BILL ANALYSIS                                                                                                                                                                                                    Ó






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          |SENATE RULES COMMITTEE            |                        SB 512|
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                                   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: 









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          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  







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            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. 







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          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  







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          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  







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          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  







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            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


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