BILL ANALYSIS
AB 1315
Page 1
Date of Hearing: April 27, 2009
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Felipe Fuentes, Chair
AB 1315 (Ruskin) - As Introduced: February 27, 2009
SUBJECT : Public Utilities Commission.
SUMMARY : Changes the appointment process for the president of
the California Public Utilities Commission (PUC) to require the
president to be re-confirmed by the Senate, and has the
attorney, executive director, and staff report to the commission
rather than the President.
EXISTING LAW :
1)The State Constitution provides the following:
a) The PUC consists of 5 members appointed by the Governor
and approved by the Senate for staggered 6-year terms.
b) Permits both houses of the Legislature to remove a
member for incompetence, neglect of duty, or corruption.
c) Provides that public utilities are subject to control by
the Legislature.
d) Permits the PUC to fix rates, establish rules, and
impose other regulatory measures for all public utilities
subject to its jurisdiction.
e) Provides the Legislature plenary power to confer
additional authority and jurisdiction upon the PUC, to
establish the manner and scope of review of the PUC, and to
impose other regulatory authorities.
2)The Public Utilities Code provides the following:
a) Exempts the PUC from the Administrative Procedures Act
(APA).
b) Requires the Governor to designate a president of the
commission from among the members of the PUC.
c) Requires the office of the PUC to be in the City and
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County of San Francisco, and requires the PUC to hold its
sessions at least once in each calendar month in the City
and County of San Francisco.
d) Provides that the president of the PUC is appointed by
the Governor and that the president or vote of the
commission directs the actions of the executive director,
the PUC attorney, and other staff of the commission, with
the exception of Division of Ratepayer Advocate staff.
e) Provides that the attorney for the PUC and the executive
director shall operate as directed by the president or by a
vote of the PUC.
THIS BILL :
1)Requires the PUC to comply with the APA.
2)Requires the Governor to appoint a president, subject to
Senate approval.
3)Requires the PUC to hold at least one session in each calendar
month in the City of Sacramento.
4)Provides that the commission directs the actions of the
executive director, the PUC attorney, and other staff of the
commission, with the exception of Division of Ratepayer
Advocate staff.
FISCAL EFFECT : Unknown.
COMMENTS : According to the author, the purpose of this bill is
to reduce the direct intervention of the Governor in the
internal workings of the PUC. This will assist the Legislature
and the public with achieving greater independence and
accountability from this crucial public agency. The author
states that by having the executive director and the attorney
report to the entire commission rather than just the president,
this bill will reduce the politicization of internal staffing
and procedural decisions, while promoting collegiality and
cooperation among commissioners.
1) Once upon a time : At the turn of the 20th century, public
policy was said to have been dictated primarily by the political
machine of the Southern Pacific Railroad, the most powerful
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corporation in the state. The Southern Pacific then controlled
85% of California's railroad mileage. To complete its near
transportation monopoly, it owned the bulk of the state's ferry
services, local transit companies, and wharf facilities.
A three-member Railroad Commission was formed to regulate the
rates for transportation, but there was concern that the
Southern Pacific used its political and economic clout to avoid
effective regulation and maintain its monopoly. Public
exasperation was exemplified by the chaplain opening the first
session of the 1911 California Legislature with the plea: "Give
us a square deal for Christ's sake." As part of Governor Hiram
Johnson's reform movement, a series of constitutional amendments
were enacted, one of which established Article XII that created
the second five-member Railroad Commission of the State of
California. In 1912, the Legislature passed the Public
Utilities Act, that expanded the commission's regulatory
authority to include natural gas, electric, telephone, and water
companies as well as railroads and marine transportation
companies.
2) The middle ages : The PUC has historically been afforded
much independence, in keeping with the turn of the century
concerns about undue influence by the railroads. In 1946, the
Railroad Commission was renamed the California Public Utilities
Commission. The Governor appoints the 5 commissioners, who must
be confirmed by the Senate, for six-year staggered terms to
ensure that no single Governor could appoint a majority of
commissioners within that Governor's four-year term. The
Governor has no power to remove a commissioner; only the
Legislature has that power.
Prior to 1998, the president of the PUC was elected by its
members. The commissioners appointed the attorney and executive
director, who performed at the direction of the commission.
The PUC has historically been granted broad latitude to set its
own procedures. Any review of PUC decisions has historically
been limited to review only by the Supreme Court. Some had
viewed the PUC's independence as less of a virtue and more of a
vice. Rather than independent, the PUC had been seen to lack
accountability. Supporters of this view cite a series of
decisions made by the PUC over the past 15 years that were
contrary to the stated desires of a majority of the Legislature,
and in some cases, in contradiction of the desires of the
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Governor. Numerous examples include the PUC-initiated efforts to
restructure the electric and gas markets, PUC actions during the
energy crisis that discouraged wholesale market stability, and
current PUC actions that continuously attempt to reopen retail
energy markets.
SB 33 (Peace) Chapter 509, Statutes of 1999, attempted to
address this perceived lack of accountability by the
commissioners. It centralized the functioning of the PUC with
its president by putting the PUC's executive director and
general counsel directly under the control of the president. It
also made the president more directly accountable to the
Governor because the Governor would appoint the president.
3) Happily ever after : There is concern that by having the
Governor appoint the president, and not having the commissioners
select their own president, this designation has resulted in a
lack of collegiality and the unintended creation of a "super
commissioner." The Governor can re-appoint that same
commissioner as president each term, and that president by
statute directs the policies and executive director, the
attorney, and the over 1,000 staff. The remaining commissioners
can become less significant, especially when the will of
individual commissioners differs from the will of the president.
The author is concerned that this has resulted in a lack of
accountability by the PUC to the Legislature. Because the
Constitution provides "plenary power" to confer authority and
jurisdiction upon the PUC, the PUC should be more responsive and
accountable to the Legislature. By requiring the Governor's
choice of president to undergo Senate confirmation, this bill
attempts to increase accountability to the Legislature.
The PUC states that Senate confirmation for the designation of
president is redundant. They claim that each of the
commissioners is already subject to Senate confirmation when
they are initially appointed to the PUC.
By having the executive director, attorney, and staff respond to
the commission, it may provide consistency with multi-year
lawsuits and rulemakings. A supporter cites an incident where
the staff had been involved in a multi-year telecommunications
issue. As soon as a new president was appointed, the attorney
was directed to call back the PUC's staff counsels and drop the
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case. Supporters also state that this bill will alleviate
current conflicts with the PUC attorney. The attorney is
supposed to represent the entire commission in federal, state,
and regional proceedings. The commission's position may not be
consistent with a position taken by the president, and the
attorney would be conflicted if they differ.
Supporters are also concerned that the senior staff at the PUC
have become more responsive to the Governor than to other
branches of government, the other commissioners, and the
Legislature. The committee may wish to consider whether
reinstating the accountability of the executive director and the
attorney to the entire commission, rather than to only the
president, will change the political dynamics of at the PUC, and
whether this change could alleviate current potential conflict
and/or increase the PUC's responsiveness to the Legislature.
If there is concern that senior staff has become too responsive
to the Governor due to the fact that they serve at the
discretion of the president, this bill would address that by
having those staff members be directed by the commission.
4) What would Goldilocks do : The previous commissions were
not accountable enough, the more recent commission is way too
accountable, but only to the Governor. Because the State
Constitution provides "plenary power" to confer authority and
jurisdiction upon the PUC, legislative efforts are underway to
find the "just right" solution.
In the 2007-08 session, AB 1157 (Ruskin) provided that the
president of the PUC be elected by the members of the
commission, rather than be appointed by the Governor. Last
year, AB 1973 (Ruskin) required Senate confirmation of the
Governor-appointed president of the PUC, and had the executive
director and attorney take directives from the commission rather
than the president. Neither bill was chaptered.
This committee may wish to discuss whether to: (1) have the
commissioners choose their President from amongst themselves, or
(2) have the Governor choose the President, have that President
undergo a second Senate confirmation, and/or set a term limit on
the President in that role.
5) Why is the PUC currently exempt from APA : The APA requires
most state departments to provide review of all new regulations
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by the Office of Administrative Law (OAL). The OAL performs a
similar quasi-judicial process to review proposed regulations as
the PUC does in its proceedings. For example, the OAL performs
a staff review for checklist compliance, returns the proposed
regulation back to the agency if it's not compliant, the
Department of Finance reviews it, it provides public
notification of rulemaking, requires the rulemaking to indicate
and include in the rulemaking record the material it relies upon
in proposing a rulemaking action, provides a comment opportunity
- minimum 45 days to comment in writing, by fax or e-mail,
conducts public hearings - optional unless rule proponents
enabling statutes require or any interested person makes timely
request, requires the agency to consider all relevant matter
presented during comment period, and if modifications are made
to an initial proposal the OAL allows comment for at least 15
days.
The Senate included a provision in AB 1973 that repealed the
PUC's exemption from APA, and made all PUC quasi-judicial
proceedings to be subject to APA. The PUC is statutorily
mandated to assess economic impacts on jurisdictional industries
and the public they serve. As with OAL, the PUC operates under
a legislatively mandated procedural structure - administration
of proceedings, hearings, comments, briefing, oral argument,
administrative and judicial review that would have to be
effectively concluded before PUC "proposed regulations" would be
at a point to begin the OAL process.
After that, at the end of a PUC "rulemaking" or
quasi-legislative proceeding that a proposal would be
sufficiently defined and "fleshed out" to be a proposal for the
secondary review by OAL.
There have been some occasions where the presiding commissioner,
after extensive review by an administrative law judge, has made
a ruling that's inconsistent with the evidence presented.
However, it is unclear whether a secondary review by OAL would
minimize those instances. This committee may wish to discuss
whether the PUC needs to, in addition to its adjudicatory
process, undergo a secondary APA process.
REGISTERED SUPPORT / OPPOSITION :
Support
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California Association of Competitive Telecommunications
Companies (CALTEL)
Opposition
AT&T
California Public Utilities Commission (CPUC)
California Water Association (CWA)
Frontier Communications
Sempra Energy
SureWest Communications
Analysis Prepared by : Gina Adams / U. & C. / (916) 319-2083