BILL ANALYSIS 1
1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
DEBRA BOWEN, CHAIRWOMAN
SCA 6 - Battin Hearing Date:
April 8, 2003 S
As Introduced: February 18, 2003 FISCAL C
A
6
DESCRIPTION
The California Constitution creates the California Public
Utilities Commission (CPUC) made up of five members appointed by
the Governor and confirmed by the Senate for staggered six-year
terms. The Legislature, with a two-thirds vote of each house,
may remove a CPUC commissioner for incompetence, neglect of
duty, or corruption. The Governor has no authority to remove a
confirmed commissioner.
This Constitutional Amendment provides for a five-member
commission popularly elected by district for six-year terms.
The Legislature shall establish five contiguous districts of
reasonably equal population that are updated after every
national census. A commissioner would be limited to a maximum
of two terms.
This Constitutional Amendment requires the Governor to appoint
members to fill vacancies on the CPUC. Such appointments must
be confirmed by the full Senate and the full Assembly.
This Constitutional Amendment deletes the authority of the
Legislature to remove a commissioner.
BACKGROUND
When the predecessor to the CPUC, the Railroad Commission, was
first established in 1879, it was comprised of three popularly
elected members. Because of the extraordinary influence of the
railroads, both as landowners and near monopolistic
transportation companies, the elected Railroad Commission proved
inadequate at checking the power of the railroads. Resentment
of the railroads grew, inspiring reform efforts in both the
Republican and Democratic parties that gave birth to the
Progressive movement. The Progressives won a near-majority in
the Legislature in 1909. In 1910, Progressive candidate Hiram
Johnson was elected Governor. This led to 23
Progressive-sponsored constitutional amendments in 1911, all but
one of which was approved by the voters.
One of those constitutional amendments created the CPUC that
Californians are familiar with today. The theory behind the
creation of the CPUC was appointed commissioners would be
independent of improper, corrupt, or partisan political
influence, and that staggered terms would provide for greater
stability. The requirement for Senate confirmation was added in
1946.
Thirteen mostly southern states have elected Public Utility
Commissions including Arizona and Georgia. Of those, nine are
elected statewide, two are elected by district, and two are
elected by the Legislature.
SCA 21 (Solis) was introduced in 1995 and sought to create a
publicly-elected CPUC, much as this bill does. That measure
passed this committee, but subsequently died in a conference
committee.
COMMENTS
1.The Fundamental Question . The CPUC was created to protect
ratepayers from utilities that were established as monopolies
to deliver what the Legislature deemed to be essential
services such as water, gas, electricity, telephone service,
and more.
The question posed by this measure is which system for placing
commissioners on the CPUC will provide ratepayers with the
most independent, responsive, and publicly accountable CPUC
that will protects the interests of all Californians?
Does the current system, where the CPUC Commissioners are
appointed, truly insulate commissioners from third-party and
partisan political influences, or does it simply hide those
influences and make the CPUC unaccountable to ratepayers and
to voters?
Will the system proposed by this measure make Commissioners
more accountable for their decisions, since they have to stand
for election, and assure they are truly acting in the public
interest? Or will that accountability be negated by the need
to raise money to run for office and the likelihood that the
majority of the contributions will come from the very entities
the candidates will be regulating once they become
commissioners?
2.Elected vs. Appointed . The obligation of the CPUC is to
follow the law and implement the policies established by the
Legislature signed into law by the Governor. The main "check
and balance" on the CPUC is the court system, though the
Legislature and the Governor have the option of enacting laws
that have the effect of overturning CPUC decisions or
policies.
Given the expense of court appeal, the historic deference
given to the CPUC by the courts, the discretion the court has
as to whether to hear a particular case, and the reality that
any party taking the CPUC to court will inevitably have
ongoing dealings with the same CPUC, the effectiveness of
judicial review of the CPUC is clearly limited.
The current system where commissioners are appointed by the
Governor and confirmed by the Senate is intended to insulate
the CPUC from political concerns. Raising utility rates is
never popular and always politically difficult, yet under
certain circumstances, it may be entirely reasonable. An
independent, non-elected commissioner would be able to make
that decision without looking over their shoulder at the next
election. On the other hand, one could argue that looking
over their shoulder may be precisely the "check and balance"
needed to ensure commissioners advance the public interest.
A study published in the Yale Journal of Regulation compared
the effect of an elected versus an appointed public utility
commission on electric rates. The study considered previously
published studies and found that some studies provided weak
evidence that elected commissions keep electric rates down,
while other studies reached the opposite conclusion. The Yale
study then considered whether elected commissions tended to
favor residential customers over industrial or commercial
customers. Contrary to expectations, the study concluded
there was no difference.
3.Will This Make The CPUC Truly Accountable To Voters &
Ratepayers? Part of the rationale for this measure is that it
will make CPUC commissioners more accountable to ratepayers
and to voters. However, just how accountable commissioners
will be is questionable for two specific reasons.
First, this measure limits a person to serving two terms as a
CPUC commissioner, meaning a sitting commissioner will only
have to defend their actions as a commissioner before the
voters on one occasion. Can voters be confident that lame
duck commissioners will represent their interests? The
author and committee may wish to consider whether the term
limit provision of this measure is appropriate.
The author and committee may also wish to consider whether a
six-year term of office is appropriate for an elected
commissioner. Shorter terms (six two-year terms or three
four-year terms) would certainly make a commissioner
accountable to voters on more occasions. However, such a
system would require a commissioner to spend more time raising
money to run for office, thus arguably limiting their
effectiveness and increasing the number of questions about
whether their regulatory decisions are being unduly influenced
by their campaign contributors.
Second, this measure fails to provide a mechanism for removing
a commissioner from office. The California Constitution
provides for the impeachment of state officers elected on a
statewide basis, members of the State Board of Equalization,
and judges of state courts for misconduct in office (Article
IV, Section 18). The Constitution also provides a recall
mechanism (Article II, Section 14). The author and committee
may wish to consider amending the measure to provide for
similar treatment of CPUC commissioners.
4.Third Party Influence & Campaign Contributions . While
California has changed mightily since the voters turned the
CPUC into an appointed, rather than an elected, body in 1911,
one thing that hasn't changed is the fact that the decisions
made by the CPUC involve huge sums of money and effect every
man, woman and child in the state. CPUC commissioners aren't
policy makers as much as they are regulators and ratemakers.
Their decisions about how to set rates, where to apportion a
particular burden, whether to enforce a particular law or
regulation, and much more will effect every California
resident in one way or another.
Utilities and businesses whose issues come before the CPUC -
sometimes on a daily basis - can be expected to be actively
involved in CPUC commissioner campaigns. Arguably, any
counterbalance to the utility influence would be limited
because the effected groups (e.g. ratepayers) probably won't
be able to compete with utility and business interests in the
same manner.
A similar question is faced the members of the Board of
Equalization (BOE), who decide on tax appeals brought by
businesses who may also have contributed money to campaigns,
and by the elected Insurance Commissioner, who sets rates on a
wide variety of insurance issues. Campaign contributions from
companies that come before the BOE are limited, but
contributions to Insurance Commissioner candidates aren't
barred or limited by law. This measure follows the latter
approach. The author and committee may wish to consider which
approach is most appropriate as it applies to CPUC
Commissioners.
5.District Elections . This measure provides for district
elections with the Legislature establishing five contiguous
districts of roughly equal population. District residence is
not required to be eligible for election.
California's electric utilities each have distinct service
territories, roughly corresponding to San Diego, Los Angeles,
and Northern California. It's not hard to conceive of
districts in which one of those utilities provides service to
the vast majority of voters. The telecommunications industry
is different in that SBC provides service to over two-thirds
of California's local telephone customers, though Verizon is
concentrated in the Los Angeles area. To the extent a
district is dominated by a particular utility, the author and
committee may wish to consider whether the commission
representative from that district could be expected to be
objective with regard to that utility.
One of the purposes of district elections is to ensure that
regional points of view are heard. However, with respect to
utility issues, it's questionable as to whether the regional
differences are large enough to warrant district, rather than
at-large, elections. The author and committee may wish to
consider whether the five commissioners should be elected
statewide and not by district. In the converse, the author
and committee may wish to consider , if the district approach
is maintained, whether the elected commission should be
required to live in the district he or she is elected to
serve.
6.Compensation . The measure fails to provide for a level of
compensation for commissioners. The California Constitution
provides for compensation for statewide office holders,
members of the Board of Equalization, and Legislators to be
set by the California Citizens Compensation Commission
(Article III, Section 8). The author and committee may wish
to consider amending the measure to provide for similar
treatment of CPUC commissioners.
7.Campaign Contribution Limits . It's not clear whether the a
person running to become a CPUC Commissioner would be running
for an elective state office or a statewide elective office.
This distinction determines whether the $3,000 or $5,000
individual campaign contribution limit applies and whether the
$6,000 or $10,000 small contributor committee limit applies.
The author and committee may wish to consider clarifying this
issue.
8.Partisan Or a Partisan Office? It's not clear whether the
office of CPUC commissioner is a partisan or non-partisan
office. The election timetable contemplated in the measure
will put the issue before the voters in the March 2004
election. If approved the Legislature this year and by the
voters in March 2004, the measure will create the five
districts and voters will choose commissioners in the November
2004 election.
If the office is partisan, there will have to be a primary
election, which isn't factored into the timetable associated
with this bill. If the office is non-partisan, then the
highest vote getter is the winner if he or she receives more
than 50% of the votes. If no candidate has more than 50%,
then there's a run-off between the two top vote getters. The
author and committee may wish to consider clarifying the
measure as to whether the positions should be partisan or
non-partisan.
9. Staggered Terms. The measure provides for staggered terms,
but it does not state which members get which terms. The
author and committee may wish to consider clarifying this
portion of the bill.
10. Multiple-Referral . The
Senate Rules Committee has asked that if this bill is
approved, that it be sent back to the Senate Rules Committee.
POSITIONS
Sponsor:
Author
Support:
None on file
Oppose:
None on file
Randy Chinn
SCA 6 Analysis
Hearing Date: April 8, 2003