BILL ANALYSIS
SB 204
Page 1
SENATE THIRD READING
SB 204 (Bowen)
As Amended May 23, 2006
Majority vote
SENATE VOTE :23-14
UTILITIES & COMMERCE 7-4 ELECTIONS 6-0
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|Ayes:|Levine, Baca, Calderon, |Ayes:|Umberg, Wyland, Karnette, |
| |De La Torre, Jerome | |Leno, Levine, Villines |
| |Horton, Montanez, | | |
| |Ridley-Thomas | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Bogh, Blakeslee, Keene, | | |
| |Wyland | | |
| | | | |
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APPROPRIATIONS 13-4
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|Ayes:|Chu, Bass, Berg, | | |
| |Calderon, | | |
| |De La Torre, Karnette, | | |
| |Klehs, Leno, Nation, | | |
| |Oropeza, Ridley-Thomas, | | |
| |Saldana, Yee | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Sharon Runner, Haynes, | | |
| |Nakanishi, Walters | | |
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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)Establishes that, if any commissioner of PUC voluntarily acquires
a financial interest in an entity that the commissioner knows or
should have known is subject to PUC regulation, the commissioner's
office shall be immediately vacated.
2)Requires PUC to update its Conflict of Interest Code and Statement
SB 204
Page 2
of Incompatible Activities consistent with the above.
3)Expands an existing provision which prohibits a person from being
a member of the California Energy Commission (CEC) if they have
received a substantial portion of their income from any electric
utility during the previous two years, to include receiving such
income from any corporation subject to CEC regulation during the
previous two years.
4)Expands an existing provision, which prohibits a member of CEC
from being employed by any electric utility or applicant to the
commission, to prohibit a CEC member from being employed by any
person or corporation subject to CEC regulation.
EXISTING LAW :
1)Prohibits a person from being a member of 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 PUC commissioner from holding a financial interest in
a person or corporation that is regulated by PUC.
3)Provides that if a PUC commissioner involuntarily acquires a
financial interest in a person or corporation that is regulated by
PUC, his or her office shall become vacant unless he or she
divests himself or herself of that interest within a reasonable
time.
FISCAL EFFECT : Minor absorbable costs to PUC.
COMMENTS : Since its creation in 1975, CEC commissioners have been
subject to specific conflict standards that bar income from electric
utilities and persons who engage in the sale or manufacture of any
major component of any electric facility from two years prior to
appointment to CEC until two years after service on CEC. Thus, a
person with income from an electric utility or facility manufacturer
in the last two years is ineligible to serve on CEC and a former
commissioner may not work for an electric utility or a facility
manufacturer for two years after the end of his or her term.
SB 204
Page 3
The current conflict of interest rules were written at a time when
the only parties seeking to build power plants, and thus regulated
by CEC, were fully integrated electric utilities. Today a number of
parties beyond the electric companies build power plants that must
be approved by CEC and CEC's jurisdiction has expanded to include
oversight of a number of renewable energy and energy efficiency
programs. Given these changes in the CEC jurisdiction, the current
law limiting CEC commissioners' conflict of interest restrictions to
electric companies no longer makes sense. This bill addresses the
changes in CEC jurisdiction by amending the conflict of interest
rules to prohibit CEC commissioners from taking income from any
entity subject to regulation by the commission.
Existing law prohibits members of PUC from holding an official
relationship with, or having a financial interest in, any person or
corporation subject to PUC regulation. The law also provides that
if a PUC commissioner involuntarily acquires a financial interest in
an entity subject to regulation by PUC, the commissioner will
forfeit his or her office unless he or she divests that interest
within a reasonable time. The statute provides for no specific
remedy of a PUC commissioner who voluntarily acquires a financial
interest in a regulated company. This ambiguity in the statute has
led a California Court of Appeals to rule that while a commissioner
that unwittingly acquires stock in a regulated company may have to
forfeit office, a commissioner that knowingly acquires stock in a
regulated company need not forfeit office.
Additionally, PUC does not have any standards that apply to
financial interests a commissioner may have prior to appointment to
PUC or after he or she leaves PUC.
This bill also addresses the ironic problem that a commissioner
would be forced to forfeit office if he or she involuntarily
acquired a financial interest in a regulated company, but not if he
or she voluntarily acquired the same interest by providing that the
penalty for voluntarily acquiring a financial interest in a
regulated entity will result in forfeiture of office.
Analysis Prepared by : Edward Randolph / U. & C. / (916) 319-2083
FN: 0016142