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 ----------------------------------------------------------------- |Author: |Hill | |-----------+-----------------------------------------------------| |Version: |8/30/2016 As Amended | ----------------------------------------------------------------- ------------------------------------------------------------------ |Urgency: |No |Fiscal: |Yes | ------------------------------------------------------------------ ----------------------------------------------------------------- |Consultant:|Nidia Bautista | | | | ----------------------------------------------------------------- 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 SB 62 (Hill) Page 2 of ? 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. SB 62 (Hill) Page 3 of ? 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. SB 62 (Hill) Page 4 of ? 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 SB 62 (Hill) Page 5 of ? 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." SB 62 (Hill) Page 6 of ? -- END --