BILL ANALYSIS                                                                                                                                                                                                              1
          1





                SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
                               DEBRA BOWEN, CHAIRWOMAN
          

          AB 1389 -  Ridley-Thomas                          Hearing Date:   
          July 8, 2003                    A
          As Proposed to be Amended               FISCAL                B

                                                                        1
                                                                        3
                                                                        8
                                                                        9

                                      DESCRIPTION
           
           Current law  defines public utilities as common carriers,  
          telephone corporations, electric corporations, gas corporations,  
          and water corporations.

           Current law  requires every public utility to furnish and  
          maintain such service as is necessary to promote the safety,  
          health, comfort, and convenience of its patrons, employees, and  
          the public.

           This bill  finds that: 

          1.Public utilities serve a vital function, providing basic  
            infrastructure essential to the efficient conduct of commerce  
            and societal interaction;
          2.In exchange for the grant of public utility status, those  
            utilities bear a heightened responsibility for contributing to  
            the public interest, including consideration of the benefits  
            benefits of public utility employment to the state and its  
            residents;
          3.It is proper state policy to encourage the employment of  
            Californians by California's public utilities.

          This bill requires the California Public Utilities Commission  
          (CPUC) to annually report to the policy committees of the Senate  
          and Assembly, and to make publicly available through the  
          Internet, information for each public utility showing:

          1.The number of customers served in California;
          2.The percentage of customers residing in California;











          3.The number of California residents employed, including those  
            employed by contractors;
          4.The percentage of each company's workforce that lives in  
            California;
          5.The capital investment for the year.

                                      BACKGROUND
           
          Every public utility is subject to the jurisdiction of the CPUC,  
          subject to preemption by federal law or exemption by state  
          statute.  The regulatory bargain has historically been one where  
          the government grants an exclusive franchise to a utility in  
          exchange for the utility agreeing to have its profits limited,  
          to meet service quality standards, and to serve all qualified  
          customers.

          The concern over utility employment started in the  
          telecommunications industry as telephone companies, which are  
          public utilities, grew into multi-state operations.  Not  
          surprisingly, this growth has provided opportunities for  
          companies to lower costs through economies of scale.  Telephone  
          companies have sought to lower their costs by consolidating  
          activities, such as call centers and operator service centers,  
          and moving them to other states and other countries.  

                                       COMMENTS

          1.California Guarantees You Customers, So . . .  .  The basis for  
            this bill appears to be that because public utilities benefit  
            from being designated as such, they should be required to  
            publicly report on how many Californians they employ, how  
            they're investing in California, and much more.

            This rationale is strongest with regard to traditional  
            utilities where regulation has either barred competitors or  
            given the public utilities a particular advantage, such as  
            local telephone companies like SBC and Verizon.  This policy  
            basis is less sound for public utilities where public utility  
            status hasn't given them the traditional advantages, such as  
            cellular telephone service. However, there remains the  
            argument that the state should encourage support for  
            businesses that employ Californians, and under that basis the  
            inclusion of non-traditional public utilities may be  
            reasonable, particularly when the requirement of this bill is  










            merely to publicly report on a companies capital investment,  
            employment practices, and customers.

           2.A Balancing Act  .  The balancing act between wages and prices  
            has always been and will always be a difficult, inexact  
            science.  Customers like low prices, but presumably those same  
            customers would like to enjoy high wages in their jobs.  The  
            extent to which wages and salaries affect the price of goods  
            and services no doubt varies by company and by industry.   
            Earlier versions of this legislation called on the state, when  
            exercising its proprietary role as a purchaser of goods and  
            services from public utilities, to act to promote the  
            employment of California residents.  That provision is no  
            longer in the bill.

           3.Proprietary Information  .  This bill requires specific  
            information be reported to the Legislature regarding each  
            utilities' employment, customer, and investment numbers and  
            practices.

            Whether this information is proprietary and/or contains trade  
            secret information is an open question, though because the  
            information required is of such a very general nature (e.g.  
            number of customers in California, total dollars invested in  
            California in a particular year), it's hard to see how such  
            information could be useful to competitors.

            Much more sensitive information than that required by this  
            bill, such as a company's gross profit margin, is currently  
            publicly available. For example, the federal Securities and  
            Exchange Commission has promulgated Regulation FD to require  
            much more public dissemination of material financial  
            information provided to securities analysts. 

           4.What About Small-Market Or One-Market Companies?   Some small  
            market utilities are concerned that because they are so small  
            and offer service in such limited areas, the information the  
            CPUC is required to release about them will be very useful to  
            the large public utilities with which they compete.   The  
            author and committee may wish to consider  amending the bill to  
            eliminate utilities of a certain size or structure from the  
            provisions of this measure.

           5.How Is The CPUC Supposed To Get This Information?   The bill  










            requires the CPUC to report information on the number of  
            customers each utility serves, the percentage of customers  
            residing in California, the percentage of each company's  
            workforce that lives in California, etc.  However, the bill  
            doesn't require the affected utilities to provide this  
            information to the CPUC.  Is the CPUC supposed to be  
            responsible for determining how many customers and employees  
            each company may have throughout the U.S., or would it be more  
            efficient to require the public utilities to provide this  
            information to the CPUC.   The author and committee may wish to  
            consider  clarifying this issue in the bill.  Furthermore,  the  
            author and committee may wish to consider  how the issue of  
            sister and subsidiary companies should be addressed, how  
            regulated and unregulated entities of the same company are  
            treated, and whether the bill's limitation to "domestic"  
            employees and "domestic" customers will provide an incomplete  
            picture of a company's activities.

           6.Haven't We Met Before?   The question of whether California  
            should encourage the employment of Californians by public  
            utilities has been broached several times over the years,  
            though past efforts have been narrowly focused on local  
            telephone service. 

            The Assembly passed HR 92 (Goldberg) in 2002, resolving that  
            a) it's proper state policy to encourage employment of  
            Californians, and discourage employment of non-Californians,  
            by California telephone corporations, and b) it's the  
            preference of the state of California, consistent with the  
            Constitution, that tasks necessary for rendering local  
            telephone service be performed by Californians.  

            Last year, the Governor issued Executive Order D-64-02 which  
            instructed state agencies to give preference to retaining  
            contracts with California companies.

            The Governor vetoed AB 1658 (Napolitano) in 1993, which sought  
            to establish California policy that, consistent with the  
            Constitution, the tasks necessary for rendering local  
            telephone service to Californians be performed by  
            Californians.

            That same year, the Legislature passed SCR 11 (Rosenthal)  
            which resolved that local telephone companies should be  










            encouraged to maintain and stimulate a larger permanent labor  
            force in California.  The resolution further urged the CPUC to  
            consider the impact on the state's workforce when determining  
            levels of earnings for local telephone companies and when  
            evaluating any mergers, divestitures, or other significant  
            changes in control of those companies.

                                    ASSEMBLY VOTES
           
          Assembly Floor                     (46-30)
          Assembly Appropriations Committee  (17-7)
          Assembly Utilities and Commerce Committee                       
          (9-4)









































                                       POSITIONS
           
           Sponsor:
           
          Communication Workers of America

           Support:
           
          California Coalition of Utility Employees
          California Conference Board of the Amalgamated Transit Union
          California Conference of Machinists
          California Labor and Telecommunications Coalition
          Engineers and Scientists of California, Local 20, IFPTE, AFL-CIO
          Hotel Employees & Restaurant Employees International Union
          Professional and Technical Engineers, Local 21, IFPTE, AFL-CIO
          Teamsters
          United Food & Commercial Workers Region 8 States Council

           Oppose:
           
          AT&T
          California Association of Competitive Telecommunications  
          Companies
          California Cable & Telecommunications Association
          Cellular Telecommunications & Internet Association
          MCI Worldcom
          Pac West Telecomm, Inc.
          Sprint

          

























          Randy Chinn 
          AB 1389 Analysis
          Hearing Date:  July 8, 2003