BILL ANALYSIS                                                                                                                                                                                                    Ó






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          |SENATE RULES COMMITTEE            |                       SB 1049|
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                                   THIRD READING 


          Bill No:  SB 1049
          Author:   Hill (D) 
          Amended:  5/27/16  
          Vote:     21 

           SENATE ENERGY, U. & C. COMMITTEE:  11-0, 4/19/16
           AYES:  Hueso, Morrell, Cannella, Gaines, Hertzberg, Hill, Lara,  
            Leyva, McGuire, Pavley, Wolk

           SENATE APPROPRIATIONS COMMITTEE:  Senate Rule 28.8

           SUBJECT:   Electrical corporations and gas corporations:   
                     accident investigations


          SOURCE:    Author


          DIGEST:  This bill requires every electrical and gas corporation  
          to cooperate fully with the California Public Utilities  
          Commission (CPUC) in an investigation into any major accident or  
          any reportable incident.  This bill requires a utility to  
          provide all facts, information, or documents that concern,  
          discuss, or analyze an accident that is not subject to attorney  
          client privilege or attorney work product doctrine.


          Senate Floor Amendments of 5/27/16 more clearly provide that a  
          utility may not withhold documents related to an accident  
          investigation on the basis that the document/information has  
          been referenced in communication with counsel. The amendments  
          address concerns expressed by opponents regarding references to  
          the utility's own analysis and investigation of the accident.   








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          The amendments further remove language that was not clearly  
          defined, such as "storm register."


          ANALYSIS:  


          Existing law:


           1) CPUC has regulatory authority over public utilities and  
             authorizes the CPUC to fix rates, establish rules, examine  
             records, issue subpoenas, administer oaths, take testimony,  
             punish for contempt, and prescribe a uniform system of  
             accounts for all public utilities subject to its  
             jurisdiction.  (California Constitution, Article XII, §§3 and  
             6)

           2) Authorizes the CPUC to, at any time, inspect the accounts,  
             books, papers, or records kept by the public utility.   
             (Public Utilities Code §314)

           3) Requires the CPUC to investigate the cause of all accidents  
             occurring within this state upon the property of any public  
             utilities or directly or indirectly arising from or connected  
             with its maintenance or operation, resulting in loss of life  
             or injury to person or property and in the judgment of the  
             CPUC requires an investigation by it, and may make such order  
             or recommendation which in its judgment seems just and  
             reasonable.  (Public Utilities Code §315)

           4) Establishes that neither the order nor recommendation of the  
             CPUC nor any accident report filed with the CPUC shall be  
             admitted as evidence in any action for damages based on or  
             arising out of such loss of life, or injury to person or  
             property.  (Public Utilities Code §315)

           5) Requires every public utility to file with the CPUC, under  
             such rules as the CPUC prescribes, a report of each accident  
             so occurring of such kinds or classes as the CPUC from time  
             to time designates.  (Public Utilities Code §315)

           6) Requires every electrical corporation to cooperate fully  
             with the CPUC in an investigation into any major accident or  







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             any reportable incident concerning overhead electric supply  
             facilities.  (Public Utilities Code §316)

           7) Requires every electrical corporation to provide the CPUC,  
             upon its request, immediate access to specified documents,  
             including any and all documents under the electrical  
             corporation's control that are related to the incident and  
             are not subject to attorney-client privilege or attorney work  
             product doctrine. (Public Utilities Code §316)

           8) Requires every public utility to furnish and maintain such  
             adequate, efficient, just and reasonable service,  
             instrumentalities, equipment, and facilities, as are  
             necessary to promote the safety, health, comfort, and  
             convenience of its patrons, employees, and the public.   
             (Public Utilities Code §451)

           9) Requires that every public utility shall deliver to the  
             CPUC, when required by the CPUC, copies of any or all maps,  
             profiles, contracts, agreements, franchises, reports, books,  
             accounts, papers, and records in its possessions or in any  
             way relating to its property or affecting its business, and  
             also a complete inventory of all its property in such form as  
             the CPUC may direct.  (Public Utilities Code §582)

           10)Establishes that the attorney-client privilege is waived  
             when the holder of the privilege, without coercion, discloses  
             a significant part of the privileged communication or  
             consents to such disclosure.  (Evidence Code §912(a))

           11)Establishes that a client has a privilege to refuse to  
             disclose, and to prevent another from disclosing, a  
             confidential communication between client and lawyer, if the  
             privilege is claimed by: (a) the holder of the privilege; (b)  
             a person who is authorized to claim the privilege by the  
             holder of the privilege; or (c) the person who as the lawyer  
             at the time of the confidential communication, but such  
             person may not claim the privilege if there is no holder of  
             the privilege in existence or if he is otherwise instructed  
             by a person authorized to permit disclosure.  (Evidence Code  
             §954)

          This bill:








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           1) Requires each electrical corporation to cooperate fully with  
             the CPUC in an investigation into any major accident or any  
             reportable incident concerning electric supply facilities,  
             rather than only overhead electric supply facilities.

           2) Requires every gas corporation to cooperate fully with the  
             CPUC in an investigation into any major accident or any  
             reportable incident concerning CPUC-regulated gas pipeline  
             facilities, regardless of pending litigation or other  
             investigations, including, but not limited to, those that may  
             be related to a CPUC investigation. 

           3) Requires each electrical and gas corporation, after the  
             scene of the incident has been made safe and, in the case of  
             a major outage, service has been restored, to provide the  
             CPUC, upon request, with access to any and all documents  
             under the electrical or gas corporation's control that are  
             related to the incident and are not subject to  
             attorney-client privilege or the attorney work product  
             doctrine, in addition to other statutorily required  
             documents.

           4) Requires that facts, information, or documents that concern,  
             discuss or analyze an accident for a failure involving  
             utility facilities, but that themselves are not privileged or  
             subject to the attorney work product doctrine, may not be  
             withheld from the CPUC on the basis that they are or were  
             referenced in a communication with counsel or incorporated  
             into an attorney's work product. 

          Background

          In September 2013, Brandon Orozco, age 28, working under a  
          contractor for Southern California Edison (SCE), died when an  
          electrical vault he was working on exploded in Huntington Beach.  
           The CPUC's Safety and Enforcement Division (SED) found that SCE  
          workers switched off the electricity in only some of the  
          circuits in the underground vault.  Subsequently, Mr. Orozco,  
          working for an SCE contractor, entered the vault to perform  
          maintenance on the circuits that were not energized, but he  
          appears not to have known which circuits were energized and  
          which were not, and he touched the wrong one.  The details of  
          why this happened are not fully known, as SCE has claimed that  
          its investigation is subject to attorney-client privilege as it  







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          was prepared by the SCE Claims Department, a department within  
          the utility's legal division, at the request of SCE lawyers.   
          SCE has refused requests to provide the investigation to the  
          CPUC, although it's provided other information.

          According to the CPUC's October 2015 incident investigation  
          report: 

            SCE's refusal to provide ESRB [CPUC's Electric Safety and  
            Reliability Branch (ESRB)] its Investigation Report and a list  
            of documents SCE reviewed in its investigation of the  
            incident, under a claim of attorney-client privilege, hampered  
            ESRB's investigation of the incident and ability to determine  
            whether SCE has identified root causes of the incident and  
            appropriate corrective actions, and whether SCE has  
            incorporated "lessons learned" in other aspects of its  
            operations.  SCE's decision to withhold this information is  
            counter to the requirements of Public Utilities Code §§314 and  
            582.  [CPUC Safety and Enforcement Division, Electric Safety  
            and Reliability Branch. "Investigation Report of the September  
            30, 2013 Subcontractor Fatality at a Southern California  
            Edison Company Underground Vault in Huntington Beach Public  
            Report." October 2015. Filed November 18, 2015.]

          The CPUC was able to secure some information from the Cal/OSHA  
          incident investigation report.  However, SCE continued to refuse  
          to provide its investigation report and related documents.  In  
          response to the CPUC's claims that SCE's actions hindered the  
          CPUC investigation and violated the statutes, SCE claims:

            The Investigation Report sought by the SED is an absolutely  
            privileged attorney-client communication.  It was prepared by  
            the SCE Claims Department at the request of SCE lawyers, and  
            in anticipation of litigation.  The authors of the  
            Investigation Report were not independent witnesses of the  
            incident.  They were instructed by SCE counsel to open a  
            confidential investigation of the incident, and the report has  
            remained accessible only to SCE counsel and those acting at  
            their direction.  In addition to qualifying for absolute  
            protection under the attorney-client privilege, the  
            Investigation Report is protected by the attorney work-product  
            doctrine because it was compiled at the direction of SCE  
            counsel. 








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          Attorney-client privilege.  As stated by the American Bar  
          Association's Center for Professional Responsibility: 

            The attorney-client privilege, sometimes referred to as the  
            testimonial privilege, is a concept from the law of evidence  
            and is present in the common law or statutes of the fifty  
            states.  The client, acting through the lawyer, may claim the  
            privilege.  As stated in Model Rule 1.6, Comment [3]: "The  
            attorney-client privilege and work product doctrine apply in  
            judicial and other proceedings in which a lawyer may be called  
            as a witness or otherwise required to produce evidence  
            concerning a client." Work-product protection is of relatively  
            recent origin, springing from court decisions construing the  
            formal discovery procedures enshrined in the Federal Rules of  
            Civil Procedure.  Under this doctrine, a lawyer's notes,  
            observations, thoughts and research are protected from  
            discovery processes.  The attorney-client privilege only  
            protects the essence of the communications actually had by the  
            client and lawyer and only extends to information given for  
            the purpose of obtaining legal representation.  The underlying  
            information is not protected if it is available from another  
            source.  Therefore, information cannot be placed under an  
            evidentiary "cloak" of protection simply because it has been  
            told to the lawyer.  [Michmerhuizen, Sue. "Confidentiality,  
            Privilege: A Basic Value in Two Different Applications,"  
            American Bar Association's Center for Professional  
            Responsibility, May 2007.  
            http://www.americanbar.org/content/dam/aba/administrative/profe 
            ssional_responsibility/confidentiality_or_attorney.authcheckdam 
            .pdf.]


          CPUC application of attorney-client privilege.  The CPUC also  
          adheres to the attorney-client privilege in its oversight of  
          utilities.  In general, the CPUC provides:

           (1)Attorney client privilege - if only facts are sought, the  
             case law is very strong on the side of the CPUC's SED to  
             access facts to inform their investigation. However,  
             attorney-client privilege provides that no conversations with  
             the utility's attorney are sought by the CPUC.  

           (2)Work-product doctrine - according to the CPUC, claims by a  
             utility of attorney work product doctrine can be more  







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             problematic and challenging for the CPUC to overcome.  If the  
             utility attorney is directing what the utility investigator  
             is investigating, the work product doctrine may apply.   
             However, it is a qualified privilege, and the CPUC SED has  
             argued in the past that the CPUC investigation to ensure the  
             public is safe outweighs the utility work product concerns,  
             or that the utility's compliance with the accident reporting  
             requirement in Section 316 of the Public Utilities Code  
             waives any right the utility has to resist the CPUC SED  
             investigation.

          The author of this bill notes that if a utility is unconcerned  
          with safety and only wants to know what happened in an incident  
          in order to protect itself from litigation, it will direct its  
          attorneys to investigate accidents and assert that information  
          as protected under attorney-client privilege.  The SCE  
          Huntington Beach fatality incident is an example of this  
          practice, as it illustrates the need to further clarify  
          additional documents/information required of utilities in CPUC  
          investigations to avoid similar situations in the future.   
          According to the CPUC, some utility investigators are  
          organizationally placed within the utility's claims department,  
          which may be housed within the utility's legal department.   
          Therefore, any follow-up on the part of the CPUC SED or others  
          to the utility's accident report is often met with resistance by  
          the utility, which claims the info is protected under (1) the  
          attorney-client privilege and (2) the work product doctrine.  

          CPUC Legal Division has had some success addressing these  
          issues.  The issue of attorney-client privilege was successfully  
          litigated in the 2007 Malibu Canyon Fire investigation prior to  
          the amendments of Public Utilities Code §316 by AB 2584  
          (Bradford, Chapter 262, Statutes of 2012).  

          What trumps what? - unresolved.  The author of this bill intends  
          to better address root cause analysis when a major incident  
          occurs related to a utility in order to prevent similar  
          incidents in the future. Currently, competing statutes can make  
          it challenging, at best, to determine what information is shared  
          with the CPUC, let alone the public.  These include the Public  
          Records Act - the public's right to know; Public Utilities Code  
          §583 - confidentiality of utility information; Public Utilities  
          Code §§582 and 316 - requiring utilities to provide requested  
          information to the CPUC; and the American jurisprudence  







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          principle of attorney-client privilege.  This bill, as currently  
          drafted, preserves the attorney-client privilege while providing  
          additional specified requirements of information that must be  
          shared by utilities with the CPUC. This bill, as drafted, does  
          not guarantee that CPUC requested information would be  
          automatically shared by a utility during an accident  
          investigation, or shared at al. However, the bill may help to  
          better position the CPUC in arguing to a judge that specified  
          information related to an investigation or outage should be  
          shared. 
           
          Applying Public Utilities Code §316 More Broadly.  The current  
          statute limits the investigation requirements of Public  
          Utilities Code §316 to overhead electric facilities. However, it  
          makes sense to include all electric facilities, especially with  
          recent incidents of underground vaults exploding in Long Beach,  
          as well as, the incident in Huntington Beach which is the  
          premise for this bill.  When §316 was originally proposed in AB  
          2584 (Bradford) the language also included gas corporations.   
          However, for reasons not explained in the committee analysis,  
          gas corporations were removed by the Senate Committee on Energy,  
          Utilities and Communications.  In light of recent incidents  
          related to gas corporations, including the 2010 fatal explosion  
          in San Bruno and the recent leak in Aliso Canyon, it makes sense  
          to also include gas corporations under the requirements of this  
          section. 

          Related/Prior Legislation
          
          AB 2584 (Bradford, Chapter 262, Statutes of 2012) required every  
          electrical corporation to cooperate fully with CPUC  
          investigations of overhead electric supply facilities regardless  
          of pending litigation or other investigations.


          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:YesLocal:   Yes


          SUPPORT:   (Verified5/31/16)


          None received








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          OPPOSITION:   (Verified5/31/16)


          American Insurance Association
          California Chamber of Commerce
          Civil Justice Association of California

          ARGUMENTS IN SUPPORT:      The author states: "Public utilities  
          need to prepare root cause analyses to learn from accidents so  
          that their engineers and operations managers can prevent them  
          from recurring.  Were such analyses to be kept private - solely  
          used by lawyers to protect the utility from lawsuits brought by  
          victims and their surviving families - the utility would risk  
          sacrificing its responsibility service "to promote the safety,  
          health, comfort, and convenience of its patrons, employees, and  
          the public" (Public Utilities Code §451).  Root cause analyses  
          need not be subject to attorney-client privilege or attorney  
          work product doctrine, and they should be available to utility  
          personnel and regulators to learn from accident and prevent  
          tragedy from striking again."


          ARGUMENTS IN OPPOSITION:     The Civil Justice Association of  
          California and the American Insurance Association oppose this  
          bill due to concerns that this bill sets a bad precedent by  
          establishing a unique and diminished form of attorney-client  
          privilege for electrical and gas corporations subject to the  
          CPUC requests for information.  They specifically take issue  
          with language that has now been amended in Appropriations  
          Committee.



          Prepared by:Nidia Bautista / E., U., & C. / (916) 651-4107
          5/31/16 22:06:46


                                   ****  END  ****


          









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