BILL ANALYSIS
SB 204
Page 1
Date of Hearing: July 5, 2005
ASSEMBLY COMMITTEE ON ELECTIONS AND REDISTRICTING
Tom Umberg, Chair
SB 204 (Bowen) - As Amended: May 10, 2005
SENATE VOTE : 23-14
SUBJECT : Public Utilities Commission: State Energy Resources
Conservation and Development Commission: commission memberships.
SUMMARY : Creates new conflict of interest standards for
members of the California Energy Commission (CEC) and the
California Public Utilities Commission (PUC). Specifically,
this bill :
1)Prohibits a person who has received a substantial portion of
his or her income directly or indirectly from any person or
corporation subject to regulation by the PUC in the previous
two years from being a member of the PUC.
2)Prohibits a member of the PUC from being employed by any
person or corporation subject to regulation by the PUC during
the term of his or her service on the PUC and for two years
after he or she ceases being a member of the PUC.
3)Prohibits any PUC commissioner from holding any other
appointed or elected office.
4)Prohibits PUC commissioners and employees from participating
in any matter that directly or indirectly affects his or her
own financial interest or the financial interest of his or her
spouse, minor child, or partner; or of any organization in
which he or she is serving, or has served as an officer or
director, trustee, partner, or employee within two years prior
to his or her appointment to the PUC.
5)Prohibits partners, employers and employees of PUC
commissioners from acting as an attorney, agent or employee
for any person or entity other than the state in connection
with any matter in which the PUC is a party or has a direct
and substantial interest.
6)Provides that any person who violates any of the above
prohibitions is guilty of a misdemeanor.
SB 204
Page 2
7)States that any PUC commissioner who voluntarily acquires a
financial interest in a corporation or person that the
commissioner knows or should have known is subject to
regulation by PUC must immediately vacate his or her office.
8)Prohibits a person who has received a substantial portion of
his or her income directly or indirectly from any person or
corporation subject to regulation by the CEC during the
previous two years from being a member of the CEC.
9)Prohibits a member of the CEC from being employed by any
person or corporation subject to regulation by the CEC for two
years after he or she ceases being a member of the CEC.
10)Makes numerous conforming and clarifying changes.
11)Corrects an erroneous cross-reference.
EXISTING LAW :
1)Prohibits a person from being a member of the CEC if that
person did either of the following during the two years prior
to appointment:
a) Received a substantial portion of income directly or
indirectly from any electric utility; or
b) Sold or manufactured any major component of any
facility.
2)Prohibits a member of the CEC from doing any of the following:
a) Working for any electric utility or applicant.
b) Working for any person engaged in the sale or
manufacture of any major component of any facility for two
years after ceasing to be a member of the CEC.
c) Holding any other elected or appointed public office or
position.
d) Engaging in any employment, activity, or enterprise,
which is clearly inconsistent, incompatible, in conflict
with, on inimical to the member's CEC duties.
SB 204
Page 3
e) Participate in a decision on matters in which the member
knows he/she, his/her spouse, minor child, or partner, or
any organization in which the member is serving, or has
served while serving as a member of the CEC or within two
years prior to appointment, has a direct or indirect
financial interest.
3)Prohibits partners, employers and employees of a member of the
CEC from acting as an attorney, agent or employee for any
person or entity other than the state in connection with any
matter in which the CEC is a party or has a direct and
substantial interest.
4)Provides that any of the above prohibitions shall not apply if
the Attorney General (AG) finds that the interest of the
member or employee of the CEC is not so substantial as to be
deemed likely to affect the integrity of the services which
the state may expect from the member or employee.
5)Provides that any person who violates any of the above
prohibitions is guilty of a felony.
6)Prohibits a PUC commissioner from holding a financial interest
in a person or corporation that is regulated by the PUC.
7)Provides that if a PUC commissioner involuntarily acquires a
financial interest in a person or corporation that is
regulated by the PUC, his or her office shall become vacant
unless he or she divests himself or herself of that interest
within a reasonable time.
8)Prohibits any state officer or employee from engaging in any
employment, activity, or enterprise, which is clearly
inconsistent, incompatible, or in conflict with his or her
duties as a state officer or employee.
9)Prohibits any state or local government public official from
participating in or attempting to influence a governmental
decision in which he or she knows, or has reason to know, he
or she has a financial interest.
FISCAL EFFECT : Unknown. State-mandated local program;
contains a crimes and infractions disclaimer.
SB 204
Page 4
COMMENTS :
1)Purpose of the Bill : According to the author, the purpose of
this bill is to ensure that PUC commissioners are free from
conflicts of interest and that their decisions aren't
influenced by positions they may have held prior to
appointment to the PUC. This bill originally attempted to
meet that goal by enacting conflict of interest standards for
the PUC based on existing standards for CEC commissioners.
After the bill was introduced, the author and Senate Energy,
Utilities and Communications Committee determined that it
would also be appropriate to update the CEC's conflict of
interest standards to more accurately reflect the CEC's
current regulatory jurisdiction.
2)Does Prior Employment Automatically Create a Conflict of
Interest ? This bill prohibits the appointment of a person to
the PUC if that person received a substantial portion of his
or her income directly or indirectly from any person or
corporation subject to regulation by the PUC in the previous
two years. Even if a person no longer has any financial
connection to a corporation regulated by the PUC, that person
would not be eligible for appointment. It is unclear whether
a conflict of interest exists simply due to an individual's
prior employment with a corporation regulated by the PUC.
The Assembly Utilities and Commerce Committee's analysis on this
bill notes that, had this bill been in effect at the time of
her appointment, Commissioner Dian Grueneich likely would not
have been eligible for appointment to the PUC. Prior to being
appointed to the PUC, Grueneich owned a law and consulting
firm that represented a number of clients before the PUC - at
least some of whom likely are regulated by the PUC. Even
though Grueneich's appointment was supported by industry
representatives, and consumer and environmental groups, she
could not have been appointed to the PUC under this bill.
The provision of this bill that prohibits the appointment of a
person to the PUC if that person received income from a
corporation subject to regulation by the PUC in the previous
two years is similar to an existing law provision that
prohibits a person from being appointed to the CEC if that
person received income from an electric utility in the
previous two years.
SB 204
Page 5
3)Senate Confirmation : Commissioners to the PUC are appointed
by the Governor and are subject to Senate confirmation. If
the Legislature believes that a person's prior employment
makes that person unable to act impartially as a member of the
PUC, the Senate has the opportunity to block that person's
appointment to the PUC during the confirmation process. On
the other hand, this bill could prevent the appointment of an
otherwise qualified individual who has expertise in the issues
considered by the PUC simply because that person had received
income from a corporation regulated by the PUC in the prior
two years.
4)Financially Interested in a Decision : The Political Reform
Act (PRA) prohibits every public official, including a member
of the PUC, from making, participating in making, or in any
way attempting to use his or her official position to
influence a governmental decision in which the public official
knows or has reason to know that he or she has a financial
interest. An official is deemed to have a financial interest
in a decision if it is reasonably foreseeable that the
decision will have a material financial effect,
distinguishable from the effect on the public generally, on
the official, a member of his or her family, a business entity
in which the official has an investment worth $2,000 or more,
any real property in which the official has an interest worth
$2,000 or more, any source of income of $500 or more in the
last 12 months, any business entity in which the official is a
director or officer, or any donor of gifts of $250 or more in
the last 12 months. The Fair Political Practices Commission
(FPPC), which is responsible for the enforcement of this
provision of law, has adopted extensive regulations to
implement it.
Because a member of the PUC is already prohibited from
participating in making a decision in which he or she has a
financial interest, the necessity for a new conflict of
interest standard is unclear.
5)What is a "Financial Interest" ? This bill prohibits a member
of the PUC from participating in any matter that affects his
or her own financial interest or the financial interest of his
or her spouse, minor child, or partner; or of any organization
in which he or she is serving, or has served as an officer or
director, trustee, partner, or employee within two years prior
to his or her appointment to the PUC. However, the Public
SB 204
Page 6
Utilities Code does not contain a definition of the term
"financial interest," and the PRA defines what constitutes a
decision in which a public official has a financial interest,
but does not define what constitutes a financial interest in a
corporation or person.
The lack of a definition of "financial interest" in this bill
could make it difficult for members of the PUC to comply, and
could result in conflicting and arbitrary application of this
bill.
6)Voluntary Acquisition of a Financial Interest : Under existing
law, a PUC commissioner is prohibited from holding an official
relationship with, or having a financial interest in, any
person or corporation subject to regulation by the PUC. If a
PUC commissioner involuntarily acquires a financial interest
in a person or corporation subject to regulation by the PUC,
that commissioner must either divest himself or herself of
that interest within a reasonable time, or the commissioner
must leave office. However, existing law does not provide a
remedy if a commissioner voluntarily acquires a financial
interest in a person or corporation subject to regulation by
the PUC.
This bill specifies that if a PUC commissioner voluntarily
acquires a financial interest in a person or corporation
subject to regulation by the PUC, in violation of existing
law, his or her office shall immediately become vacant.
7)Double-Referral : On June 27, 2005, this bill was approved by
the Assembly Committee on Utilities and Commerce by a vote of
7-4.
SB 204
Page 7
REGISTERED SUPPORT / OPPOSITION :
Support
None on file.
Opposition
None on file.
Analysis Prepared by : Ethan Jones / E. & R. / (916) 319-2094