BILL ANALYSIS                                                                                                                                                                                                    



                                                                     AB 895


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          GOVERNOR'S VETO


          AB  
          895 (Rendon)


          As Enrolled September 16, 2015


          2/3 vote


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          |ASSEMBLY:  |79-0 |(June 1, 2015)  |SENATE: |39-0 |(September 10, |
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          |ASSEMBLY:  |79-0 |(September 11,  |        |     |               |
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          Original Committee Reference:  U. & C.


          SUMMARY:  Requires proceeds of any claims arising out of the  
          2000 to 2002 energy crisis to be monetary and deposited into the  
          Ratepayer Relief Fund, to be appropriated for the benefit of  
          ratepayers, as specified. 









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          The Senate amendments do the following:


          1)Require that all settlements entered into by the Attorney  
            General (AG) or the California Public Utilities Commission  
            (CPUC) be monetary.


          2)Limit the restrictions on the distribution and expending of  
            proceeds to claims recovered by the CPUC.


          3)Restrict the use of the Ratepayer Relief Fund to reducing  
            rates for customers or to reduce debt service on bonds.


          4)Allow the CPUC to recover its litigation and investigation  
            costs.


          5)Provide that actions to enforce the CPUC's process for  
            handling and determining disclosable public records, as well  
            as actions to enforce Bagley-Keene Open Meetings Act  
            requirements, may be taken to the superior court.


          6)Make various legislative findings regarding the judicial  
            review provisions of the Bagley-Keene Open Meetings Act.


          EXISTING LAW:  


           1)Establishes the Ratepayer Relief Fund in the State Treasury to  
            benefit electricity and natural gas ratepayers, and to fund  
            investigation and litigation costs of the state in pursuing  
            allegations of overcharges and unfair business practices  
            against generators, suppliers, or marketers of electricity or  








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            natural gas.  (Government Code Section 16428.15) 


          2)Requires that any energy settlement agreement entered into by  
            the AG, after reimbursing the AG's litigation and  
            investigation expenses, to be directed for the following  
            purposes in priority order:  a) to reduce ratepayer costs of  
            those utility ratepayers harmed by the actions of the settling  
            parties, and b) for deposit in the Ratepayer Relief Fund.   
            (Government Code Section 16428.3)


          3)Authorizes funds deposited in the Ratepayer Relief Fund to be  
            appropriated by the Legislature for purposes that benefit  
            ratepayers.  Money in the fund may be appropriated to finance  
            energy litigation and investigation expenses of state  
            entities, to reduce rates for customers in the affected  
            service areas of electrical utilities and gas utilities, and  
            to reduce the debt service on bonds issued, as specified.   
            (Government Code Section 16428.5)


          FISCAL EFFECT:  According to the Senate Appropriations  
          Committee, this bill would have increased revenues, potentially  
          in the billions of dollars, to the Ratepayer Relief Fund.


          COMMENTS:   


           1)Authors Statement:  "After the 2000-02 energy crisis, various  
            lawsuits were filed seeking billions in refunds to California  
            ratepayers.  Litigation continues to this day.  However, a  
            recent out-of-court case settlement (Dynegy 2012), negotiated  
            by the CPUC, resulted in money being spent on developing a  
            statewide electric vehicle charging program, rather than on  
            refunding ratepayers.  Using settlement refunds for purposes  
            other than direct refunds to ratepayers is a policy decision  
            the Legislature should make.  AB 895 ensures legislative  








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            oversight over the use of ratepayer refunds resulting from  
            electricity crisis litigation, so that the funds will be used  
            to benefit ratepayers instead of used for other purposes by  
            the CPUC."
          2)Background:  In 1996, legislation established a competitive  
            deregulated electricity market in California which worked well  
            until May 2000, after a serious drought diminished the supply  
            of inexpensive hydropower.  This led to the Western  
            Electricity Crisis of 2000 to 2001.  California's increasing  
            electricity prices, partnered with inadequate infrastructure  
            and the deteriorating financial stability of major  
            investor-owned utilities, triggered a crisis in California.   
            These problems made market manipulation possible, and caused  
            all-time high retail electricity prices and power outages  
            throughout California. 


            Since that time, various lawsuits have sought billions of  
            dollars in refunds.  Litigation continues to this day,  
            resulting in settlements and judgments in favor of California  
            electric ratepayers.  Most recently, on April 21, 2015, the  
            United States Supreme Court ruled that a federal law governing  
            the natural gas market does not shield energy companies from  
            state antitrust claims made over the 2000 to 2002 energy  
            crisis, opening the door to further litigation.


          3)CPUC Handling of Electric Crisis Settlement Funds:  The CPUC  
            has directed most funds from energy crisis litigation to  
            ratepayers.  However, a recent out-of-court case settlement  
            (Dynegy 2012), negotiated by the CPUC, resulted in money being  
            spent on developing a statewide electric vehicle charging  
            program, rather than on refunding ratepayers.  This program is  
            not meeting the milestones specified in the settlement order,  
            raising questions about the supposed benefit to ratepayers and  
            the effectiveness of the current process.  


           4)Ratepayer Relief Fund:  The Ratepayer Relief Fund was  








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            established primarily to benefit ratepayers, and fund  
            investigation and litigation costs of the state in pursuing  
            allegations of overcharges or unfair practices that adversely  
            affected ratepayers.  Money in the fund may be appropriated to  
            finance energy litigation and investigation expenses of state  
            entities, to reduce rates for customers in the affected  
            service areas of electrical utilities and gas utilities, and  
            to reduce the debt service on bonds issued, as specified.


            This bill ensures legislative oversight over electric crisis  
            settlement funds by requiring that settlement funds be  
            deposited into the Ratepayer Relief Fund, to be appropriated  
            by the Legislature, for the benefit of ratepayers. 


          5)Bagley-Keene Open Meeting Act:  The CPUC is subject to the  
            Bagley-Keene Open Meeting Act, which requires state entities  
            take "action" only at a public meeting following public  
            posting of an agenda describing the item for proposed action.   
            Any private gathering of a majority of the members of a state  
            body at the same time and place to hear, discuss, or  
            deliberate upon any item that is within its jurisdiction is  
            unlawful.  


            In June 2014, a court decision held that Californian can  
            enforce transparency laws, such as the Bagley-Keene Act, on  
            the CPUC only in a court of appeals or the Supreme Court.   
            Yet, any superior court can enforce such laws against other  
            state agencies.  Current law only allows a review of  
            procedural issues of an agency's decision, not the substance;  
            for the CPUC, however, current law does not allow a review of  
            either.  


            This bill provides that actions to enforce the Bagley-Keene  
            Open Meeting Act and the CPUC's process for disclosing public  
            records may be taken to the superior court.  In addition, this  








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            bill makes various legislative findings regarding the judicial  
            review provisions of the Bagley-Keene Open Meeting Act.


          GOVERNOR'S VETO MESSAGE:  


           This bill requires all energy crisis settlement agreements  
          entered into by the Attorney General and Public Utilities  
          Commission to be monetary, and specifies that the priority use  
          of settlement funds is to reduce ratepayer rates.


          Although I agree with the intent to maximize ratepayer benefits  
          from energy crisis settlements, this bill unreasonably limits  
          the range of solutions that may well serve the public interest.




          Analysis Prepared by:                                             
                           Edmond Cheung / U. & C. / (916) 319-2083  FN:  
          0002518