BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 1364|
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THIRD READING
Bill No: SB 1364
Author: Huff (R)
Amended: 5/25/12
Vote: 21
SENATE ENERGY, UTIL. & COMMUNIC. COMMITTEE : 13-0, 4/24/12
AYES: Padilla, Fuller, Berryhill, Corbett, De Le�n,
DeSaulnier, Emmerson, Kehoe, Pavley, Rubio, Simitian,
Strickland, Wright
SENATE APPROPRIATIONS COMMITTEE : 7-0, 5/24/12
AYES: Kehoe, Walters, Alquist, Dutton, Lieu, Price,
Steinberg
SUBJECT : Water corporations
SOURCE : City of Claremont
City of Placentia
DIGEST : This bill subjects water corporations with more
than 2,000 service connections to the same audit powers of
the Public Utilities Commission (PUC) as electrical, gas,
and telephone corporations, and requires water corporations
with more than 2,000 service connections to include more
specific information in its notices to ratepayers regarding
potential rate increases. This bill allows the PUC to
direct a water corporation with more than 2,000 service
connections, or an electrical, gas or telephone
corporation, to utilize the services of an independent
auditor, who shall be selected and supervised by that
CONTINUED
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water, electrical, gas, or telephone corporation.
ANALYSIS : Existing law, the PUC has regulatory authority
over public utilities, including electrical corporations,
gas corporations, telephone corporations, and water
corporations, as defined. The Public Utilities Act
authorizes the PUC, each commissioner, and each officer and
person employed by the PUC at any time to inspect the
accounts, books, papers, and documents of any public
utility. This authorization applies to inspections of the
accounts, books, papers, and documents of any business that
is a subsidiary or affiliate of, or a corporation that
holds a controlling interest in, an electrical, gas, or
telephone corporation.
Existing law authorizes the PUC to fix the rates and
charges for every public utility, and requires that those
rates and charges be just and reasonable.
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.
This bill requires 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 will also be allowed to require
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that the water corporation also notify the customers of the
PUC's decision on its rate change application.
This bill subjects water corporations with more than 2,000
service connections to the same reporting and auditing
requirements currently imposed on electrical, gas, and
telephone corporations.
Background
Water utility service is a monopoly subject to full rate
regulation by the PUC. California has 135 water utilities,
generally classified by their number of service
connections, including 10 Class A companies with more than
10,000 service connections; 6 Class B companies with more
than 2,000 service connections, 22 Class C companies having
more than 500 service connections, and 83 Class D companies
with less than 500 service connections.
Customer Notice of Rate Increases . The standard process
for rate approval is a General Rate Case (GRC), which water
corporations are required to file every three years.
Existing law and PUC rules require utilities to do a bill
insert or other mailed notice to customers of any rate
change proposal filed with the PUC for approval. The goal
is to make customers aware of potential increases and
enable their participation in PUC review of the proposed
increase and scrutiny of the utility's expenditures given
as justification for the increase.
Exceptions to the customer notice requirement include rate
changes proposed in Advice Letters to implement a rate
increase already approved in a GRC. For example, a GRC may
approve various capital projects and authorize the utility
to implement the rate increase to cover the costs of the
project by filing an Advice Letter after construction is
completed.
Affiliate Transactions . Transparency and reporting
requirements related to a regulated utility's transactions
with its affiliates are to ensure that ratepayers are not
subsidizing parts of a company's business not related to
the provision of utility service. Although existing law
does not list water corporations among the utilities
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subject to these requirements, the PUC's Decision
10-10-019, adopted in October 2010, implements
substantially the same requirements for Class A and B water
corporations.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriations Committee, ongoing
costs of $225,000 from the PUC Utilities Reimbursement
Account (special fund) beginning in 2013-14 for audit
responsibilities.
SUPPORT : (Verified 5/29/12)
City of Claremont (co-source)
City of Placentia (co-source)
City of Cypress
City of Stanton
Division of Ratepayer Advocates
OPPOSITION : (Verified 5/29/12)
Public Utilities Commission
RM:do 5/29/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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