BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 512| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- UNFINISHED BUSINESS Bill No: SB 512 Author: Hill (D) Amended: 8/19/16 Vote: 21 PRIOR VOTES NOT RELEVANT SENATE PUBLIC SAFETY COMMITTEE: 4-2, 4/28/15 AYES: Hancock, Leno, McGuire, Monning NOES: Anderson, Stone NO VOTE RECORDED: Liu 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: 61-12, 8/29/16 - See last page for vote SUBJECT: Public Utilities Commission SOURCE: Author SB 512 Page 2 DIGEST: This bill proposes a suite of reforms of the operations and governance of the California Public Utilities Commission (CPUC), including allowing intervenor compensation for certain local governments, requiring specified information is available to the public, requiring specified reporting of the CPUC regarding the timeliness of proceedings, applying the Code of Ethics from the Administrative Procedures Act (APA) to administrative law judges (ALJs), and others. Assembly Amendments add provisions that allow certain local governments to be paid intervenor compensation when they intervene or participate in CPUC proceedings for the purpose of protecting health and safety. The amendments also require the CPUC Policy and Planning Division to study the outreach efforts undertaken by other state or federal utility regulatory bodies and make recommendations. Other amendments made further tweaks to existing language in the bill. 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. (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) SB 512 Page 3 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) 7) Authorizes intervenors involving electric, water, and telephone utilities to be compensated for making a substantial contribution to proceedings of the CPUC, as determined by the CPUC. (Public Utilities Code §1801 et seq.) 8) Requires intervenor compensation to be awarded to eligible intervenors in a timely manner, within a reasonable period after the intervenor has made the substantial contribution to a proceeding that is the basis for the compensation award. (Public Utilities Code §1801.3) 9) Defines "compensation" to mean payments for all or part, as determined by the CPUC, of reasonable advocate's fees, reasonable expert witness fees, and other reasonable costs of preparation for and participation in a proceeding, and includes the fees and costs of obtaining an award, as specified, and of obtaining judicial review, if any. (Public Utilities Code §1802) 10)Defines "customer" to mean any of the following: SB 512 Page 4 a) A participant representing consumers, customers, or subscribers of any electrical, gas, telephone, telegraph, or water corporation that is subject to the jurisdiction of the CPUC; b) A representative who has been authorized by a customer; or c) A representative of a group or organization authorized pursuant to its articles of incorporation or bylaws to represent the interests of residential customers, or to represent small commercial customers who receive bundled electric service from an electrical corporation. (Public Utilities Code §1802) d) States that "customer" does not include any state, federal, or local government agency, any publicly owned public utility, or any entity that, in the CPUC's opinion was established or formed by a local government entity for the purpose of participating in a CPUC proceeding. (Public Utilities Code §1802) 11)Establishes an Office of Ratepayer Advocates (ORA) to represent and advocate on behalf of public utility customers with a goal to obtain the lowest possible rate for service consistent with reliable and safe service levels with a primary focus on residential and small commercial customers. (Public Utilities Code §309.5) This bill: 1) Requires the CPUC to hold its sessions at least once in each calendar month, without specifying the location. 2) Applies the Administrative Adjudication Codes of Ethics to CPUC administrative law judges. SB 512 Page 5 3) Requires the CPUC to seek the participation of those likely to be affected by a decision, prior to determining the scope of a proceeding. This provision does not apply to adjudication cases. 4) Requires the CPUC Policy and Planning Division to study the outreach efforts undertaken by other state or federal utility regulatory bodies and make recommendations. 5) Requires the CPUC to include a docket card that lists the public versions of all prepared oral and written testimony and advice letter filings, protests, and responses on its Internet Web site. 6) Requires the CPUC to make additional information available on the Internet, including information on how members of the public and ratepayers can gain access to the CPUC's ratemaking process. 7) Expands and recasts an existing annual reporting requirement to the Governor and Legislature to include, among other things, the description of all scheduled proceedings that may be considered by the CPUC during the calendar year, the outcomes, and the performance criteria for the CPUC and the executive director. 8) Permits intervenor compensation to be paid to certain local government entities that intervene or participate in commission proceedings to the extent that their involvement was for the purpose of protecting health and safety, under specified circumstances. 9) Clarifies that intervenor compensation, in proceedings at the CPUC, is allowed for intervenors who made a substantial SB 512 Page 6 contribution in a proceeding, regardless of whether or not a settlement is reached. Background 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 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 SB 512 Page 7 improvement. CPUC intervenor compensation. The CPUC initiated its intervenor compensation program in 1981 and state law was enacted in 1984 to govern the program. The program is intended to ensure that intervenors - individuals and groups that represent the interests of utility ratepayers - have the financial resources to bring their concerns and interest to the CPUC at its proceedings. Intervenors advocate for a variety of ratepayers, including residential and small-business customers, minority groups, and the disabled. State law allows intervenors that participate in CPUC proceedings involving utilities, such as electric, gas, and water utilities, to request compensation for the costs associated with that participation. Public utilities generally pay these intervenor compensation awards from the amounts they collect from their ratepayers. These awards affect utility rates so that utilities can recoup any amounts they pay to intervenors. Intervenor compensation process. An intervenor planning to claim intervenor compensation must get involved in the proceeding by filing a notice of intent to claim compensation that indicates the planned extent and estimated costs of the intervenor's planned participation in a proceeding. In addition, to be eligible for compensation, the intervenor must show that it meets various mandates that state law imposes, including the need to demonstrate substantial contribution to the CPUC proceeding. When an intervenor participates in a proceeding they are excepted to contribute via factual contentions, legal arguments, or policy recommendations. These efforts can be demonstrated by bringing witnesses, submitting testimony from multiple witnesses, raising issues when it cross-examines the utility's witnesses during evidentiary hearings, working with other intervenors to achieve a settlement and others. When the CPUC issues a final decision on a proceeding, the intervenor may file a claim for intervenor compensation. The CPUC reviews the claim and adjusts up or down based on their assessment of the intervenor's participation. Additionally, intervenors must show "significant financial hardship" to receive compensation, by submitting documents demonstrating either that the intervenor could not afford to SB 512 Page 8 participate without undue hardship or that the economic interest of the individual members is small in comparison to the cost of effective participation in the proceeding. Office of Ratepayer Advocates (ORA). Within the CPUC is an independent ORA to represent and advocate on behalf of the interests of public utility customers and subscribers within the jurisdiction of the CPUC. ORA's goal is to obtain the lowest possible rate for service consistent with reliable and safe service levels. For revenue allocation and rate design matters, the office primarily considers the interests of residential and small commercial customers. ORA has a staff of 147 staff, consisting of engineers, economists, scientists, and auditors with expertise in regulatory issues related to the electricity, natural gas, water, and communications industries in California. ORA's staff performs in-depth review and analyses of regulatory policy issues and utility proposals, for funding that totals in the tens of billions of dollars, in order to determine whether utility requests are in the interest of the ratepayers who fund utility activities through their utility bills. ORA also supports environmental policies that benefit customers and seeks to ensure that utility actions comport with CPUC rules and California environmental laws and policy goals. In 2015, ORA participated in 192 CPUC proceedings. Intervenor compensation - government agencies not eligible. The statute governing intervenor compensation excludes state, federal, or local government agency, any public utility, or any entity formed by a local government agency for the purpose of participating in a CPUC proceeding from the definition of customer. This exclusion is premised on the fact that government agencies are funded with public dollars and have the ability to increase taxes or fees to fund their activities. Government agencies can participate as a party in any CPUC proceeding. However, the Senate Energy, Utilities, Communications Committee approved AB 2120 (Weber) which would have allowed county offices of education to collect intervenor compensation for participation on ratemaking proceedings. At the time, the committee discussed the potential slippery slope of allowing schools to receive intervenor compensation. As was SB 512 Page 9 noted in the analysis: It may be difficult to allow K-12 schools to participate in the intervenor compensation program, but not allow other government agencies that may also face similar challenges in their ability to raise revenues to cover costs to participate in CPUC proceedings. Ultimately, it's ratepayers who shoulder the costs of compensating intervenors. This bill would make communities eligible for intervenor compensation that have suffered a catastrophic loss related to utility infrastructure, as was the case for the City of San Bruno who experienced a catastrophic gas pipeline explosion that decimated a neighborhood. In its letter on the bill, the City of San Bruno stated: As we embarked on our participation in three investigations related to the explosion in our community we were shocked to discover that?.such compensation is not available to local government organizations like ours. Cities and counties that have suffered catastrophe are least able to devote their limited resource to the arcane and expensive task of participation in CPUC proceedings - they have more than enough to do to just respond, to address the needs of their residents and to rebuild and recover. Intervenor compensation when no settlement is reached. This bill clarifies that compensation is allowed for intervenors who made a substantial contribution in a proceeding, regardless of whether or not a settlement is reached. This provision is intended to end the era of "go-along, get-along," a practice instituted by former-CPUC President Peevey to encourage intervenors to enter into settlements in order to receive intervenor compensation. Those who did not settle would not be deemed to have made a substantial contribution and then, therefore, ineligible for intervenor compensation, whether or not their contribution was, indeed, substantial. Related/Prior Legislation SB 512 Page 10 SB 215 (Leno and Hueso, 2016) proposes a suite of reforms of the 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. 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 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: Yes According to the Assembly Committee on Appropriations, increased SB 512 Page 11 CPUC costs of up to $1.1 million annually (Public Utilities Reimbursement Account) to comply with the provisions of this bill. Most of the costs are associated with providing intervenor fees to local governments, in particular, determining eligibility. According to the Legislative Analyst's Office, there are over 5,300 local government agencies. This is more than 100 times greater than the number of eligible intervenors that participated in CPUC proceedings during any given year. SUPPORT: (Verified8/29/16) California Farm Bureau City of Carmel-by-the-Sea City of Laguna Beach City of San Bruno Sierra Club California OPPOSITION: (Verified8/29/16) None received ARGUMENTS IN SUPPORT: According to the author, 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 organization. This bill is intended to reform the CPUC's governance structure by clearly outlining the roles and responsibilities of Commissioners and providing transparency and accountability. ASSEMBLY FLOOR: 61-12, 8/29/16 AYES: Alejo, Arambula, Atkins, Baker, Bloom, Bonilla, Bonta, Brown, Burke, Calderon, Campos, Chang, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Daly, Dodd, Eggman, Gallagher, SB 512 Page 12 Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Hadley, Roger Hernández, Holden, Irwin, Jones-Sawyer, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, McCarty, Medina, Mullin, Nazarian, O'Donnell, Olsen, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago, Mark Stone, Thurmond, Ting, Weber, Wilk, Williams, Wood, Rendon NOES: Achadjian, Travis Allen, Bigelow, Brough, Chávez, Beth Gaines, Grove, Harper, Jones, Melendez, Obernolte, Waldron NO VOTE RECORDED: Dahle, Frazier, Kim, Mayes, Patterson, Steinorth, Wagner Prepared by:Nidia Bautista / E., U., & C. / (916) 651-4107 8/31/16 9:27:24 **** END ****