BILL ANALYSIS
SB 947
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Date of Hearing: June 28, 2010
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Steven Bradford, Chair
SB 947 (Leno) - As Amended: June 28, 2010
SENATE VOTE : (vote not relevant)
SUBJECT : Electrical and gas corporations: political
expenditures.
SUMMARY : Prohibits a specific electrical and gas corporation
from spending funds received from ratepayers on political and
public affairs related to state or local governments.
Specifically, this bill :
1)Prohibits an electrical and gas corporation that serves more
than 3 million customers from spending funds received from
ratepayers as authorized revenues on political and public
affairs related to state or local governments.
2)Defines political and public affairs as including any
activities involving, directly or indirectly, advocacy of the
election or defeat of political candidates and of the adoption
or defeat of ballot measures, through the actions of the
corporation or through a third party.
3)Requires each electrical and gas corporation that serves more
than 3 million customers to annually report to the California
Public Utilities Commission (PUC) all political and public
affairs spending for the preceding year.
4)Requires the PUC to ensure that all political and public
affairs spending identified in the annual report is not
included in rates paid by the ratepayers of the specified
electrical and gas corporation, by disallowing the reported
amounts from revenues authorized to be collected from
ratepayers and reducing the corporation's rates.
EXISTING LAW permits the PUC to fix rates and establish rules
for all public utilities and includes the furnishing power as a
public utility, subject to control by the Legislature.
FISCAL EFFECT : Unknown.
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COMMENTS : This bill is targeted at PG&E. This past election,
PG&E expended over $46 million to sponsor Proposition 16, an
initiative on the California state ballot, titled, "Taxpayers
Right to Vote Act."
Proposition 16 would have placed new voter approval requirements
on local governments before they can use "public funds"-defined
broadly in the measure to include tax revenues, various forms of
debt, and ratepayer funds-to start up electricity service,
expand electricity service into a new territory, or to create a
community choice aggregator (CCA). Proposition 16 included
three major elements. First, if an authorized local government
entity seeks to start up electricity service, it must receive
approval by two-thirds of the voters in the area proposed to be
served. Second, if an existing publicly owned utility seeks to
expand its electric delivery service into a new territory, it
must receive an approval by two-thirds of the voters in both the
area currently served by the utility and the new area proposed
to be served. Third, the measure requires two-thirds voter
approval for a local government to create a CCA. (Proposition
16 provided 3 minor exemptions.)
According to opponents of Proposition 16, the intent was to
thwart efforts for communities and municipalities to become a
CCA. State law allows a city or a county, or a combination of
the two, to arrange to provide electrical service within their
jurisdiction through a contract with an electricity provider
other than the investor-owned utility (IOU) that would otherwise
serve that local area. Although no CCA currently exists to
provide electricity service in California, several communities
are exploring this option. Under this approach, electricity
would be purchased by the CCA from an independent electric
service provider instead of the local IOU. The IOU that serves
that local area would continue to be used to deliver the
electricity to the customers. Electricity customers within that
jurisdiction would automatically get their electricity from the
CCA unless they elected to "opt-out" and continue to receive
service from the IOU serving their local area.
The Legislative Analyst states that the Proposition 16-imposed
public voter approval requirements for the start-up or expansion
of publicly owned utilities or the formation of CCAs could, in
some cases, result in public disapproval of such changes. Also,
the existence of these new voter approval requirements could
deter some local government agencies from proceeding with such
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plans. This would leave the local jurisdictions with no choice
but their existing IOU.
But they're shareholder funds : PG&E expended over $46 million
to place Proposition 16 on the June 2010 primary ballot. Every
three years the PUC holds General Rate Case proceedings for the
major utilities. In the GRC, the PUC sets a pre-specified
revenue requirement for the first year and uses formulaic
adjustments for the following years. Included in rates are
costs for electric generation, distribution, bond charges,
public purpose programs, and other elements.
The 2009 GRC revenue requirement for PG&E was $4.4 billion. Of
that amount, $909 million was for "return on rate base."
Because the utilities provide the upfront financing for all
capitalized items of expenses, the PUC provides a rate of return
on invested capital. The rate of return is the weighted average
cost of debt and shareholder equity. The PUC allows a "fair and
reasonable return that is sufficient to allow continued flow of
needed capital." PG&E calls this rate of return, "shareholder
funds," although they are derived from ratepayers via rates.
Utilities and Commerce Committee Informational Hearing : On
February 25, 2010, this committee held a joint hearing with the
Senate Energy and Communications Committee on Proposition 16.
PG&E stated that they only used shareholder funds and did not
intend to thwart competition in their service territories. An
opponent of Proposition 16, former Executive Director of the
California Energy Commission testified, that the PUC does not
set that rate at a level to create a $46 million fund for
sole-sponsored attempt to change the Constitution. Geesman also
stated, "It ought to be illegal to take ratepayer money and use
it politically against ratepayer interests. If PG&E's making an
excessive return, it ought to give the money back."
REGISTERED SUPPORT / OPPOSITION :
Support
None on file.
Opposition
None on file.
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Analysis Prepared by : Gina Adams / U. & C. / (916) 319-2083