BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 512| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: SB 512 Author: Hill (D) Amended: 1/4/16 Vote: 21 PRIOR VOTES NOT RELEVANT 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 SUBJECT: Public Utilities Commission SOURCE: Author DIGEST: This bill proposes a suite of reforms of the operations and governance of the California Public Utilities Commission (CPUC), including requiring the CPUC to hold no less than six sessions per year in Sacramento, expand the information required of the CPUC in its annual report and workplan to the Legislature and Governor, require specific information on its website, apply the Code of Ethics from the Administrative Procedures Act (APA) to administrative law judges (ALJs), and others. ANALYSIS: SB 512 Page 2 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)Requires the office of the CPUC to be located in the City and County of San Francisco. Requires the CPUC to hold at least one session per calendar month in the City and County of San Francisco. (Public Utilities Code §306) 3)Requires the CPUC to publish and maintain on its website specified information, including a docket card that lists all documents filed and all decisions or rulings issued in those proceedings, as provided. (Public Utilities Code §311.5) 4)Requires the CPUC to develop, publish and annually update an annual workplan report that describes the scheduled ratemaking proceedings and other decisions that may be considered during the calendar year, along with other specified information to be included in the workplan report. (Public Utilities §910) 5)Requires the CPUC to annually submit a report to the Legislature on the number of cases where resolution exceeded the time periods prescribed in scoping memos and days that commissioners presided in hearings. (Public Utilities Code §910.1) 6)Exempts the CPUC from the APA. (Public Utilities Code §1701) This bill: 1)Requires the CPUC to hold its sessions at least one in each calendar month in either the City and County of San Francisco or the City of Sacramento, with no less than six sessions in Sacramento each year. 2)Requires the CPUC to include in the required docket card all public versions of all prepared written testimony and advice letter filings, protests, and responses. 3)Requires the CPUC to make additional information available on SB 512 Page 3 the internet, including operation of the office of public advisor and information on how members of the public and ratepayers can gain access to CPUC ratemaking process. 4)Reorganizes, clarifies and expands on the requirement for the CPUC to publish an annual workplan report to the Legislature and Governor. Specifically, this bill expands the report and workplan to require the CPUC to establish performance criteria for the CPUC and the executive director and an annual evaluation of the performance of the executive director. 5)Expands the information required in the CPUC's annual report to the Legislature to include information on the timeliness in resolving cases, information on the disposition of applications for rehearings, the number of scoping memos issued in each proceeding, and the number of orders issued extending the statutory deadlines. 6)Requires the CPUC to seek the view of those who are likely to be affected by a proceeding prior to instituting a proceeding, except in adjudication cases. 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. 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 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 exposed regular, private, familiar communications between PG&E and certain CPUC commissioners. SB 512 Page 4 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. 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 natural gas pipeline safety efforts by the utilities 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. Reporting to the Legislature. Current law requires the CPUC to publish an annual workplan by February 1st and for the president of the CPUC to appear annually before the relevant legislative policy committees. SB 512 proposes several amendments to ensure the CPUC's annual report more accurately reflects the agency's progress related to timeliness of proceedings and the need to ensure the work of the agency is evaluated based on establishing SB 512 Page 5 annual goals and performance criteria. A more public "Public Utilities Commission". The often legalistic processes at the CPUC can present a daunting challenge for a resident to engage directly in proceedings. SB 512 attempts to improve the agency's efforts on public engagement by requiring specified information on the website and requiring the agency to seek out those who are likely affected by potential proceedings and actions. This bill requires all public versions of documents related to proceedings are included in the docket card, which lists all documents for a given proceeding. This bill also requires an annual performance evaluation of the executive director by the CPUC based on the established workplan. As well as information about how members of the public can gain access to ratemaking proceedings. Code of ethics. Most state agencies follow the APA rules and requirements for rulemakings and enforcement proceedings. However, as a quasi-independent agency, the CPUC is exempt from the APA and instead follows its own rules and procedures. SB 512 proposes to apply the APA Code of Ethics to adjudication proceedings of the CPUC to align with other state agencies. It's unclear the exact benefit of this change. However, considering the largely universal use of the APA by agencies across the state and the country, a move to align the CPUC towards more commonly used practices and procedure is likely an improvement. Prior/Related 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 extends 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 in SB 661 (Hill, 2015). The bill was vetoed by the Governor. SB 215 (Leno and Hueso, 2016) proposes a suite of reforms of the SB 512 Page 6 CPUC related to governance and operations, including disqualification of commissioners to proceedings, reforming the rules governing ex parte communications, and other reforms. The bill is currently being considered by the Senate Floor. SB 660 (Leno and Hueso, 2015) proposed reforms 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. SB 611 (Hill, as amended April 13, 2013) proposed reforms of the CPUC, including repealing some of the powers of the president. The bill was successfully voted out of Senate Committee on Energy, Utilities and Communications. It was subsequently amended numerous times, and ultimately chaptered into law with unrelated language regarding modified limousines. FISCAL EFFECT: Appropriation: No Fiscal Com.:YesLocal: No According to the Senate Appropriations Committee; Ongoing costs of up to $120,000 annually to the Public Utilities Reimbursement Account (special) to have at least six meetings in Sacramento. Ongoing costs of $65,000 annually to the Public Utilities Reimbursement Account (special) to evaluate and report to the Legislature on the performance of the CPUC and the executive director. One-time costs of $263,000 for two years to the Public Utilities Reimbursement Account (special) for a proceeding to develop rules for the seeking of views of interested parties for all proceedings. Ongoing costs of $450,000 annually to the Public Utilities Reimbursement Account (special) to views of those likely to be affected by a proceeding. Unknown one-time and ongoing costs, potentially the hundreds of thousands to millions of dollars, to the Public Utilities Reimbursement Account (special) to upgrade and maintain SB 512 Page 7 information technology systems to fulfill public information requirements. SUPPORT: (Verified1/21/16) None received OPPOSITION: (Verified1/21/16) None received ARGUMENTS IN SUPPORT: The author states that "recent scandals at the CPUC have highlighted the need for more visibility in the interactions between commissioners and regulated utilities, and a series of embarrassing audits of the CPUC's mismanagement of public funds [and] poor safety oversight point toward poor management of the operation." "SB 512 would reform the CPUC's governance structure, more clearly outlining the roles and responsibilities of the commissioners and staff, and it would end loopholes that allow regulated utilities to influence CPUC commissioners outside the public eye." Prepared by:Nidia Bautista / E., U., & C. / (916) 651-4107 1/25/16 16:16:45 **** END ****