BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 215|
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UNFINISHED BUSINESS
Bill No: SB 215
Author: Leno (D) and Hueso (D)
Amended: 8/18/16
Vote: 21
SENATE ENERGY, U. & C. COMMITTEE: 10-0, 1/13/16
AYES: Hueso, Fuller, Cannella, Hertzberg, Hill, Lara, McGuire,
Morrell, Pavley, Wolk
NO VOTE RECORDED: Leyva
SENATE APPROPRIATIONS COMMITTEE: 7-0, 1/21/16
AYES: Lara, Bates, Beall, Hill, Leyva, Mendoza, Nielsen
SENATE FLOOR: 37-0, 1/26/16
AYES: Allen, Anderson, Beall, Berryhill, Block, Cannella, De
León, Fuller, Gaines, Galgiani, Glazer, Hall, Hancock,
Hernandez, Hertzberg, Hill, Hueso, Huff, Jackson, Lara, Leno,
Leyva, McGuire, Mendoza, Mitchell, Monning, Moorlach, Morrell,
Nguyen, Nielsen, Pan, Pavley, Roth, Runner, Stone, Vidak,
Wieckowski
NO VOTE RECORDED: Bates, Liu, Wolk
ASSEMBLY FLOOR: 79-0, 8/22/16 - See last page for vote
SUBJECT: Public Utilities Commission
SOURCE: The Utility Reform Network
DIGEST: This bill proposes a suite of reforms of the rules,
operations and procedures of the California Public Utilities
Commission (CPUC) pertaining to the laws and rules related to ex
parte communications and criteria and process for
disqualification of commissioners to a proceeding
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Assembly Amendments remove the prohibition of ex parte
communications in ratesetting proceedings and clarify the
disclosure requirements on interested persons and decision
makers for ex parte communications; and make numerous technical
changes to the bill.
ANALYSIS:
Existing law:
1)Establishes the CPUC with five members appointed by the
Governor and confirmed by the Senate and empowers the CPUC to
regulate privately owned public utilities in California.
(Article XII of the California Constitution; Public Utilities
Code §301 et seq.)
2)Requires the CPUC to adopt procedures on the disqualification
of administrative law judges (ALJs) due to bias or prejudice.
(Public Utilities Code §309.6)
3)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 et seq.)
4)Directs the CPUC to adopt rules, by regulation, to define
decisionmakers and persons of interest for purposes of
applying rules regarding ex parte communication. (Public
Utilities Code §1701.1)
5)Provides that a proceeding is subject to request for rehearing
within 10 days of the date of a decision and if not appealed,
shall not be subject to judicial review. (Public Utilities
Code §1701.1)
6)Prohibits ex parte communication in adjudication cases.
(Public Utilities Code §1701.2)
7)Prohibits ex parte communication in ratesetting cases, but
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permits oral ex parte communication if (a) all parties are
invited with no less than three days' notice (b) written ex
parte communication, provided copies are transmitted to all
parties, and (c) when an ex parte meeting is granted to a
party, all other parties are also granted individual ex parte
communication. (Public Utilities Code §1701.3)
8)Provides that ex parte communication in quasi-legislative
cases is permitted without restriction. (Public Utilities
Code §1701.4)
This bill:
1)Reforms and expands rules regarding ex parte communications in
proceedings and requires the CPUC.
2)Requires the CPUC to adopt procedures on the disqualification
of commissioners due to bias or prejudice similar to those for
ALJs and specifies criteria for such action in ratesetting and
adjudicatory proceedings.
3)Requires the CPUC to define decisionmaker for the purposes of
ex parte communication rules to include commissioners, the
personal staff of a commissioner who are acting in a policy or
legal advisory capacity, the chief ALJ, and the ALJ assigned
to the proceeding.
4)Requires the CPUC to establish rules regarding the types of
issues considered procedural matters and specifies that
communication between an interested person and decisionmaker
regarding which commissioner or ALJ may be assigned to a
matter is not considered a procedural matter.
5)Requires the CPUC to establish rules for reporting ex parte
communications, including ex parte communications that may be
prohibited, and applies the rules governing ex parte
communications in adjudication and ratesetting cases to
communications that occur at conferences.
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6)Requires the CPUC to render its decisions based on the
evidence of the record and prohibits ex parte communication
from being part of the record of the proceedings.
7)Provides that the CPUC commissioners may meet in a closed
session to discuss administrative matters so long as no
collective consensus is reached or vote taken on any matter
requiring a vote of the commissioners and requires the CPUC to
adopt rules to define administrative matters.
8)Provides for penalties for violations of ex parte
communication rules, including allowing the CPUC to impose a
civil penalty where financial benefits exceed the maximum of
the $50,000 limit per violation.
9)Authorizes the Attorney General to bring an enforcement action
in the superior court against a decisionmaker or employee of
the CPUC who violates the ex parte communication rules.
Background
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. 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.
Emails demonstrate "Culture of Conversation". During the summer
and fall of 2014, Pacific Gas and Electric Company (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 that 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 the ALJ to the San Bruno 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 Michael
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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. 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.
San Onofre Nuclear Generating Stations (SONGS). In early
February 2015, only after a newspaper published details of the
search warrant which mentioned a previously undisclosed meeting
between Southern California Edison (SCE) executive and then-CPUC
President Peevey, SCE disclosed a meeting that occurred two
years prior in Warsaw, Poland between then-CPUC President Peevey
and a utility executive in which they discussed how to resolve
the shutdown plans for SONGS. The facility had a failed steam
generator that required SONGS to be permanently retired. In
November 2014, the CPUC approved a settlement agreement between
utilities and ratepayer advocates that split the costs of
retiring the facility and the associated replacement power, with
ratepayers shouldering $3.3 billion of the $4.7 billion total
costs. In light of the information about the meeting in Poland,
some of the parties to the settlement agreement have rescinded
their support. In December 2015, the CPUC voted 4-0 to fine SCE
$16.7 million for violations of ex parte communications rules
regarding the SONGS closure proceeding.
Ex parte communications. Substantive communication 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. Statute recognizes that ex parte
communications can conflict with the need for public decision at
the CPUC. The current law directs the CPUC to adopt regulations
requiring reporting of ex parte communications. Statute does
not require a CPUC decisionmaker to report ex parte
communication with an interested party. Statute directs CPUC to
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identify each of its proceedings according to one of three
categories - adjudicatory, quasi-legislative, and ratesetting -
and provides ex parte rules applicable to each type of
proceeding. The types of proceedings and the statutory ex parte
rules applicable to each are:
Adjudication cases - enforcement cases and complaints,
except those challenging the reasonableness of rates or
charges. Statute expressly prohibits ex parte
communication related to an adjudicatory proceeding.
Quasi-legislative cases - those that establish policy,
including, but not limited to, rulemakings and
investigations which may establish rules affecting an
entire industry. Statute expressly allows for ex parte
communication without restriction in these types of
proceedings.
Ratesetting cases - cases in which rates are established
for a specific company. Statute lacks clarity as it
expressly prohibits ex parte communication related to
ratesetting cases, yet, provides circumstances in which ex
parte communication is permitted and establishes procedures
for reporting and managing such communication.
Party of One. The CPUC's laws and rules governing ex parte
communication are unique among other state agencies, and also
among similar agencies across the nation. Many of the experts
who presented at the March 11, 2015 oversight hearing of the
Senate Committee on Energy, Utilities and Communications on ex
parte communication noted that rules governing ex parte
communications in ratesetting proceedings may be the most
permissive as compared to other agencies, such as the Federal
Energy Regulatory Commission and other states' ratesetting
agencies. California law is less clear in ratesetting
proceedings, a major function of the CPUC, both stating that ex
parte communication is prohibited, while allowing for a number
of exceptions. Many of the presenters at the March 11, 2015
hearing advocated for doing away with ex parte communication in
ratesetting proceedings because of the lack of fairness, the
un-level playing field, and the time and resources that are
required of commissioners and others. A report released June
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2015, authored by Michael Strumwasser and requested by the CPUC,
reviewed ex parte communication practices at the CPUC and also
recommended prohibiting ex parte communication in ratesetting
proceedings and requiring disclosure in quasi-legislative
proceedings. However, some interested parties have expressed
concerns that doing away with ex parte communications may
further challenge interests with a less prominent issue in a
ratesetting proceeding to have their concerns heard. This bill
requires disclosure of ex parte communications in ratesetting
proceedings, including a description of the interested person's
communications and contents. Unlike current practice, the bill
also requires decisionmakers to promptly disclose these ex parte
communications. The bill strengthens enforcement of violations
of ex parte communications rules and prohibits communications
regarding procedural issues with any decisionmaker, except the
ALJ in an adjudicatory proceeding.
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 - CPUC 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."
Related/Prior Legislation
AB 825 (Rendon, 2015) proposed a suite of reforms of the CPUC to
make the agency more accessible and transparent to the public.
The bill was vetoed by the Governor.
AB 1023 (Rendon, 2015) proposed to codify the summary log
requirements currently required at the CPUC for ratesetting
proceedings and extend those requirements to quasi-legislative
proceedings. The bill was vetoed by the Governor.
SB 48 (Hill, 2015) proposed a suite of reforms of the governance
and operations of the CPUC, including some of the same reforms
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in SB 611 (Hill, 2013). The bill was vetoed by the Governor.
SB 512 (Hill, 2015) proposes a suite of reforms of the
operations and governance of the CPUC, including requiring the
CPUC to hold no less than six sessions per year in Sacramento,
expanding the information required of the CPUC in its annual
report and workplan to the Legislature and Governor, requiring
specific information on its Web site, applying the Code of
Ethics from the Administrative Procedures Act to ALJs, and
others. The bill is currently under consideration by the
Assembly Floor.
SB 660 (Leno and Hueso, 2015) proposed many of the same reforms
included in SB 215 of the ex parte communications laws related
to ratesetting and quasi-legislative proceedings, addresses the
process for disqualifying a commissioner from a proceeding, and
other reforms of the CPUC. The bill was vetoed by the Governor.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: Yes
According to the Assembly Appropriations Committee, increased
CPUC costs in the range of $250,000 to $600,000 (Public
Utilities Reimbursement Account).
SUPPORT: (Verified8/22/16)
The Utility Reform Network (source)
California Environmental Justice Alliance
California Large Energy Consumers Association
Center for Accessible Technology
Communications Workers of America, District 9
Consumer Federation of California
Goodin, MacBride, Squeri & Day LLP
Greenling Institute
Mussey Grade Road Alliance
Non-Utility Stakeholders Group
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San Diego Area Congregations for Change
Sierra Club California
OPPOSITION: (Verified8/22/16)
None received
ARGUMENTS IN SUPPORT: The authors state that decision-making
based on the public record is central to the work of the CPUC
whose decisions are addressed in proceedings more akin to a
judicial process in a courtroom setting and unlike other state
agencies or bodies. The recent release of 65,000 emails has
demonstrated a cozy relationship between some of the
commissioners and staff at the CPUC and the regulated utilities.
These exchanges have severely undermined the public's trust in
the agency. While in some cases the rules may have been broken,
it is also evident that the problems at the CPUC are more
systemic than solely a personality or an individual. There is a
need to strengthen and clarify rules governing ex parte
communication to preserve the public trust and prevent future
scandals.
This bill seeks to remedy three specific problems: "(1)
unreasonable process and unduly restrictive standards for
determining whether a commissioner should be disqualified due to
prejudice, (2) unreasonably permissive rules governing ex parte
communications, and (3) commissioners and staff who violate ex
parte communication rules are adjudicated by the CPUC itself
rather than by an independent judiciary."
ASSEMBLY FLOOR: 79-0, 8/22/16
AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker,
Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke,
Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley,
Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth
Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto,
Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper,
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Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim,
Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis,
Mayes, McCarty, Medina, Mullin, Nazarian, Obernolte,
O'Donnell, Olsen, Patterson, Quirk, Ridley-Thomas, Rodriguez,
Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting,
Wagner, Waldron, Weber, Wilk, Williams, Wood, Rendon
NO VOTE RECORDED: Melendez
Prepared by:Nidia Bautista / E., U., & C. / (916) 651-4107
8/23/16 10:09:11
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