BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Kevin de Le�n, Chair
SB 900 (Hill) - Public Utilities.
Amended: April 8, 2014 Policy Vote: EU&C 9-0
Urgency: No Mandate: No
Hearing Date: April 28, 2014 Consultant:
Marie Liu
This bill meets the criteria for referral to the Suspense File.
Bill Summary: SB 900 would require the California Public
Utilities Commission (CPUC) to consider safety in electrical and
gas rate cases.
Fiscal Impact:
Annual costs between $1.2 million and $2.2 million from the
Public Utilities Commission Utilities Reimbursement Account
(special) for increased safety analysis in ratesetting
cases.
Annual costs of approximately $600,000 from the Public
Utilities Commission Utilities Reimbursement Account
(special) to conduct additional hearings for ratesetting
cases.
Background: Under existing law, the CPUC is responsible for
establishing electrical and gas rates for investor-owned
utilities (IOUs) that allow the utilities to recover appropriate
costs for distribution, transmission, and/or generation and earn
a reasonable rate of return for their shareholders. IOU rates
are determined in ratesetting proceedings, which include general
rate cases (GRCs). These proceedings may be conducted entirely
through a written comment or through an evidentiary hearing
process.
On November 14, 2013, the CPUC opened a proceeding regarding how
to best consider safety in GRCs (R. 13-11-006). The CPUC intends
that the rulemaking will determine whether and how the CPUC
should use a risk-based decision-making framework to evaluate
safety and reliability improvements in GRC applications. The
rulemaking will also develop necessary performance metrics and
evaluation tools and modify the documentation requirements for
the IOUs to better evaluate safety provisions.
SB 900 (Hill)
Page 1
Proposed Law: This bill would require the CPUC to develop formal
procedures to consider safety in electrical and gas rate cases.
The procedures must include requirements for the following:
A CPUC staff report on the safety performance of the
utility that would be entered into the record of the rate
case;
An evaluation of the quality of the risk analysis for
safety-related revenue requests that would be entered into
the record of the rate case;
The making of findings as to the safety benefits of
safety-related proposed expenditures; and
Monitoring of the safety performance of the utility.
Staff Comments: This bill impacts CPUC workload in two ways:
first, by increasing the necessary workload involved in a
proceeding to make the required safety-related analyses; and
second, by increasing the number of proceedings that must be
conducted through hearings instead of written comments.
1.Recently, when the CPUC conducted PG&E's 2014 GRC, they applied
an approach to safety evaluation similar to what is required by
this bill. The additional analysis in this case necessitated the
equivalent of six additional PYs. The CPUC has recently
redirected 2.5 existing PYs to support safety considerations in
GRCs. Considering the variety and scope of ratesetting cases,
the experience in the PG&E GRC, and the recent redirection of
2.5 PYs to work on safety considerations in GRCs, the CPUC is
likely to need between 10 and 19 additional staff in the Safety
and Enforcement Division (3 Senior Utilities Engineer, up to 5
Utilities Engineers, 4-5 PURA III and V, 2-5 Financial Examiners
III and IV, and 1 Public Utilities Counsel) for an annual cost
between $1.2 and $2.2 million. The actual cost depends on the
number of hearings the CPUC will need to conduct (see comment
#2).
Staff notes that a CPUC staff proposal was recently released on
April 17, 2014 in the open proceeding regarding safety
considerations. The staff proposal included procedures that are
similar to what is required under this bill, such as a new phase
in GRCs to consider safety provisions that includes a staff
report assessing the technical merits and risk analyses of the
IOU's safety proposals. The staff proposal also includes a
requirement for the IOUs to prepare an annual Risk Mitigation
SB 900 (Hill)
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Accountability Report that examines the projected and actual
benefits and costs of its risk mitigation programs. This recent
staff proposal indicates that the CPUC will likely request
additional appropriations to implement new safety procedures
regardless of the outcome of this bill. The more similar the
rulemaking becomes to the requirements in this measure, the more
the costs should be attributed to the CPUC's own decisions
rather than this bill.
2.This bill also has a fiscal impact by indirectly changing the
manner which the CPUC handles ratesetting cases. This bill would
require the CPUC to incorporate safety considerations into all
rate cases in a specified manner, including that certain
findings need to be entered into the proceeding's record. Since
records are only established for proceedings conducted through
hearings, this bill indirectly eliminates the option for the
CPUC to conduct a ratesetting case through written comment.
Staff estimates that a quarter to half of all ratesetting
proceedings are handled through written comment. Conducting
these proceedings through a hearing instead of written comment
would increase staff workload. The CPUC estimates that it would
need approximately 5 additional positions (2 administrative law
judges, 1 legal secretary, 1 legal assistance, 1 court reporter)
to conduct all ratesetting proceedings though hearings. Staff
notes that such a change to the CPUC's proceeding process is not
the author's intent.