BILL ANALYSIS
AB 1497
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Date of Hearing: April 27, 2009
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Felipe Fuentes, Chair
AB 1497 (Hall) - As Amended: April 2, 2009
SUBJECT : Public utilities: intervenor fees:
SUMMARY : Provides that the cost of intervenor fees awarded for
proceedings related to specific telephone corporations shall be
paid from the Public Utilities Commission's (PUC) intervenor
compensation fund and not by the telephone corporation.
EXISTING LAW :
1)Provides compensation for reasonable advocate fees to
specified groups or persons for representing customer interest
in any proceeding at the PUC if the customer's participation
makes a substantial contribution to the proceeding.
(intervenor compensation)
2)Provides that awards of advocate fees shall be paid by the
public utility that is subject of the respective hearing or
proceeding.
3)Provides that a utility may recover the cost of issuing
advocate awards in rates.
4)PUC rules provide that the advocate fees may be paid out of
the intervenor compensation program fund, which is funded
through a charge on all utilities, for proceedings that
involve multiple utilities.
5)PUC rules provide that the four largest telephone corporations
in California are not subject to rate-of-return regulation
that sets the rates they can charge based on the cost of
providing telephone service.
FISCAL EFFECT : Unknown.
COMMENTS : According to the sponsor, Verizon, the purpose of
this bill is to address the fact that while historically all
telephone corporations could recover the cost of intervenor fees
by directly passing the costs on to customers the telephone
companies that are no longer rate regulated and now must absorb
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the costs of these fees themselves.
1) Background : To encourage participation in PUC proceedings
current statute creates the intervenor compensation program
which funds the costs of ratepayers and ratepayer advocates who
participate in the PUC process. The intervenor must
"substantially contribute" to the PUC's decision and the
participant could not otherwise afford to take part without
undue hardship.
If an identified utility or utilities are the focus of the
proceeding, the intervenor compensation is paid directly by that
utility or utilities. If there are multiple utilities involved,
the payment can be divided among them in proportion to each
utilities' jurisdictional revenues. A utility would be the focus
of a proceeding if the utility is the defendant in a complaint
case, the respondent in an investigation or rulemaking, or the
applicant in an application proceeding. If the number of
utilities that are the focus of the proceeding is very large,
such as when the proceeding involves new rules for an entire
industry, the awards can be paid from user fees collected from
all regulated water, telecommunications, and energy utilities to
the intervenor compensation fund, which is a part of the PUC's
annual budget.
2) Changing market place : The current intervenor compensation
rules were put into place when all utilities were subject to
rate-of-return regulation. Under these regulations each
utility's rates were set by the PUC based on the utility's
reasonable cost of providing service plus a reasonable profit.
Under this model, utilities are allowed to treat regulatory
costs such as intervenor compensation as a cost of business and
imbed the costs in rates.
In 2007, the PUC eliminated most rate controls of the four
largest telephone corporations in California (AT&T, Verizon,
SureWest, and Frontier Communications). The basis for lifting
the last of the rate regulations was a determination that there
was effective competition for telephone service in almost all
areas of the state and competition would ensure that the
telephone corporation kept costs at "just and reasonable"
levels.
Verizon believes that since they are no longer explicitly
allowed to embed the cost of intervenor compensation into rates
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it may be "impracticable" to require them to directly pay these
costs. They believe the current rules are unfair in a
competitive market place and inconsistent with the statute.
3) So who pays : The bill does not reduce the amount of
intervenor compensation funds that will be paid in the future.
Instead, the bill provides that the compensation will be paid
out of an account that is funded through the PUC's general
operating funds. The PUC is funded through a surcharge assessed
on all regulated utilities. Since all utilities pay into the
fund, any award of compensation from the fund relating to a
proceeding involving a single telephone corporation will be paid
for by all customers of all utilities, include electric, gas,
and water utilities. PUC rules specify that when compensation
is paid out of the intervenor compensation fund the PUC will
separately account for the funds so that the award will only be
paid from funds contributed by the utilities in the affected
industry. However, it is not clear the PUC follows this rule in
practice.
Under current rules and practices at the PUC there are already
very few cases where a non-rate-of-return telephone company is
identified as an individual respondent where they would pay
intervenor fees directly. The only instance that could commonly
occur is a judicial matter where the PUC is investigating an
action of the telephone company that is in violation of PUC
rules or statute. Under AB 1497, the telephone company would not
be obligated to fund the cost of intervenor fees in these
judicial matters.
4) Opposition : The smaller telephone companies, PG&E, and TURN
are opposing this bill because they are concerned the bill would
result in cost shifts and place an unfair burden on them.
Additionally, TURN believes that the telephone companies should
be requires to pay the intervenor compensation awards in cases
that involve a direct complaint against the telephone company.
REGISTERED SUPPORT / OPPOSITION :
Support
Verizon (Sponsor)
Opposition
AB 1497
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California Association of Competitive Telecommunications
Companies (CALTEL)
California Independent Telephone Companies (CITC)
Pacific Gas and Electric Company (PG&E)
Southern California Edison (SCE)
The Utility Reform Network (TURN)
Analysis Prepared by : Edward Randolph / U. & C. / (916)
319-2083