BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 660|
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VETO
Bill No: SB 660
Author: Leno (D) and Hueso (D)
Amended: 9/6/15
Vote: 21
SENATE ENERGY, U. & C. COMMITTEE: 7-2, 4/27/15
AYES: Hueso, Cannella, Hertzberg, Hill, Leyva, McGuire, Wolk
NOES: Fuller, Morrell
NO VOTE RECORDED: Lara, Pavley
SENATE APPROPRIATIONS COMMITTEE: 5-2, 5/28/15
AYES: Lara, Beall, Hill, Leyva, Mendoza
NOES: Bates, Nielsen
SENATE FLOOR: 29-7, 6/2/15
AYES: Allen, Anderson, Beall, Block, Cannella, De León,
Galgiani, Glazer, Hall, Hancock, Hernandez, Hertzberg, Hill,
Hueso, Jackson, Lara, Leno, Leyva, Liu, McGuire, Mendoza,
Mitchell, Monning, Moorlach, Pan, Pavley, Roth, Wieckowski,
Wolk
NOES: Berryhill, Gaines, Huff, Morrell, Nguyen, Nielsen, Stone
NO VOTE RECORDED: Bates, Fuller, Runner, Vidak
SENATE FLOOR: 40-0, 9/11/15
AYES: Allen, Anderson, Bates, Beall, Berryhill, Block,
Cannella, De León, Fuller, Gaines, Galgiani, Glazer, Hall,
Hancock, Hernandez, Hertzberg, Hill, Hueso, Huff, Jackson,
Lara, Leno, Leyva, Liu, McGuire, Mendoza, Mitchell, Monning,
Moorlach, Morrell, Nguyen, Nielsen, Pan, Pavley, Roth, Runner,
Stone, Vidak, Wieckowski, Wolk
ASSEMBLY FLOOR: 80-0, 9/10/15 - See last page for vote
SUBJECT: Public Utilities Commission
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SOURCE: Author
DIGEST: This bill proposes a suite of reforms of the
governance, rules, operations and procedures of the California
Public Utilities Commission (CPUC), including: reform of the
laws and rules related to ex parte communications; criteria and
process for disqualification of commissioners to a proceeding;
and authorizes the commission to appoint the chief
administrative law judge.
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 Governor to designate one of the commissioners
as president, who is authorized to direct and prescribe
duties of an attorney (general counsel), executive director,
and other staff and preside at CPUC meetings. (Public
Utilities Code §305)
3) Authorizes the CPUC to appoint a general counsel to
represent the CPUC in all actions, to commence, prosecute or
intervene in proceedings as directed by the president, and to
advise the CPUC and each commissioner on all matters. (Public
Utilities Code §307)
4) Authorizes the executive director to employ officers,
Administrative Law Judges (ALJs), and other staff to perform
the duties and exercise powers conferred on the CPUC. (Public
Utilities Code §309)
5) Requires the CPUC to adopt procedures on the
disqualification of ALJs due to bias or prejudice. (Public
Utilities Code §309.6)
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6) 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.)
7) Directs the CPUC to adopt by regulation rules to define
decisionmakers and persons of interests for purposes of
applying ex parte communication rules. (Public Utilities Code
§1701.1)
8) Prohibits ex parte communication in adjudication cases.
(Public Utilities Code §1701.2)
9) Prohibits ex parte communication in ratesetting cases, but
permits oral ex parte communication if (a) all-parties are
invited with no less than three day notice (b) written ex
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. (Public
Utilities Code §1701.3)
10)Provides that ex parte communication in quasi-legislative
cases is permitted without restriction. (Public Utilities
Code §1701.4)
11)Establishes rules for state agencies to ensure meetings are
open, public and available to all, as noted in the
Bagley-Keene Open Meeting Act. Restricts a majority of
members of a state governing body, including the CPUC, from
meeting without proper notice, public access, and
transparency. (Government Code §11120)
This bill:
1) Reforms and expands ex parte communications rules for
proceedings, including prohibiting these communications in
ratesetting proceedings and allowing these communications in
quasi-legislative proceedings with disclosure requirements on
decisionmakers.
2) Requires the CPUC to define decisionmaker to include
commissioners, their personal staff advisors, the general
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counsel, the executive director, the Chief ALJ and assigned
ALJ.
3) Requires the CPUC to adopt procedures for disqualification
of commissioners due to bias or prejudice similar to those of
ALJs and specifies criteria for such action in ratesetting
and adjudicatory proceedings.
4) Requires the CPUC to specify procedural matters that do not
constitute an ex parte communication in its rules and
practice and procedures.
5) Requires the CPUC to appoint a Chief ALJ to be responsible
for executive and administrative management and oversight of
the Administrative Law Division. Requires the Chief ALJ,
rather than the executive director, to keep a true and full
record of all commission proceedings.
6) Authorizes the CPUC to delegate specific management and
internal oversight functions to committees comprised of two
commissioners.
7) Prohibits interested parties from oral or written ex parte
communications related to procedural issues, except with the
presiding ALJ.
8) Makes a violation of the ex parte communications rules
enforceable by the Attorney General with consideration for
the severity of the violation.
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, PG&E, bowing to legal pressure from the City
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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 administrative law judge
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 Peter 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, after a newspaper published details of the search
warrant, Southern California Edison 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.
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
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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 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.
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 11th oversight hearing of the Senate
Energy, Utilities and Communication Committee noted that rules
governing ex parte communications in ratesetting proceedings may
be the most permissive as compared to other agencies, such as
the Federal Regulatory Energy Commission and other states'
ratesetting agencies. The 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 11th, 2015
hearing advocated for doing away with ex parte communication
because of the lack of fairness, the un-level playing field, the
time and resources that are required of commissioners and
others. 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.
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 Legislation
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AB 825 (Rendon, 2015), which was vetoed, would have proposed a
suite of reforms of the CPUC to make the agency more accessible
and transparent to the public.
AB 1023 (Rendon, 2015), which was vetoed, would have proposed to
codify the summary log requirements currently required at the
CPUC for ratesetting proceedings and extend those requirements
to quasi-legislative proceedings.
SB 48 (Hill, 2015), which was vetoed, would have proposed a
suite of reforms of the CPUC, including modifying the role of
the president, meeting location requirements, and other reforms.
SB 215 (Leno, 2015) proposes a suite of reforms of the CPUC
related to governance and operations, including disqualification
of commissioners to proceedings, modifying the role of the
president, and other reforms. Many of the provisions of this
bill were amended into SB 660. The bill is currently in the
Senate Energy, Utilities and Communications Committee.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: Yes
According to the Assembly Appropriations Committee, increased
CPUC costs of an estimated $900,000 including $430,000 limited -
term and $470,000 ongoing costs, to implement and enforce the
provisions of the bill and hold additional public meetings, as
necessary (Public Utilities Reimbursement Account).
SUPPORT: (Verified11/4/15)
California Bus Association
California Environmental Justice Alliance
Center for Accessible Technology
Consumer Federation of California
Privacy Rights Clearinghouse
San Diego Area Congregations for Change
Sierra Club California
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The Greenlining Institute
The Utility Reform Network
OPPOSITION: (Verified11/4/15)
None received
ARGUMENTS IN SUPPORT: The authors state that decision-making
based upon 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 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.
Furthermore, the authors state that there is an insufficient
role for CPUC commissioners other than the president to direct
management of the CPUC and an unreasonable process with unduly
restrictive standards for determining whether a commissioner
should be disqualified due to prejudice.
GOVERNOR'S VETO MESSAGE:
I am returning Senate Bill 660 and Assembly Bill 1023
without my signature.
These bills aim to improve the public accessibility and
transparency in decision-making at the Public Utilities
Commission.
There are many important and needed reforms in this package
of bills. Unfortunately, taken together there are various
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technical and conflicting issues that make the over fifty
proposed reforms unworkable. Some prudent prioritization
is needed.
These reforms should include greater public access through
technology improvements, incorporating public comments into
the record, more Commission meetings outside of San
Francisco, amending Section 583 of the Public Utilities
Code to require more information to be publicly available,
facilitating greater deliberation among Commissioners
through Bagley-Keene reform to improve decisionmaking and
some tightening of the rules on ex-parte communications.
I am directing my office to work with the authors on
drafting these reforms and to ensure the Commission
receives the necessary resources to implement them swiftly
and effectively.
ASSEMBLY FLOOR: 80-0, 9/10/15
AYES: Achadjian, Alejo, Travis Allen, 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, Roger Hernández, Holden,
Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder,
Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina,
Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen,
Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez,
Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting,
Wagner, Waldron, Weber, Wilk, Williams, Wood, Atkins
Prepared by:Nidia Bautista / E., U., & C. / (916) 651-4107
11/13/15 16:03:39
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