BILL ANALYSIS
SB 201
Page 1
Date of Hearing: July 9, 2001
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Roderick D. Wright, Chair
SB 201 (Speier) - As Amended: July 5, 2001
SENATE VOTE : 27-10
SUBJECT : Public Utilities Commission: division to represent
interest of customers and subscribers.
SUMMARY : This bill deletes the repeal of the provisions in the
Public Utilities Code (PU Code) that provide for an independent
division within the California Public Utilities Commission
(CPUC) chartered with representing public utility consumers in
commission proceedings. Specifically, this bill :
1)Removes the January 1, 2002 sunset date in Section 309.5 of
the PU Code and retains the independent Office of Ratepayer
Advocates (ORA) beyond that date.
2)Provides that the Director of ORA, an appointee of the
Governor subject to Senate confirmation, shall be paid a
salary equal to that of the five appointed CPUC commissioners.
3)Transfers one million eight hundred fifty thousand dollars
($1,850,000) from CPUC Reimbursement Account in the General
Fund to CPUC Ratepayer Advocate Account for expenditure in
2001-02 fiscal year for enhancement of consumer and ratepayer
advocacy before CPUC.
EXISTING LAW : Provides for an independent consumer
representative within CPUC consisting of and chartered with:
1)a director appointed by the governor;
2)assignment of personnel to the division sufficient to ensure
that customer and subscriber interests are fairly represented
in all significant proceedings;
3)separation of advocacy personnel from any advisory role to any
decision maker on the same case or proceeding;
4)discovery rights inclusive of the division's ability to compel
the production or disclosure of any information it deems
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necessary to perform its duties from entities regulated by the
commission, with a resolution process in place for any
objections to such requests by an assigned commissioner, or in
the absence of a proceeding, by the president of CPUC;
5)a separate budget allocation from that of CPUC to be utilized
exclusively by the division in the performance of its duties.
FISCAL EFFECT : This bill requires an additional one million
eight hundred fifty thousand dollars in the 2001-02 fiscal year
budget for staff augmentation.
COMMENTS :
Current Role of ORA and History of Section 309.5 Creating the
Division.
The Office of Ratepayer Advocates was created by statute in 1996
and became independent from
CPUC in January of 1997. Up to that time a division existed
within CPUC representing consumer interests, and the division's
budget and personnel were determined by CPUC. It was determined
that a conflict was apparent by having consumer interests
represented by a division of a state agency where there was no
independence. Section 309.5 of the PU Code provided for ORA's
independence, its separate budget allocation and for the
presumption that staffing should be adequate to fairly represent
consumer interests in CPUC proceedings. The enabling language
also provided ORA with significant discovery rights before CPUC,
but with a check and balance provision in the event that an
entity regulated by CPUC objected to providing responses to
discovery requests. In proceedings with an assigned
commissioner, objections to ORA discovery requests are to be
decided by the assigned commissioner. Where no proceeding is
yet open or prior to assignment of a commissioner, such
objections will be resolved by the president of CPUC according
to the existing statute.
Since 1997 ORA participated in proceedings opened by CPUC, by
other parties, and in cases initiated by ORA itself. CPUC has
upheld that "ORA shall have discovery rights, as do other
parties to the proceeding. It may also rely on Section 309.5
(e)?" (Decision (D.) 01-02-041). Section 309.5 (e) is the
portion of the PU Code which provides ORA broader rights to
compel production or disclosure of "any information it deems
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necessary to perform its duties", subject to review of any
objections by an assigned commissioner or president of CPUC.
Finally, Section 309.5 carried a sunset date of January 1, 2002
unless extended by statute. This bill seeks to repeal the
sunset and enhance ORA staffing. There is no opposition to this
bill.
ORA Today.
In its support letter, California State Employees Association
(CSEA) expresses its concern "with the gradual phasing out of
the Office of Ratepayer Advocates", citing that "Several years
ago this office took the brunt of severe budget cuts and has
never fully recovered." CSEA's letter is particularly cogent,
as absent this legislation, independent consumer representation
disappears at CPUC just as the specter of competition is proving
to be a failure in the energy markets and to be virtually
non-existent in the local telecommunications market in this
state. Many states actively pursue market abuse prevention and
service quality assurances through special consumer advocacy
agencies and California would be left far behind most other
states regarding utility consumer advocacy without ORA's
existence. In Illinois recent legislation created hundreds of
new positions and a special unit of the Attorney General's
office specifically to handle telecommunications consumer
protection areas (energy consumer protection advocacy already
existed there) in the rate de-regulated environment.
Market changes in California in gas, electricity and
telecommunications have created complex situations for
consumers. There has been a dramatic rise in consumer
complaints about market abuse, poor service quality and lack of
competition for basic services in the telecommunications area.
ORA contributed significantly to a market abuse complaint case
raised in 1998 by Utility Consumer Action Network (UCAN), and in
the presiding officer's decision in that case (C. 98-04-004),
the areas specifically addressed by ORA testimony were upheld.
Subsequently, ORA filed two complaints on its own after initial
investigation, one dealing with a Prompted Repeat Dialing
Service and one dealing with long repair intervals for basic
residential telephone service. In both of these two latter
cases, ORA had to independently conduct discovery over initial
objections of a regulated utility.
CPUC is an administrative agency that formerly handled utility
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matters largely through evidentiary rate cases vested with
determining both rate levels and service areas. With rate
regulation extremely relaxed for energy and telecommunications
markets, the largest areas of concern include market abuse and
service quality. The energy market is dysfunctional by anyone's
measure at this stage, and ORA participated in numerous rate and
other proceedings for both gas and electric service in recent
years, contributing significantly to the outcomes of many cases.
On the telecommunications side, in the Prompted Repeat Dialing
case ORA intervened after a service was authorized through an
informal process at CPUC and a rate increase was granted. In
the course of reviewing internal utility documents, ORA
determined and brought forth in the evidentiary proceeding that
much of this information had not been disclosed to CPUC in the
informal process, including information that demonstrated
violation of various PU Code sections. Absent ORA's existing
discovery rights, these violations might never have come to
light, despite widespread consumer complaint about the service,
including during the period the service was subject to an
informal market trial. Virtually all residential and most small
commercial consumers in California are still faced with a
monopoly providing them with their basic telephone service and
with only one utility offering them gas or electric service.
The types of market abuse and service neglect these market
structures can facilitate render independent consumer
representation a desirable necessity in CPUC proceedings.
SB 201 and ORA Tomorrow.
While ORA advocates in other ways, it is largely vested with a
responsibility to adequately and fairly represent utility
consumer interests in evidentiary proceedings. This bill
ensures ORA's continued ability to perform such advocacy by
eliminating the sunset provision. This bill seeks to clarify
the legislative intent behind Section 309.5 by eliminating
language that has been interpreted by some entities to limit
ORA's role to open CPUC proceedings. Since CPUC has upheld
ORA's ability to file complaints and initiate proceedings in
various decisions and orders, this change is intended to clarify
the statute to prevent further misinterpretation. This
clarification is similar to that proposed in AB X2 57 (Wiggins)
for Section 11652 of the PU Code relating to municipal utility
district voting requirements, which was also subject to numerous
interpretations. It is sometimes claimed that ORA's ability to
open a proceeding can competitively disadvantage one competitor
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versus another, but that is actually a function of whether or
not both entities are regulated. Especially in the complex
telecommunications market, the term "competitor" is sometimes
misused to describe unregulated market participants with
virtually no market share in the regulated market. ORA's
discovery rights extend only to utilities regulated by CPUC.
Sempra Energy, in its opposition letter, cites to the deletion
of "in commission proceedings" in describing ORA's advocacy role
in Section 309.5 of the PU Code, as a concern that ORA may
advocate independent of the Commission before other regulatory
bodies, such as Federal Energy Regulatory Commission (FERC) and
Federal Communications Commission (FCC). Currently, ORA does
not participate in proceedings before these federal regulatory
agencies and currently ORA cannot appeal CPUC decisions in the
courts. The author's intent with the language change was to
clarify ORA's discovery rights, whether or not a CPUC proceeding
was open, not to expand ORA's role into the federal arena beyond
its current participation.
In addition to clarifying the existing role of ORA and repealing
the sunset of the statute providing ORA's charter, this bill
also seeks to augment staffing in ORA and to provide that the
director's salary is commensurate with those of the five CPUC
commissioners. These last two provisions go to ORA's ability to
fairly represent consumer interests. ORA's staff today is
significantly smaller than the former internal CPUC division
that represented consumer interests. ORA's ability to obtain
and retain adequate, skilled staff to represent consumer
interests on such complex matters as utility costing,
ratemaking, market abuse and service quality will be better
enabled by the additional staffing this bill's funding would
provide. Also, since ORA is an independent office with its
director appointed by the Governor subject to Senate approval
just as CPUC commissioners are appointed, it is reasonable that
ORA's director should have a commensurate salary. ORA addresses
all utility areas CPUC addresses, with the exception of
transportation matters, and its director must have significant
technical expertise in addition to managerial skills to
effectively lead the office.
Staff recommends:
ORA performs a necessary consumer advocacy role unique by virtue
of its independence and its position as a state office. The
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change in regulatory focus from rate-setting to market-based
regulation has demonstrated a need to prevent market abuse and
deteriorated service quality. ORA is uniquely positioned beyond
the interests of consumer groups with stated constituencies and
private funding requirements as an independent state office.
The continuation of ORA's role will provide a much needed
benefit to hard hit utility consumers in this state and the
staff augmentation provided for this in bill will best serve
those long term consumer interests.
The author may wish to clarify that deleting the "in commission
proceedings" provision from Section 309.5, it is not intended to
enable ORA to participate in proceedings before other regulatory
bodies or the courts, except to the extent ORA is a party to a
proceeding appealed or otherwise brought before the additional
body as the result of a CPUC proceeding.
REGISTERED SUPPORT / OPPOSITION :
Support
Office of Ratepayer Advocates (ORA)
The Utility Reform Network (TURN)
Utility Consumer Action Network (UCAN)
California State Employees Association (CSEA)
Opposition
Sempra Energy (unless amended)
Analysis Prepared by : Kelly Boyd / U. & C. / (916) 319-2083