BILL ANALYSIS Ó
SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS
Senator Ben Hueso, Chair
2015 - 2016 Regular
Bill No: SB 215 Hearing Date: 4/21/2015
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|Author: |Leno |
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|Version: |4/15/2015 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
DIGEST: This bill proposes a suite of reforms related to the
governance and operations of the California Public Utilities
Commission (CPUC), specifically modifying powers of the
president of the commission, directing the agency to establish
rules for disqualification of commissioners in proceedings,
expanding the definition of decisionmakers, and other reforms.
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 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 commission meetings, and other powers.
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(Public Utilities Code §305)
3. 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)
4. Requires the CPUC to determine the nature of a
proceeding, specifically whether it is quasi-legislative,
ratesetting, or adjudicatory and establishes definitions
and rules related to each. (Public Utilities Code §1701.1)
5. Directs the CPUC to adopt by regulation rules to define
decisionmakers and persons for purposes of applying ex
parte communication rules. (Public Utilities Code §1701.1)
This bill:
1. Modifies the role and powers of the president of the
CPUC, including repealing the authority of the president to
direct the executive director, the attorney and other CPUC
staff.
2. Establishes that committees of two or more commissioners
shall meet regularly with staff for purposes of management
and internal oversight functions and exempts these meetings
from the requirements of the Bagley-Keene Open Meeting Act.
3. Requires the CPUC to adopt procedures for
disqualification of commissioners due to bias or prejudice
similar to those of other state agencies and based on
specified criteria for ratesetting and adjudicatory
proceedings.
4. Requires rules governing ex parte communication for
those with financial interest to include persons involved
in issuing a credit ratings or advising entities or persons
who may invest in the shares or operations of a party to a
proceeding.
5. Expands the definition of decisionmaker for the purposes
of ex parte communications rules to include the agency
general counsel, the executive director, the director of
Energy Division, the director of the Communications
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Division, the director of the Water Division and the
director of the Safety and Enforcement Division.
6. Requires those defined as decisionmakers to report
communications between themselves and a person with an
interest who is not a party to the proceeding.
7. Prohibits any ex parte communication from being included
in the record of a proceeding or from being relied upon for
contested issues.
8. Prohibits communications with decisionmakers on
procedural issues, except with the assigned administrative
law judge.
Background
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 the 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
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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 administrative law judge (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.
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 San Bruno-related proceeding. 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 a year 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
(SONGS).
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Recently appointed 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.
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 the utilities'
natural gas pipeline safety efforts 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 CPUC courts of appeal and the Supreme Court, not trial
courts.
Changing Role of President . Legislation proposed over the years,
and some enacted, has been aimed at improving CPUC
accountability. Concurrent with the 1996 electric
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restructuring, a series of procedural reforms were enacted to
improve the accountability of individual commissioners by
requiring commissioners 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
commission. 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.
Disqualification of Commissioners . The law directs the CPUC to
establish rules to address incidents when an ALJ may be
disqualified from a proceeding. However, no similar mention is
made of addressing concerns of bias by commissioners. In recent
times, any motions to recuse a commissioner from a proceeding
due to a party's claim that there is undue bias have been
denied. After the release of the PG&E emails, the City of San
Bruno motioned for a recusal of then President Peevey. That
motion was denied. The ALJ at the time stated that "No specific
rule sets forth a procedure for addressing motions to seek the
recusal of a Commissioner for cause."
Open and Public Meetings . The Bagley-Keene Open Meeting Act
governs state bodies to ensure meetings are open and available
to all interested persons to participate, including provisions
for proper notice, etc. A 2006 Appellate Court decision (Wolfe
v. City of Fremont) held that a member of a governing body who
went to a majority of members of the governing body did not
violate the serial meetings provisions, unless the communication
resulted in a decision of the board. By default this decision
was widely seen as allowing previously prohibited serial
meetings from occurring. In response, the state passed
legislation in 2009, AB 1494 (Eng, Chapter 150, Statutes of
2009), to close this perceived loophole. The CPUC has
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implemented those changes in the Bagley-Keene law by restricting
communication between a majority of commissioners and their
personal advisors.
Comments
Powers of the President. This bill proposes to remove many of
the changes instituted under SB 33 which sought to centralize
the power of the CPUC president, with a significant exception
for maintaining the provisions requiring the governor to appoint
the president. There are many models of governance across state
agencies with some agencies. Some agencies have presidents or
chairs of boards with many more powers than their colleagues on
the board or commission, while others share authority fairly
evenly. Under the SB 33 changes, the CPUC structure became more
similar to that of the California Energy Commission. However, as
the release of emails have demonstrated, the lines between
overseeing the agency and a president injecting oneself in the
operations of agency have become rather blurred in recent years.
For an agency with such a large workload on a wide range of
topics, it is imperative that the five-member governing board of
the CPUC share responsibilities among each other in a matter
that empowers each, but also provides for clarity as to their
role vs. that of the staff.
Like a Salmon, Swimming Upstream. The vast majority of the
proposed reforms of the CPUC in this bill, and related bills in
committee, are seeking to clarify and strengthen rules governing
the agency's operations. However, one proposed amendment in SB
215 seeks to make amendments of the Bagley Keene Open Meetings
Act requirements as it relates to CPUC commissioners meeting in
subcommittees to address management and operational issues.
Specifically, SB 215 will permit a majority of commissioners to
serve together on subcommittees of the commission and be exempt
from the requirements of the Open Meeting Act. AB 1494
prohibits meetings of a majority of a governing body without
proper public notice, prepared agendas, acceptance of public
testimony and requires the meetings in public unless
specifically authorized by the Act to meet in closed session.
Some current and former commissioners have noted that since the
application of the changes from AB 1494, CPUC commissioners have
been further isolated from one another, making it more difficult
to effectively oversee the operations of the agency.
Disqualification of Commissioners . While the law provides that
the CPUC establish regulations regarding the disqualification of
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administrative law judges due to bias or prejudice for a
proceeding, there is no such requirements in the statute related
to presiding commissioners. Instead, the CPUC has a practice,
based on past decisions, of allowing a commissioner to vote on
the decision whether to they should be recused from the
proceeding. The Utility Reform Network (TURN) has experienced
some situations in which its efforts to disqualify a
commissioner for a proceeding where TURN believes there is bias
or prejudice have been thwarted. They suggest that the practice
at the CPUC whereby there must be "clear and convincing"
evidence that the commissioner has an "unalterable closed mind
on the matters critical to the disposition of the proceeding" is
much too high of a threshold.
SB 215 proposes to direct the CPUC to establish rules related to
the disqualification of commissioners. These rules are to
include prohibiting a commissioner or ALJ from ruling on a
motion regarding their own bias and utilizing specific criteria,
including private communications to influence the request for
relief sought by a party and actions taken during the
proceeding. The bill explicitly prohibits past work experience
to be sufficient basis for demonstrating bias.
The author and committee may wish to consider amendments that
will further refine the proposed criteria, including language
that requires the following to be inserted: "at a minimum" after
"based on" and before "any of the following" in Section 5, line
23.
Procedural Matters . SB 215 directs parties to address procedural
issues with the ALJ exclusively in order to avoid opportunities
where ex parte communication might occur by a party contacting a
decisionmaker regarding procedural issue.
In an effort to eliminate any conflicts with related legislation
in committee, the author and committee may wish to amend SB 215
by:
Delete language in Section 6 (B) regarding the
definition of decisionmakers and decisionmakers
responsibility to report communications with a person with
an interest.
Prior/Related Legislation
SB 48 (Hill) proposes a suite of reforms of the CPUC, including
modifying the role of the president, ex parte communication
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rules, meeting location requirements, and other reforms.
SB 660 (Hueso) proposes reforms of the CPUC ex parte
communications laws related to ratesetting and quasi-legislative
proceedings.
AB 1494 (Eng, Chapter 150, Statutes of 2009) amends to the
Bagley-Keene Open Meeting Act to prohibit a majority of the
members of a state body from using a series of communications of
any kind to discuss or deliberate on an item of business before
the body.
FISCAL EFFECT: Appropriation: No Fiscal
Com.: Yes Local: Yes
SUPPORT:
California Environmental Justice Alliance
Center for Accessible Technology
Communications Workers of America, District 9 AFL-CIO
Consumer Federation of California
Mussey Grade Road Alliance
Privacy Rights Clearinghouse
San Diego Area Congregations for Change
Sierra Club California
The Greenlining Institute
The Utility Reform Network (Sponsor)
CONCERN:
California Cable & Telecommunications Association
OPPOSITION:
African Methodist Episcopal Churches (5,000)
Asian Journal
COR Community Development Corporation
Chinese American Institute for Empowerment
Christ Our Redeemer AME Church
Ecumenical Center for Black Church Studies
Jesse Miranda Center for Hispanic Leadership
Los Angeles Latino Chamber of Commerce
National Asian American Coalition
National Diversity Coalition
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OASIS Center International
Orange County Interdenominational
West Bay Pilipino Multi-Service Center
ARGUMENTS IN SUPPORT: The author argues this bill will
provide needed reforms of operations of the CPUC, which recent
events and controversies indicate are needed. Furthermore, the
author states that the there is an insufficient role for CPUC
commissioners other than the president to direct management of
the commission and an unreasonable process with unduly
restrictive standards for determining whether a commissioner
should be disqualified due to prejudice.
ARGUMENTS IN OPPOSITION: A coalition of organizations has
expressed opposition to the proposed limitations on the power of
the president. They argue that a strong president is necessary
to ensure the agency staff are not dominating the process at the
CPUC. The same organizations raise concerns about the need for
additional reforms to help the average person or small
organization better engage at the CPUC where the processes can
be very legalistic and alienating.
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