BILL ANALYSIS �
AB 2661
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Date of Hearing: April 22, 2014
ASSEMBLY COMMITTEE ON ELECTIONS AND REDISTRICTING
Paul Fong, Chair
AB 2661 (Bradford) - As Amended: March 28, 2014
SUBJECT : Political Reform Act of 1974: conflicts of interests:
Energy Commission.
SUMMARY : Limits the ability of a person to be appointed to the
California Energy Commission (CEC) if he or she received income
from a load serving entity in the two years prior to his or her
appointment. Moves conflict of interest provisions relative to
the CEC into the Political Reform Act (PRA). Specifically, this
bill :
1)Moves the following conflict of interest provisions that are
applicable to the CEC from the Public Resources Code to the
PRA, and gives the Fair Political Practices Commission (FPPC),
instead of the Attorney General, the authority to waive these
provisions if the interest is not sufficiently substantial to
affect the integrity of services that the state may expect:
a) A prohibition on a person from being a member of the CEC
if, during the two years prior to appointment to the CEC,
the person received any substantial portion of his or her
income directly or indirectly from any electric utility or
engages in the sale or manufacture of any major component
of any facility.
b) A prohibition on members of the CEC (except for the
Secretary of the Resources Agency and the President of the
Public Utilities Commission (PUC), who are ex officio
members of the CEC) from holding any other elected or
appointed public office or position.
c) A prohibition on members or employees of the CEC
maintaining a relationship as a partner, employer,
employee, or consultant with a person who acts as an
attorney, agent, or employee for a person other than the
state in connection with a judicial or other proceeding,
hearing, application, request for ruling, or other
determination; contract; claim; controversy; study; plan;
or other particular matter in which the CEC is a party or
has a direct and substantial interest.
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2)Expands the prohibition described in (1)(a) above, by
additionally prohibiting the appointment of an individual who
received a substantial portion of his or her income directly
or indirectly from any load serving entity, as defined, or
from any person engaged in or authorized to engage in
generating, transmitting, or distributing electricity in the
state.
3)Repeals the following restrictions on members and employees of
the CEC:
a) A prohibition on a member being employed by an electric
utility, applicant, or, within two years after he or she
ceases to be a member of the CEC, by any person who engages
in the sale or manufacture of any major component of a
facility.
b) A prohibition on a member or employee participating
personally and substantially in his or her official
capacity in a proceeding in which any of the following has
a direct or indirect financial interest:
i) The member or employee;
ii) The member or employee's spouse or minor child;
iii) The member or employee's partner; or,
iv) An organization for which the following are true:
(1) The organization is not a governmental
organization or an educational or research institution
that qualifies as a nonprofit organization; and,
(2) The member or employee is serving or has
served as an officer, director, trustee, partner, or
employee while serving as a member or employee of the
CEC or, for members of the CEC, during the two year
period prior to the member's appointment.
4)Defines the following terms, for the purposes of this bill:
a) "Facility" to mean the structure or equipment necessary
for generating, transmitting, or distributing electricity,
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including electric transmission lines and thermal, wind,
hydroelectric, and photovoltaic plants.
b) "Load serving entity" to mean a person, including an
electrical corporation, electric service provider, or
community choice aggregator, who sells or provides, or is
authorized to sell or provide, electricity to end users
located in the state.
c) "Major component" to mean any product or equipment
integral to facility construction or operation or to
electrical generation, transmission, or distribution.
5)Provides that the term "income," for the purposes of the
conflict of interest provisions that are specific to the CEC,
includes the following payments that are not otherwise
considered income for the purposes of the PRA: salary and
reimbursement for expenses or per diem, and social security,
disability, or other similar benefit payments received from a
state, local, or federal government agency, and reimbursement
for travel expenses and per diem received from a bona fide
nonprofit entity exempt from taxation under Section 501(c)(3)
of the Internal Revenue Code.
6)Makes technical and conforming changes.
EXISTING LAW :
1)Establishes the State Energy Resources Conservation and
Development Commission, also known as the CEC, within the
Resources Agency, consisting of five members appointed by the
Governor. Requires the CEC to be made up of members with the
following backgrounds:
a) One member with a background in the field of engineering
or physical science who has knowledge of energy supply or
conservation systems;
b) One member who is an attorney and a member of the State
Bar of California with administrative law experience;
c) One member with a background and experience in the field
of environmental protection or the study of ecosystems;
d) One member who is an economist with a background and
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experience in the field of natural resource management;
and,
e) On member from the public at large.
2)Prohibits a person from being a member of the CEC if, during
the two years prior to appointment to the CEC, the person
received any substantial portion of his or her income directly
or indirectly from any electric utility or engaged in the sale
or manufacture of any major component of any facility.
a) Defines "electric utility" to mean any person engaged
in, or authorized to engage in, generating, transmitting,
or distributing electric power by any facilities,
including, but not limited to, any such person who is
subject to the regulation of the PUC.
b) Defines "facility" to mean any electric transmission
line or thermal powerplant, or both electric transmission
line and thermal powerplant, regulated according to
specified provisions of the Public Resources Code.
3)Prohibits a member of the CEC from being employed by an
electric utility or applicant or, within two years after the
person ceases to be a member of the CEC, by any person who
engages in the sale or manufacture of any major component of
any facility.
4)Provides that the Secretary of the Resources Agency and the
President of the PUC are ex officio members of the CEC and,
with the exception of these two positions, prohibits members
of the CEC from holding any other elected or appointed public
office or position.
5)Creates the FPPC, and makes it responsible for the impartial,
effective administration and implementation of the PRA.
6)Prohibits a public official, pursuant to the PRA, from making,
participating in making, or in any way attempting to use his
or her official position to influence a governmental decision
in which the official knows or has reason to know that he or
she has a financial interest.
7)Provides that violations of the PRA are subject to criminal,
civil, and administrative penalties.
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FISCAL EFFECT : Unknown. State-mandated local program; contains
a crimes and infractions disclaimer.
COMMENTS :
1)Purpose of the Bill : According to the author:
Public Resources Code (PRC) Section 25205 specifies
conflicts of interest and incompatible activities only
applicable to Commissioners of the California Energy
Commission (CEC). The section was adopted when the
CEC was established, in 1974, prior to statutes that
created competitive electricity markets.
Also in 1974, voters enacted the Political Reform Act
(Government Code sections 81000 et seq.), which -
along with other later-enacted statutes - addresses
the same issues that are the focus of PRC Section
25205: prohibiting financial conflicts of interests of
public officials in public contracting, post-agency
employment, and prohibiting the holding of
incompatible public offices.
PRC Section 25205 is exceedingly vague and, therefore,
difficult to interpret. As a result, CEC Commissioners
decline to participate in matters that the language of
the statute may prohibit, but where no actual conflict
exists.
PRC Section 25205 may have made sense at the time of
its adoption, but the subsequent adoption and
development of generally-applicable conflicts law,
shifts in the electricity market structure, and the
ambiguity of many of its terms render it obsolete.
2)California Energy Commission Background : The CEC was created
by the Legislature in 1974 through the passage of AB 1575
(Warren), Chapter 276, Statutes of 1974 as the state's primary
energy policy and planning agency. The CEC's primary
responsibilities include (1) forecasting future energy needs;
(2) promoting energy efficiency and conservation by setting
appliance and building efficiency standards; (3) supporting
energy research that advances energy science and technology
through research, development and demonstration programs; (4)
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developing renewable energy resources and alternative
renewable energy technologies for buildings, industry and
transportation; (5) licensing thermal power plants 50
megawatts or larger; and (6) planning for and directing state
response to energy emergencies.
3)Effect of Moving Energy Commission Conflict Rules to the
Political Reform Act : Legislation that created the CEC was
signed into law two weeks prior to the adoption of the PRA by
the voters through the passage of Proposition 9 at the June
1974 statewide primary election. As a result, at the time
that the CEC was created, and its specific conflict of
interest rules were established, the FPPC did not exist, and
the state did not have the conflict of interest rules that
were enacted through the PRA and through subsequent amendments
to the PRA (although general conflict of interest rules
existed prior to the adoption of the PRA, the PRA enacted more
comprehensive rules, including a requirement for governmental
agencies to adopt a conflict of interest code).
Notwithstanding the fact that the CEC has its own set of
conflict of interest rules, the conflict of interest
provisions in the PRA apply generally to all public officials
and public agencies, including the CEC and its members and
employees. As noted above, this bill repeals certain
provisions of the CEC's conflict of interest rules that limit
the ability of members and employees of the CEC to participate
in governmental decisions that affect their financial
interests. The PRA's conflicts of interest rules, however,
will continue to apply to those governmental actions by the
CEC and its members and employees.
This bill proposes transferring certain other conflict of
interest rules that are specific to the CEC from the Public
Resources Code into the PRA. This move, along with
corresponding changes made in this bill, has two primary
effects. First, by including these restrictions in the PRA,
the FPPC will be primarily responsible for the enforcement and
interpretation of the CEC's conflict rules. Second,
violations of the CEC's conflict of interest rules will no
longer be subject only to felony penalties. Instead,
violations of these rules will be subject to the same
penalties that apply to other violations of the PRA, namely
misdemeanor criminal penalties, or civil or administrative
fines.
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4)Broadening of Energy Commission Conflict Rules & Suggested
Amendments : In addition to moving the CEC's conflict of
interest rules from the Public Resources Code to the PRA and
repealing certain conflict rules, this bill also broadens
existing restrictions on who can become a member of the CEC
such that former employees of electricity providers other than
electric utilities are also subject to restrictions on being
appointed to the CEC. The author argues that this expansion
appropriately reflects changes in the electricity market since
the CEC was created, and would result in restrictions that
apply to all electricity producers that are active in the
energy markets today.
The language of this bill, however, may inadvertently prohibit
a person from being appointed to the CEC if that person is
employed by a company that receives even a small portion of
its income from energy-related activities. This bill, for
instance, could prevent an employee of Home Depot from being
appointed to the CEC because Home Depot sells solar panels,
even though the sale of solar panels amounts to only a small
portion of Home Depot's overall business. In order to ensure
that this bill does not apply in such a broad manner,
committee staff recommends that this bill be amended to
provide that a person is prohibited from being appointed to
the CEC only if that person receives a substantial portion of
his or her income from an entity that receives a substantial
portion of its income from energy-related activities.
5)Income from Governmental Bodies and Conflicts of Interest :
Generally, the conflict of interest rules in the PRA do not
treat income from governmental entities as a potential source
for a conflict of interest. This bill, by contrast, provides
that income from governmental entities can be a source of a
conflict that would prevent a person from being appointed to
the CEC. According to the author's office, the reason for
making income from governmental entities a potential source
for a conflict of interest is that municipal utilities, which
are responsible for a sizeable share of electricity sales in
the state, are subject to CEC oversight with respect to their
procurement of renewable energy, energy efficiency program
progress, and implementation of incentive programs.
6)Political Reform Act of 1974 : California voters passed an
initiative, Proposition 9, in 1974 that created the FPPC and
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codified significant restrictions and prohibitions on
candidates, officeholders and lobbyists. That initiative is
commonly known as the PRA. Amendments to the PRA that are not
submitted to the voters, such as those contained in this bill,
must further the purposes of the initiative and require a
two-thirds vote of both houses of the Legislature.
7)Double-Referral : This bill has been double-referred to the
Assembly Natural Resources Committee. Due to upcoming
committee deadlines, if this bill is approved in committee
today, it would need to be heard in the Assembly Natural
Resources Committee next week. As a result, to ensure that
this bill can be heard in both policy committees before the
upcoming deadline, this bill should not be amended in
committee today. Instead, if it is the committee's desire
that this bill be amended, this bill should be passed out of
committee with the author's commitment to amend the bill
subsequent to passage by this committee.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file.
Opposition
None on file.
Analysis Prepared by : Ethan Jones / E. & R. / (916) 319-2094