BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 853| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 853 Author: Roger Hernández (D) Amended: 9/4/15 in Senate Vote: 21 SENATE ENERGY, U. & C. COMMITTEE: 7-3, 7/13/15 AYES: Hueso, Hertzberg, Hill, Lara, Leyva, McGuire, Wolk NOES: Fuller, Cannella, Morrell NO VOTE RECORDED: Pavley SENATE APPROPRIATIONS COMMITTEE: 4-3, 8/27/15 AYES: Lara, Beall, Leyva, Mendoza NOES: Bates, Hill, Nielsen ASSEMBLY FLOOR: 50-25, 6/2/15 - See last page for vote SUBJECT: Electrical and gas corporations: security of plant and facilities SOURCE: Coalition of California Utility Workers DIGEST: This bill requires an electrical and gas investor-owned utility to utilize employees of the utility for any work associated with the design, engineering, and operation of its nuclear, electrical and gas infrastructure, unless the utility has prior approval from the California Public Utilities Commission to contract out that work. Senate Floor Amendments of 9/4/15 (1) exempt from the requirements of the bill (a) emergency situations that require supplemental work by third parties and (b) utility projects that serve state transportation infrastructure projects; (2) note AB 853 Page 2 that existing requirements of investor-owned utilities to procure from women, minority, disabled veterans and lesbian, gay, bisexual and transgender owned businesses still applies; and (3) make additional technical changes. ANALYSIS: Existing law: 1)Establishes the California Public Utilities Commission (CPUC) and empowers it to regulate privately-owned public utilities in California. Specifies that the Legislature may prescribe that additional classes of private corporations or other persons are public utilities. (Article XII of the California Constitution; Public Utilities Code §301 et seq.) 2)Provides the CPUC regulatory authority over public utilities, including electrical corporations and gas corporations, as defined. (Public Utilities Code §§218 and 222) 3)Requires the CPUC, after a hearing, if it finds that the rules, practices, equipment, appliances, facilities, or service of any public utility, or the methods of manufacture, distribution, transmission, storage, or supply employed by it, are unjust, unreasonable, unsafe, improper, inadequate, or insufficient, to determine and, by order or rule, fix the rules, practices, equipment, appliances, facilities, service, or methods to be observed, furnished, constructed, enforced, or employed. (Public Utilities Code §761) 4)Requires the CPUC to prescribe rules for the performance of any service or the furnishing of any commodity of the character furnished or supplied by any public utility, and, on proper demand and tender of rates, require such public utility to furnish such commodity or render such service within the time and upon the conditions provided in such rules. (Public Utilities Code §761) 5)Requires electrical and gas corporations, and other investor-owned utilities, to submit a detailed and annual report and plan to the CPUC to increase procurement and contracting with women, minority, disabled veterans and lesbian, gay, bisexual and transgender owned businesses. (Public Utilities Code §8281 et seq.) AB 853 Page 3 This bill: 1)Requires electrical and gas corporations that file general rate cases on or after January 1, 2016, with the CPUC to obtain approval from the CPUC prior to contracting out work to non-utility employees for any work associated with design, engineering, and operation of its nuclear, electrical, and gas infrastructure, including all computer and information technology (IT) systems 2)Requires the electrical and gas corporation to file a request with the CPUC to employ persons that are not employees of the utility as part of the general rate case proceeding. 3)Requires the utility to demonstrate and the CPUC to evaluate that the work can be performed safely and securely, and without jeopardizing the security of its nuclear, electrical, and gas infrastructure. 4)Requires the CPUC to issue a written decision as part of the general rate case proceeding to determine whether the utility can utilize non-utility employees for the described work. 5)Exempts contracting for work related to construction, alteration, demolition, installation, maintenance, or repair work on its nuclear, electrical or gas infrastructure from requiring approval by the CPUC. 6)Exempts standard equipment purchased from an outside vendor from the requirements of this bill. 7)Exempts supplemental work performed by a third party in response to an emergency from the requirements of this bill. 8)Exempts design, engineering, or construction work associated with infrastructure necessary to accommodate state transportation infrastructure projects. 9)Clarifies that nothing in this bill alters the requirements of investor-owned utilities to increase procurement and contracting with women, minority, disabled veterans, and lesbian, gay, bisexual and transgender owned businesses AB 853 Page 4 Background Southern California Edison (SCE) layoffs. In April 2014, SCE announced it would be laying off 400-500 IT workers at its Irwindale, California location. SCE has also stated that an additional 100 employees would be leaving voluntarily. The 500 lost jobs reportedly represent just over a quarter to a third of the SCE Irwindale facility IT workforce of 1,500 to 1,800 employees. Earlier this year, news reports in the Los Angeles Times, and other outlets, surfaced that SCE was replacing laid off workers with outsourced contracted workers from two Indian companies, Infosys and Tata. Some of these news reports included claims by SCE laid off workers that they were being asked to train their replacements who were in the country on H-1B visas. SCE has confirmed it is outsourcing IT work to two Indian companies, Tata and Infosys, and that about 70 percent of that work would be completed offshore, but did not know whether or not foreign workers would be brought to the U.S. to complete the remaining 30 percent of the work. H-1B Visas. H-1B visas were introduced by the federal government in 1990, and over the years the annual cap on them has ranged up to 195,000, and currently stands at 65,000 (plus 20,000 for individuals with master's degrees). Under federal law, visa users must have specialized training or a bachelor's degree in the subject for which they are being hired. The visa holder must be offered the prevailing wage for the work, and they can only take jobs for which employers could not find a qualified American worker. Tata and Infosys are reportedly the largest holders of H-1B visas, based on the 2013 figures, with each having 6,000+ H-1B visas. According to the same list, about 50 percent of the H-1B visas holders are offshore companies. Employers must file wage data and location information with federal authorities, known as a Labor Condition Application (LCA). A February 2015 news story in Computer World Magazine noted that "in Irwindale, California, where SCE runs a major part of its IT operations, Tata and Infosys, had as many as 180 LCAs, and in a random check of these applications, every address matched a SCE location." Lawmakers and the public have raised concerns about potential abuses with the H-1B visa program after several news reports AB 853 Page 5 have noted the potential widespread abuse of the program by companies who are looking to reduce their costs at the expense of American workers. Many of these news stories have included claims by laid off employees that they are required to train their replacements who are H-1B visa holders in exchange for their severance or other benefits package, and/or on condition of confidentiality. In March 2015, the U.S. Senate Judiciary Committee held a hearing on "Immigration Reforms Needed to Protect Skilled American Workers." The hearing focused on the H-1B visa program, the ability to bring high-skilled workers in the country to help companies compete, but also noted concerns with stories of abuse by employers who are displacing American workers in a manner inconsistent with the requirements or intent of the visa program. Outsourcing as a security risk. AB 853 finds and declares that protecting the security of nuclear, electrical, and natural gas utility systems, as well as the privacy of ratepayers' personal information is a paramount state interest. This bill declares that electrical and gas corporations should make every reasonable effort to protect their computer systems from unauthorized intrusions and, to do so, the IT personnel who operate those systems should be direct employees of the utility. General Rate Case (GRC). All utilities that are regulated by the CPUC are required to undergo a GRC to request funding for distribution and generation costs associated with their service. GRCs are major regulatory proceedings and provide the CPUC an opportunity to perform an exhaustive examination of a utility's operations and costs. Usually performed every three years, the GRC allows the CPUC to conduct a broad and detailed review of a utility's revenues, expenses, and investments in plant and equipment to establish an approved revenue requirement. Through the GRC, a utility forecasts how they will structure their operations and make investments for the next three years. Prior/Related Legislation AJR 12 (E. Garcia, 2015) urges the United States Department of Labor and the Congress of the United States to investigate alleged misuse of the H1-B Visa program. The bill is currently under consideration on the Senate Floor. AB 853 Page 6 FISCAL EFFECT: Appropriation: No Fiscal Com.:YesLocal: Yes According to the Senate Appropriations Committee, at least $40,000 in one-time costs and at least $144,000 ongoing annually to the Public Utilities Reimbursement Account (special) to consider advice letters or GRC petitions to allow the use of contract works. SUPPORT: (Verified9/4/15) Coalition of California Utility Workers (source) California Labor Federation California State Association of Electrical Workers California State Pipe Trades Council International Union of Elevator Constructors State Building and Construction Trades Council, AFL-CIO Western States Council of Sheet Metal Workers OPPOSITION: (Verified9/4/15) @Business, Inc. Accu-Bore Directional Drilling Advanced Concepts, Inc. Agile Sourcing Partners, Inc. American Council of Engineering Companies - California American Truck & Trailer body Co., Inc. AREVA Barnard Pipeline, Inc. Bay Area Council Bjork Construction Company, Inc. Burns & McDonnell Engineering Company Cadence Resource Group CalAsian Chamber of Commerce California Business Properties Association California Chamber of Commerce California Hispanic Chambers of Commerce California Manufacturers & Technology Association CANUS Corporations CB&I AB 853 Page 7 Computer Technology Industry Association Cupertino Electric Inc. EN Engineering, LLC Energy Experts International ETIC Engineering, Inc. Fluor Corporation Gas Transmission Systems, Inc. Golder Associates Granite Construction Company Gravity Pro Consulting Holtec International Hot Line Construction, Inc. Information Technology Alliance for Public Sector IW Group, Inc. J. Givoo Consultants, Inc. Large-Scale Solar Association Latin Business Association Latino Journal Los Angeles Area Chamber of Commerce Los Angeles County Business Federation MGE Underground, Inc. National Federation of Independent Business National Gay & Lesbian Chamber of Commerce OneSource Supply Solutions Orange County Hispanic Chamber of Commerce Pacific Gas and Electric Company ProActive Business Solutions, Inc. PS Energy Group, Inc. S2S Environmental Resource Management San Francisco Chamber of Commerce San Jose Silicon Valley Chamber of Commerce Sargent & Lundy Engineers, Ltd. Semper Electric, Inc. Siemens Sierra Utility Sales, Inc. Silicon Valley Leadership Group Snelson Companies, Inc. Southern California Edison Sumitomo Electric USA, Inc. TechNet Terra Verde Environmental Consulting, LLC The Latino Coalition The Okonite Company Underground Construction Co., Inc. AB 853 Page 8 Utility Tree Service Inc. Western Electrical Contractors Association, Inc. Wilson Utility Construction Company World Wide Technology, Inc. Zines, Inc. ARGUMENTS IN SUPPORT: According to the author, AB 853 prohibits an electrical or gas corporation from outsourcing critical nuclear, electrical and gas infrastructure work, including computer and informational technology systems, without first obtaining approval from the CPUC. The author cites concerns with news reports regarding layoffs of hundreds of SCE employees and the outsourcing of these jobs to contractors from overseas, potentially including H-1B visa holders who would be brought in to replace California workers. "The part of any computer system most vulnerable to being compromised is the personnel who operate the system. Unfortunately, recent events have raised concerns about the safety and security of such systems." ARGUMENTS IN OPPOSITION:SCE argues that AB 853 has the potential to jeopardize the safe, reliable operation of the electric service and thousands of California jobs. SCE further states they currently have a database of 8,000 contract workers in a wide variety of jobs related to operations of the utility. "Work is performed by contract workers in any manner of job duties? to bring expertise that is not a core function of the utility, for urgent projects? This bill could bring utility projects to a stand-still, including interconnections, major projects, and critical emergency response and recovery effort, by requiring each hiring to go through a lengthy public process. AB 853 suggests this [contract] workforce creates questions about the security and safety of the utility, which is unfair and unwarranted." ASSEMBLY FLOOR: 50-25, 6/2/15 AYES: Alejo, Bonilla, Bonta, Brown, Burke, Calderon, Campos, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Daly, Dodd, Eggman, Frazier, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Roger Hernández, Holden, Irwin, Jones-Sawyer, Levine, Lopez, Low, McCarty, Medina, Mullin, Nazarian, O'Donnell, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Mark Stone, Thurmond, Ting, Weber, Williams, Atkins NOES: Achadjian, Travis Allen, Baker, Bigelow, Brough, Chang, AB 853 Page 9 Beth Gaines, Gallagher, Hadley, Harper, Jones, Kim, Lackey, Linder, Maienschein, Mathis, Mayes, Melendez, Obernolte, Olsen, Patterson, Steinorth, Wagner, Waldron, Wilk NO VOTE RECORDED: Bloom, Chávez, Dahle, Grove, Wood Prepared by:Nidia Bautista / E., U., & C. / (916) 651-4107 9/8/15 20:56:42 **** END ****