BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session SB 215 (Leno) - Public Utilities Commission ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: January 4, 2016 |Policy Vote: E., U., & C. 10 | | | - 0 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: Yes | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: January 19, 2016 |Consultant: Marie Liu | | | | ----------------------------------------------------------------- This bill meets the criteria for referral to the Suspense File. Bill Summary: SB 215 would make numerous changes to the governance of the California Public Utilities Commission (CPUC), particularly in regards to ex parte communication. Fiscal Impact: Up to $558,000 annually for the first four-years and potentially up to $373,000 thereafter from the Public Utilities Reimbursement Account (special) for creation and implementation of rules to disqualify commissions or administrative law judges (ALJs) on the appearance of bias. Up to $708,000 annually from the Public Utilities Reimbursement Account (special) to create and implement new ex parte communication rules. Ongoing costs of $375,000 from the Public Utilities SB 215 (Leno) Page 1 of ? Reimbursement Account (special) for two additional ALJs for longer proceedings as a result of including oral and written comments received at a hearing in the record of proceedings. Minor and absorbable costs from the Public Utilities Reimbursement Account (special) for CPUC to elect to hold all-party conferences for a proceeding. Background: The CPUC is governed by five members appointed by the Governor and approved by the Senate Rules Committee. The CPUC is generally empowered to regulate privately owned public utilities in California. Policies and actions of the CPUC are generally made through a proceeding. Each proceeding is assigned a lead commissioner and an administrative law judge (ALJ). ALJs prepare proposed decisions which may be adopted in whole or in part by the commission. Substantive communications outside of the public record that occurs between a decisionmaker and a party with an interest in a CPUC proceeding are known as "ex parte" communications. As these communications can conflict with the need for public decision making, the CPUC is required under the existing law to have regulations that require the reporting of ex parte communications within three working days of the communication having occurred. These regulations require specific information about the communication including the form which it occurred, the identity of the recipient and the person initiating the communication and the names of any other parties present, as well as a description of the communication. The requirement to report ex parte communication falls with the interested party, not the CPUC decisionmaker. The CPUC has three types of proceedings, which is its regulator and decision making process, each of which have different existing ex parte communication rules. 1.Adjudication Cases: Ex parte communications are prohibited. 2.Ratesetting Cases: Ex parte communications are prohibited except under specified conditions. Oral ex parte SB 215 (Leno) Page 2 of ? communications are allowed with a commissioner if all interested parties are invited and given at least three days' notice. Written ex parte communications are permitted if copies are transmitted to all parties on the same day. If an individual ex parte communication meeting is granted to any party, all other parties shall also be granted individual meetings of similar duration. 3.Quasi-legislative Cases: Ex parte communications are allowed without restriction. Proposed Law: This bill would make a number of changes to the CPUC's governance, especially in regards to ex parte communication. Specifically, this bill would: Require the CPUC to adopt procedures on the disqualification of commissioners and would further specify the reasons for which a commissioner or ALJ can be disqualified in ratesetting and adjudicatory proceedings. Prohibit ex parte communications in ratesetting proceedings, with some exceptions and limitations. Expand the parties and the types of communications that subject to the ex parte communication rules. Extends the requirements for the disclosure of prohibited ex parte communications to the decisionmaker in addition to the interested party. Allow the CPUC to assess civil penalties for violations of ex parte communication requirements. Allow the Attorney General (AG) to bring enforcement action against a decisionmaker or CPUC employee who violates ex parte communication requirements. Allow for the holding of an all-party conference, as defined, that have broad participation by parties to a proceeding. SB 215 (Leno) Page 3 of ? Require that CPUC to establish and maintain a communications log summarizing al written and oral ex parte communications. This log must be available to the public on the CPUC's website by July 1, 2017. Related Legislation: SB 660 (Leno) would have made many of the same changes as proposed by this bill, among other provisions. The governor vetoed SB 660 citing technical and conflicting issues among the bills that proposed governance changes at the CPUC. Staff Comments: Disqualification provisions: This bill would require that a commissioner or ALJ be disqualified if there is an appearance of bias or prejudice. The CPUC anticipates initial annual costs of $558,000 for one ALJ and two legal counsel positions for four years to develop and implement disqualification procedures. The ALJ would be needed ongoing to make judgments on disqualification motions. The legal counsel positions would be needed to advise and handle increased litigation risks. After four years, the CPUC estimates that only one of these legal positions will be needed after legal precedent is established, bringing the annual costs down to $373,000. Staff notes a similar provision in SB 660 had lower one-time and ongoing costs. However, the CPUC notes the additional costs are largely the result of a lower standard for disqualification in this bill compared to SB 660 as this bill would allow disqualification on the appearance of bias. Because of this lower standard and because disqualification motions can be made multiple times throughout a proceeding and by multiple parties, the CPUC has increased its anticipated ongoing costs under the assumption that there will be a large increase in the number of disqualification motions that will need to be addressed. Staff notes that while an increase in ongoing costs appears to be justified, the actual increase is speculative. Ex parte provisions generally: This bill will label a greater number of communications as ex parte communications by expanding SB 215 (Leno) Page 4 of ? the definition of decisionmaker and by including informal discussions. The CPUC would have greater responsibilities for tracking allowable ex parte communications and reporting prohibited communications. While the tracking requirements under this bill are not detailed, the CPUC believes the sheer number of communications that will need recorded and tracked will necessitate ongoing annual costs of $708,000 (1 ALJ II, 1 legal counsel III, 2 legal analysts, 1 senior legal analyst). Staff notes that these costs are higher than the costs associated with similar provisions in SB 660. It is unclear what assumptions have changed since last year. Staff notes that this bill would also eliminate most ex parte communications in ratesetting cases, which currently involve thousands of communication disclosures under existing laws. However, since the current rules places the responsibility of disclosing these communications with the interested party instead of the decisionmaker, the CPUC does not anticipate that eliminating these communications will result in any significant workload reduction. Potential additional legal costs: The CPUC notes that the bill's provisions allowing the AG to bring enforcement action against a decisionmaker or CPUC employee for violations of ex parte communication requirements could result in legal costs as the CPUC would be required to either defend its employees or to pay for their litigation costs. Inclusion of hearing comments into the record of proceedings: This bill would require the CPUC to include oral and written comments received from the public at a hearing to be included in the record of proceedings and to allow parties to respond to these comments. According to the CPUC, these provisions are likely to extend the length of all proceedings and increase the amount of ALJ workload per proceeding, which will necessitate two additional ALJs at an annual cost of $375,000. These provisions and associated costs were not part of SB 660. SB 215 (Leno) Page 5 of ? -- END --