BILL ANALYSIS                                                                                                                                                                                                    Ó




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                                        VETO 


          Bill No:  SB 48
          Author:   Hill (D)
          Amended:  9/9/15  
          Vote:     21  

           SENATE ENERGY, U. & C. COMMITTEE:  9-0, 4/27/15
           AYES:  Hueso, Fuller, Cannella, Hertzberg, Hill, Leyva,  
            McGuire, Morrell, Wolk
           NO VOTE RECORDED:  Lara, Pavley

           SENATE APPROPRIATIONS COMMITTEE:  7-0, 5/28/15
           AYES:  Lara, Bates, Beall, Hill, Leyva, Mendoza, Nielsen

           SENATE FLOOR:  39-0, 6/1/15
           AYES:  Allen, Anderson, Bates, Beall, Block, Cannella, De León,  
            Fuller, Gaines, Galgiani, Glazer, Hall, Hancock, Hernandez,  
            Hertzberg, Hill, Hueso, Huff, Jackson, Lara, Leno, Leyva, Liu,  
            McGuire, Mendoza, Mitchell, Monning, Moorlach, Morrell,  
            Nguyen, Nielsen, Pan, Pavley, Roth, Runner, Stone, Vidak,  
            Wieckowski, Wolk
           NO VOTE RECORDED:  Berryhill

           SENATE FLOOR:  38-1, 9/11/15
           AYES:  Allen, Anderson, Bates, Beall, Berryhill, Block,  
            Cannella, De León, Fuller, Gaines, Galgiani, Glazer, Hall,  
            Hancock, Hernandez, Hertzberg, Hill, Hueso, Huff, Jackson,  
            Lara, Leno, Leyva, Liu, McGuire, Mitchell, Monning, Moorlach,  
            Nguyen, Nielsen, Pan, Pavley, Roth, Runner, Stone, Vidak,  
            Wieckowski, Wolk
           NOES:  Morrell
           NO VOTE RECORDED:  Mendoza

           ASSEMBLY FLOOR:  79-0, 9/11/15 - See last page for vote

           SUBJECT:   Public Utilities Commission








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          SOURCE:    Author


          DIGEST:  This bill proposes a suite of reforms of the governance  
          and operations of the California Public Utilities Commission  
          (CPUC), including, among others, requiring sessions in  
          Sacramento, applying the Code of Ethics from the Administrative  
          Procedures Act (APA) to administrative law judges (ALJs),  
          clarifying and augmenting the information the CPUC must provide  
          the Legislature in its annual report, and others.


          ANALYSIS: 

          Existing law:

          1)Establishes the CPUC with five members appointed by the  
            Governor and confirmed by the Senate and empowers it to  
            regulate privately owned public utilities in California.   
            (Article XII of the California Constitution; Public Utilities  
            Code §301 et seq.)

          2)Requires the Governor to designate one of the commissioners as  
            president who is granted with certain authority not provided  
            to the other four commissioners.  These powers include the  
            ability to direct the executive director, the general counsel  
            and staff, as well as, preside over all CPUC meetings, and  
            other powers.  (Public Utilities Code §305)

          3)Requires the CPUC to hold at least one hearing per calendar  
            month in the City and County of San Francisco.  (Public  
            Utilities Code §306) 

          4)Authorizes the CPUC to appoint a general counsel to represent  
            the CPUC in all actions, to commence, prosecute or intervene  
            in proceedings as directed by the president, and to advise the  
            CPUC and each commissioner on all matters. (Public Utilities  
            Code §307)

          5)Requires the president of the CPUC to annually appear before  








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            the appropriate legislative policy committees.  (Public  
            Utilities Code §321.6)

          6)Exempts the CPUC from the APA. (Public Utilities Code §1701)

          7)Provides that the California Supreme Court and the court of  
            appeal of the CPUC shall be the venues to address appeals of  
            CPUC decisions.  (Public Utilities Code §1701.6)

          8)Establishes rules for state agencies to ensure meetings are  
            open, public and available to all, as noted in the  
            Bagley-Keene Open Meeting Act. Restricts a majority of members  
            of a state governing body from meeting without proper notice,  
            public access, and transparency.  (Government Code §11120)

          This bill:

          1)Finds it is the intent of the Legislature that the CPUC should  
            be subject to the judicial review provisions of the  
            Bagley-Keene Open Meeting Act.

          2)Requires the CPUC to make information about the operation of  
            the office of public advisor and other specified information  
            available on the Internet. Requires that information is  
            available regarding how the public and ratepayers can access  
            the CPUC's ratemaking process. 

          3)Requires the CPUC to hold no less than six sessions per year  
            in the City of Sacramento. 

          4)Directs the CPUC to modify their annual report, a document  
            that is published and provided to the Legislature by February  
            1st, to include performance criteria for both the CPUC and  
            executive director, and annually evaluate the executive  
            director based on the performance criteria, an accounting of  
            the CPUC's proceedings and other specified information.   

          5)Requires the CPUC to create a report regarding the cases  
            before the agency, including timeliness in resolving the  
            cases, approvals for rehearings, number of scoping memos  
            issued in each proceeding, number of orders issued, and other  
            items.








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          6)Requires the ALJs to adhere to ethics provisions of the APA  
            for adjudicated proceedings. 

          7)Requires the CPUC to seek the views of those who are likely  
            affected by a decision or proceeding, except in adjudicated  
            cases, and requires the CPUC to demonstrate their efforts to  
            engage these residents within the text of the order.

          8)Provides that actions to enforce the requirements of the  
            Bagley-Keene Open Meeting Act or the California Public Records  
            Act can be taken to the superior court. 

          9)Includes chaptering amendments related to AB 825 (Rendon,  
            2015) and the Budget Act of 2015. 
          
          Background

          Fatal explosion in San Bruno.  On September 9, 2010, a natural  
          gas pipeline owned by Pacific Gas and Electric Company (PG&E)  
          exploded in a residential neighborhood in the City of San Bruno.  
           Eight people died, dozens were injured, 38 houses were  
          destroyed and many more were damaged.  The investigations by the  
          National Transportation Safety Board (NTSB) and an independent  
          review panel appointed by the CPUC found that PG&E mismanaged  
          their pipeline over decades, failed to adequately test the  
          strength of the pipeline and, more generally, valued profits  
          over safety.  These same investigations also noted the CPUC's  
          inadequate oversight of PG&E.   

          Emails demonstrate "Culture of Conversation."  During the summer  
          and fall of 2014, PG&E, bowing to legal pressure from the City  
          of San Bruno, began to release a growing number of emails  
          between the utility and CPUC officials.  PG&E released 65,000  
          emails from over a five-year period many of which PG&E says it  
          believes "violated CPUC rules governing ex parte  
          communications."  The initial release of emails exposed regular,  
          private, familiar communications between PG&E and certain CPUC  
          commissioners. 

          Criminal investigations opened.  Since PG&E's initial release of  
          the emails, both the state Attorney General and the United  








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          States Department of Justice have opened investigations into  
          communications between the CPUC and regulated entities.  PG&E  
          has fired three senior executives.  A senior CPUC official has  
          resigned, while other top CPUC officials - including longtime  
          CPUC President Michael Peevey and Executive Director Paul  
          Clannon - have retired under pressure.  

          Audits reveal CPUC's efforts are lacking.  In recent years, the  
          CPUC has undergone a number of audits related to its budget,  
          transportation program, natural gas pipeline safety program and  
          others.  The findings of these audits have raised concerns about  
          the ability of CPUC to manage even some of its core functions.   
          A March 2014 audit by the State Auditor found that "the  
          commission lacks adequate processes for sufficient oversight of  
          utility balancing accounts to protect ratepayers from unfair  
          rate increases."  The NTSB San Bruno investigation report and  
          subsequent audits found that CPUC's oversight of natural gas  
          pipeline safety efforts by the utilities needs improvements. 
           
           The CPUC quasi-independent, but still accountable to the  
          Legislature.  The CPUC was established by constitutional  
          amendment as part of the sweep of progressive reforms in the  
          early 1900s.  Then-Governor Hiram Johnson pushed for reforms of  
          the Railroad Commission, which became today's CPUC, as a largely  
          independent agency that would guard against the corrupting  
          influence of railroads.  In demonstration of its independence,  
          the CPUC was located in San Francisco, a distance from the state  
          capitol in Sacramento.  Article XII of the California  
          Constitution grants the CPUC authority to regulate public  
          utilities "subject to control of the Legislature" and grants the  
          Legislature "plenary power" to confer authority and jurisdiction  
          upon the CPUC, with the intent that the CPUC be accountable to  
          the Legislature.
           
           Reporting to the Legislature.  Current law requires the CPUC to  
          publish an annual workplan by February 1st and for the president  
          of the CPUC to appear annually before the relevant legislative  
          policy committees.  SB 48 proposes several amendments to ensure  
          the CPUC's annual report more accurately reflects the agency's  
          progress related to timeliness of proceedings and the need to  
          ensure the work of the agency is evaluated based on establishing  
          annual goals and performance criteria.  This bill also requires  








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          an annual performance evaluation of the executive director by  
          the CPUC based on the established workplan.

          Code of ethics.  Most state agencies follow the APA rules and  
          requirements for rulemakings and enforcement proceedings.   
          However, as a quasi-independent agency, the CPUC is exempt from  
          the APA and instead follows its own rules and procedures.  SB 48  
          proposes to apply the APA Code of Ethics to adjudication  
          proceedings of the CPUC to align with other state agencies.  

          Appeals.  A party wishing to appeal a decision of the CPUC can  
          appeal to the CPUC's own court or the California Supreme Court.   
          This unique limitation to CPUC processes means most decisions of  
          the agency stand as it is unlikely the Supreme Court will wish  
          to hear many of these cases.  This bill proposes to allow any  
          action related to the Bagley-Keene Open Meetings Act or the  
          California Public Records Act to be petitioned at a superior  
          court, where there is greater opportunity to have a case heard. 

          Affected stakeholders.  This bill proposes a requirement on the  
          CPUC to affirmatively seek out the views and input of those  
          impacted most by a proposed proceeding or investigation.  One of  
          the many criticisms of the CPUC is the challenges of identifying  
          who may be interested and facilitating their participation as a  
          party in a proceeding.  CPUC processes are legalistic and  
          archaic and can be off-putting to the average resident who wants  
          to participate.  However, the CPUC should be encouraged to make  
          every feasible effort to connect with those most affected by  
          their decisions, whether it is a community affected by increased  
          water rates or low-income residents who can benefit from public  
          purpose programs. 

          Prior/Related Legislation
          
          AB 825 (Rendon, 2015), which was vetoed, would have proposed a  
          suite of reforms of the CPUC to make the agency more accessible  
          and transparent to the public. 

          AB 1023 (Rendon, 2015), which was vetoed, would have proposed to  
          codify the summary log requirements currently required at the  
          CPUC for ratesetting proceedings and extends those requirements  
          to quasi-legislative proceedings. 








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          SB 215 (Leno, 2015) proposed a suite of reforms of the CPUC  
          related to governance and operations, including disqualification  
          of commissioners to proceedings, modifying the role of the  
          president, and other reforms. Many of the provisions of this  
          bill were amended into SB 660.  The bill is currently in the  
          Senate Energy, Utilities and Communications Committee.

          SB 660 (Leno and Hueso, 2015), which was vetoed, would have  
          proposed reforms of the ex parte communications laws related to  
          ratesetting and quasi-legislative proceedings, addressed the  
          process for disqualifying a commissioner from a proceeding, and  
          other reforms of the CPUC. 

          SB 611 (Hill, as amended April 13, 2013) proposed some of the  
          same changes suggested in SB 48, including repealing some of the  
          powers of the president.  The bill was successfully voted out of  
          Senate Committee on Energy, Utilities and Communications.  It  
          was subsequently amended numerous times, and ultimately  
          chaptered into law with unrelated language regarding modified  
          limousines. 
          
          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:YesLocal:   No

          According to the Assembly Appropriations Committee:

          1)Significant one-time information technology upgrades,  
            including contracting, systems development, staffing, and  
            implementation costs of approximately $7.5 million to fulfill  
            the public information requirements of this bill. 


          2)Ongoing annual costs of approximately $1.7 million to maintain  
            and operate the new information technology systems.


          3)One-time costs of $120,000 a year for two years for a  
            proceeding to establish rules for outreach, and ongoing costs  
            of up to $400,000 per year to seek the views of interested  
            persons.









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          4)Ongoing annual legal costs of approximately $335,000 for the  
            workload associated with superior court reviews of  
            Bagley-Keene Open Meeting and Public Records Acts enforcement  
            actions.


          5)Ongoing annual costs of up to $120,000 to hold at least six  
            meetings in Sacramento instead of San Francisco.  This  
            includes the costs of meetings sites, equipment, and staff  
            travel.


          6)Ongoing annual costs of $35,000 for increased reporting  
            requirements.


          SUPPORT:   (Verified10/21/15) 

          California Newspaper Publishers Association
          Communications Workers of America, District 9 AFL-CIO
          Sierra Club California
          The Utility Reform Network


          OPPOSITION:   (Verified10/21/15)


          None received

          ARGUMENTS IN SUPPORT:     The author argues that the current  
          governance structure, whereby the president of the CPUC is able  
          to direct the CPUC staff, is not working.  The author cites a  
          string of incidents, including some involving management of  
          ratepayer money, management staff leadership failures, and  
          recent scandals, as evidence that the current system is broken.   
          The author commends the leadership of the CPUC for taking some  
          positive steps in recent months.  However, he cautions these  
          changes should not be temporary.  Therefore, permanent changes  
          are needed of the agency as defined in this bill. 

          ARGUMENTS IN OPPOSITION:     The opponents expressed concerns  








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          that the current powers of the president should be preserved.   
          They argue that not having a strong president will result in the  
          ALJ having dominance in decision-making.  


          GOVERNOR'S VETO MESSAGE:


               I am returning Senate Bill 18, Senate Bill 48 and Assembly  
               Bill 825 without my signature. 

               These bills include various provisions to increase  
               transparency and accessibility to the Public Utilities  
               Commission.  I support the intent of these bills and many  
               of their proposed reforms, however some additional work is  
               needed to ensure that they achieve their intended purposes  
               and can be effectively implemented.

               Allowing Bagley-Keene and Public Records Act lawsuits to be  
               brought against the Commission by any interested party in  
               Superior Court, rather than exclusively in the Courts of  
               Appeal and the California Supreme Court, will only result  
               in increased litigation and likely delay Commission  
               decision-making.  It will not improve public access to  
               critical information about the actions of regulated  
               entities.  Amending Section 583 of the Public Utilities  
               Code to require more information to be publicly available  
               is a much better way to ensure that the public is provided  
               with this information.

               Moreover, the Commission needs sufficient funds to fully  
               accomplish some of these reforms, such as holding more  
               public meetings outside of San Francisco, shortening the  
               timeframe for concluding formal ratesetting and  
               quasi-legislative proceedings and expanding the scope of  
               the information required to be posted on the CPUC's web  
               site.  I am directing the Commission to work with the  
               Legislature through the budget process to ensure the  
               necessary funds are dedicated to accomplish these needed  
               reforms.

          ASSEMBLY FLOOR:  79-0, 9/11/15








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          AYES:  Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom,  
            Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang,  
            Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle,  
            Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina  
            Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez,  
            Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden,  
            Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder,  
            Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina,  
            Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen,  
            Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez,  
            Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting,  
            Wagner, Waldron, Weber, Wilk, Wood, Atkins
          NO VOTE RECORDED:  Williams


          Prepared by:Nidia Bautista / E., U., & C. / (916) 651-4107
          11/4/15 14:11:57


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