominent consideration within a general rate case.  
          In fact, CPUC President Picker has stated to the Legislature his  
          interest to establish an independent office that is focused on  
          advocating for safety issues within CPUC general rate-making  
          proceedings stating there are shortcomings to the existing  








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          universe of participants. The CPUC has responsibility for safety  
          of utilities and has a division dedicated to safety - the Safety  
          and Enforcement Division (SED). However, the CPUC notes that the  
          SED is focused on enforcement of existing regulations and rules  
          and has limited capacity to participate in the rate-making  
          process. On the other hand, ORA is very active within rate cases  
          and guides its advocacy with the "goal is to obtain the lowest  
          possible rate for service consistent with reliable and safe  
          service levels." As such, it is appropriate that this bill  
          includes a sunset on the proposed Office of Safety Advocates to  
          ensure it is providing the anticipated added value to the  
          rate-making process. 


          Prior/Related Legislation
          
          SB 900 (Hill, Chapter 552, Statutes of 2014) required the CPUC  
          to consider safety in electrical and gas general rate cases.
          


          FISCAL EFFECT:                 Appropriation:  No    Fiscal  
          Com.:             Yes          Local:          No


            SUPPORT:  

          None received

          OPPOSITION:

          None received

          ARGUMENTS IN SUPPORT:    According to the author: "SB 62 fixes  
          problems with the CPUC's proposal for an in-house advocate for  
          safety.  As the funding for the proposal was approved in this  
          year's Budget, the Legislature must provide statutory policy  
          direction to: 1) ensure that the CPUC cannot shift  
          responsibility for safety onto this advocate, as responsibility  
          lies ultimately with the CPUC, to 2) advocate for the  
          transparency of safety-related performance, and to 3) sunset the  
          advocate, so that it can't limp on in perpetuity without action  
          by the Legislature."










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