BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 118|
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UNFINISHED BUSINESS
Bill No: SB 118
Author: Bowen (D)
Amended: 6/19/03
Vote: 21
SENATE ENERGY, U.&C. COMMITTEE : 8-0, 4/22/03
AYES: Bowen, Morrow, Alarcon, Battin, Dunn, McClintock,
Murray, Sher
NO VOTE RECORDED: Vasconcellos
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SENATE FLOOR : 37-0, 5/22/03 (Passed on Consent)
AYES: Aanestad, Ackerman, Alarcon, Alpert, Ashburn,
Battin, Bowen, Brulte, Burton, Cedillo, Chesbro, Denham,
Ducheny, Dunn, Figueroa, Florez, Hollingsworth, Johnson,
Karnette, Knight, Kuehl, Machado, Margett, McClintock,
McPherson, Morrow, Murray, Oller, Ortiz, Perata,
Poochigian, Scott, Sher, Soto, Torlakson, Vasconcellos,
Vincent
NO VOTE RECORDED: Escutia, Romero, Speier
SUBJECT : Public Utilities Commission: conflict of
interest
SOURCE : Author
DIGEST : This bill clarifies that a California Public
Utilities Commission (PUC) commissioner shall forfeit that
office in cases where they voluntarily obtain a financial
interest, as defined, in a PUC-regulated company.
CONTINUED
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2
Assembly amendment adds a definition for "financial
interest."
ANALYSIS : Current law:
1.Bars any California Public Utilities Commission
commissioner from having a financial interest in any
person or corporation subject to PUC regulation. The
penalty for violation of this provision in cases where
the commissioner involuntarily acquired the interest and
didn't divest him or herself of the interest within a
reasonable period of time is forfeiture of office.
2.As interpreted by the courts, doesn't require a
commissioner to forfeit his or her office in cases where
he or she voluntarily acquires a financial interest in
company subject to PUC regulation.
This bill:
1.Requires a PUC commissioner to forfeit their office in
cases where they voluntarily obtain a financial interest,
as defined, in any person or corporation that the
commissioner knows or should know is subject to PUC
regulation.
2.Requires the PUC to update its conflict of interest code,
by February 28, 2004.
Background
Under California law, it's clear a PUC commissioner cannot
have a financial interest in any person or corporation
subject to PUC regulation. However, the penalty for
violating this law isn't clear, as the First Appellate
District of the California Court of Appeals has recently
found.
If the commissioner obtained the financial interest
involuntarily (e.g. through an inheritance, or acquisition
of a regulated company by a non-regulated company) the law
requires the commissioner to be removed from office if he
or she doesn't rid him or herself of the financial interest
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within a reasonable period of time. However, if the
financial interest is obtained voluntarily (e.g. direct
purchase of utility stock) forfeiture of office isn't
required.
In April 2002, a San Francisco Superior Court judge fined
then-PUC Commissioner Henry Duque $5,000 and ordered him
removed from the PUC after finding then-Commissioner Duque
invested $27,000 in Nextel, a mobile phone company that's
regulated by the PUC.
On January 3, 2003, the First Appellate District of the
California Court of Appeals overturned that order, ruling
that because of a "critical gap" in the statute's wording,
the law doesn't specify any penalty for commissioners who
voluntarily invest in a regulated company .
On April 9, 2003, the state Supreme Court declined to take
review of the decision by the State Appellate Court, thus
allowing the Appellate Court decision to stand.
The bill is intended to address the Appellate Court
decision and close the gap in current statute.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
Minor absorbable special fund costs to PUC (Public
Utilities Reimbursement Account).
SUPPORT : (Verified 9/4/03)
Foundation for Taxpayer and Consumer Rights
Utility Consumers Action Network
NC:nl 9/9/03 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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