BILL ANALYSIS 1
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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
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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