BILL ANALYSIS                                                                                                                                                                                                    �




                   Senate Appropriations Committee Fiscal Summary
                           Senator Christine Kehoe, Chair


          SB 1364 (Huff) - Water Corporations.
          
          Amended: April 30, 2012         Policy Vote: EU&C 13-0
          Urgency: No                     Mandate: Yes
          Hearing Date: May 24, 2012      Consultant: Marie Liu
          
          SUSPENSE FILE.  AS PROPOSED TO BE AMENDED.

          
          Bill Summary: SB 1364 would subject water corporations with more 
          than 2,000 service connections to the same audit powers of the 
          California Public Utilities Commission (PUC) as electrical, gas, 
          and telephone corporations. This bill would also require water 
          corporations with more than 2,000 service connections to include 
          more specific information in its notices to ratepayers regarding 
          potential rate increases.

          Fiscal Impact: Minor and absorbable costs from the Public 
          Utilities Commission Utilities Reimbursement Account (special 
          fund) beginning in 2013-14 for audit responsibilities.

          Background: Existing law requires that public utilities notify 
          their customers when it has submitted an application to the PUC 
          for a rate change with certain exceptions. This provision 
          applies to electrical, gas, heat, telephone, water, or sewer 
          system corporations. 

          To ensure that a regulated utility is not using ratepayer funds 
          to subsidize parts of a company's business not related to the 
          utility service, existing law requires that every electrical, 
          gas, and telephone corporation annually submit to the PUC a 
          report describing all significant transactions between the 
          corporation and its subsidiaries or affiliates. The PUC must 
          periodically audit, or ensure that an independent audit has 
          reviewed, all significant transactions.of an electrical, gas or 
          telephone corporation. The PUC may assess penalties for 
          imprudent or unreasonable transactions While existing law does 
          not apply to water corporations, the PUC issued a decision in 
          October 2010 (D. 10-10-019) that subjects water corporations 
          with more than 2,000 service connections to these reporting and 
          auditing provisions, at the water corporation's cost. 
           








          SB 1364 (Huff)
          Page 1


          Proposed Law: This bill would require that rate change 
          notifications issued by water corporations with more than 2,000 
          service connections must also include the estimate rate impacts 
          on the various customer classes. The PUC would also be allowed 
          to require that the water corporation also notify the customers 
          of the PUC's decision on its rate change application.

          This bill would subject water corporations with more than 2,000 
          service connections to the same reporting and auditing 
          requirements currently imposed on electrical, gas, and telephone 
          corporations.

          Staff Comments:  D. 10-10-019 has slightly different audit 
          requirements than this bill in that this bill requires the PUC 
          to select, manage, and oversee requirements for the audit while 
          D. 10-10-19 places this burden and cost on the water 
          corporations. Under this bill, the PUC will be required to audit 
          two utilities per year (10 water corporations would be affected 
          by this bill) for on-going costs of $226,000 annually. 

          Proposed Author Amendments: Allow the audit costs to be borne by 
          the water corporation instead of the PUC.