BILL ANALYSIS
SB 204
Page 1
Date of Hearing: June 20, 2006
ASSEMBLY COMMITTEE ON ELECTIONS AND REDISTRICTING
Tom Umberg, Chair
SB 204 (Bowen) - As Amended: May 23, 2006
SENATE VOTE : 23-14
SUBJECT : Public Utilities Commission: State Energy Resources
Conservation and Development Commission: commission memberships.
SUMMARY : Requires a commissioner of the California Public
Utilities Commission (PUC) to immediately vacate office if he or
she voluntarily acquires a financial interest in a corporation
or person that the commissioner knows or should have known is
subject to regulation by the PUC. Specifically, this bill :
1)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.
2)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 California Energy
Commission (CEC) during the previous two years from being a
member of the CEC.
3)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.
4)Makes numerous conforming and clarifying changes.
5)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
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b) Sold or manufactured any major component of any
facility.
2)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.
3)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.
4)Provides that any person who violates any of the above
prohibitions is guilty of a felony.
5)Prohibits a PUC commissioner from holding a financial interest
in a person or corporation that is regulated by the PUC.
6)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.
7)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.
8)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.
COMMENTS :
1)Purpose of the Bill : In April 2002, a San Francisco Superior
Court judge fined then PUC Commissioner Henry Duque $5,000 and
ordered him removed from PUC after finding Duque invested
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$27,000 in Nextel, a mobile phone company that is regulated by
PUC. Commissioner Duque had acquired the stock in 1999
believing that Nextel was regulated by the Federal
Communications Commission (FCC) and not subject to PUC
jurisdiction. In fact, Nextel is subject to both FCC and PUC
jurisdiction. Duque disclosed the stock ownership on his 1999
and 2000 statements of economic interest. Duque sold the
stock in 2000, after receiving a call from a reporter about
the stock.
On January 3, 2003, the First Appellate District of the
California Court of Appeals overturned that order and ruled
that under the plain meaning of the statue the law doesn't
specify any penalty for commissioners who voluntarily invest
in a regulated company. The law only provides for forfeiture
of office if the Commissioner involuntarily acquires an
interest in a regulated company. The court stated that "we
must limit ourselves to interpreting the law as written and
leave for the people and the Legislature the task of revising
it as they deem wise." People v. Duque , 105 Cal. App 4th 259,
266. This bill is intended to address the Appellate Court
Decision and close the gap in the statute's wording.
2)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
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.
3)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
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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.
4)Double-Referral : On June 27, 2005, this bill was approved by
the Assembly Committee on Utilities and Commerce by a vote of
7-4.
5)Reconsideration : On July 5, 2005, this bill failed passage in
this committee by a vote of 3-3. Since that time, this bill
has been amended to remove a section of the bill that would
have prohibited a person who 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, and would have
prohibited 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.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file.
Opposition
None on file.
Analysis Prepared by : Ethan Jones / E. & R. / (916) 319-2094