BILL ANALYSIS
SENATE JUDICIARY COMMITTEE
Adam B. Schiff, Chairman
1999-2000 Regular Session
AB 1398 A
Assembly Member Papan B
As Amended June 15, 2000
Hearing Date: August 8, 2000 1
Public Utilities Code 3
DLM:cjt 9
8
SUBJECT
Public Water Utilities: Judicial Review of PUC Decisions
DESCRIPTION
This bill would indefinitely extend the following current
provisions for judicial review of Public Utilities
Commission (PUC) decisions affecting water corporations,
which would otherwise be replaced on January 1, 2001 with
a different, less deferential review standard
Review of commission decisions pertaining solely to water
corporations are only by petition for writ of review in
the Supreme Court, except that review of complaint or
enforcement proceedings may be in the court of appeal or
the Supreme Court.
The standard of review in ratemaking and licensing
decisions is under the "any evidence" test, and for other
types of decisions the review extends no further than to
determine whether the commission has regularly pursued
its authority, including a determination whether the
order or decision under review violates any right of the
petitioner under the state or federal Constitution.
The Supreme Court will grant expedited consideration to
any petition alleging that the court of appeal has
assumed jurisdiction to review a commission decision
pertaining solely to a water corporation over which the
court of appeal has no jurisdiction
(more)
AB 1398 (Papan)
Page 2
BACKGROUND
Article XII of the state Constitution establishes the
Public Utilities Commission for the purpose of fixing
rates, establishing rules, examining records, and
prescribing a uniform system of accounting for all public
utilities subject to its jurisdiction. To this end, the
commission institutes internal procedures governing its
decision-making process. Article XII, sec. 5 provides that
"the Legislature has plenary power ... to establish the
manner and scope of review of commission action in a court
of record...." Thus, the Legislature may create
different standards for review of commission decisions or
designate lower courts for appeal.
In 1998, SB 779 (Calderon) Ch. 886, Stats. of 1998, made
substantial changes in the judicial review process of PUC
decisions. In relevant part, SB 779 provided for
expanded judicial review of major PUC decisions by both the
California Supreme Court and the courts of appeal, from
abuse of discretion to substantial evidence review. This
provision was operative for all entities on January 1,
1999, except for decisions affecting water corporations,
for whom the expanded judicial review is set to begin
January 1, 2001.
AB 1398 would indefinitely extend the deferential review
standards of PUC decisions affecting water corporations.
CHANGES TO EXISTING LAW
1. Existing law authorizes any aggrieved party to
petition the court of appeal or the Supreme Court to
review decisions of the Public Utilities Commission.
Existing law also provides that, until January 1, 2001,
review of commission decisions pertaining solely to water
corporations are only by petition for writ of review in
the Supreme Court, except that review of complaint or
enforcement proceedings may be in the court of appeal or
the Supreme Court.
This bill would continue the current provisions for
review of PUC decisions pertaining to water corporations.
AB 1398 (Papan)
Page 3
2. Existing law provides that no new or additional
evidence may be introduced upon review of a commission
decision by the court. In a complaint or enforcement
proceeding, or in a ratemaking or licensing decision of
specific application that is addressed to particular
parties, the review by the court does not extend further
than to determine, on the basis of the entire record,
whether (abuse of discretion) occurred.
Existing law also provides that, until January 1, 2001,
this standard of judicial review does not apply to
ratemaking or licensing decisions of specific application
addressed solely to water corporations. Instead the "any
evidence" test applies, which means if there is any
evidence to support the PUC decision, it will stand.
This bill would continue this exemption from the
standard of review for ratemaking or licensing decisions
of specific application relating solely to water
corporations.
3. Existing law provides until January 1, 2001, in
reviewing decisions (other than ratemaking and licensing
decisions discussed above) pertaining solely to water
corporations, the review extends no further than to
determine whether the commission has regularly pursued
its authority, including a determination whether the
order or decision under review violates any right of the
petitioner under the state or federal Constitution.
This bill would continue this standard of review for
water corporations.
4. Existing law provides that, until January 1, 2001, the
Supreme Court will grant expedited consideration to any
petition alleging that the court of appeal has assumed
jurisdiction to review a commission decision pertaining
solely to a water corporation over which the court of
appeal has no jurisdiction.
This bill would continue that provision.
COMMENT
1. Stated need for legislation
AB 1398 (Papan)
Page 4
The bill's sponsor, the California Water Association
(CWA), writes to explain the need for legislation,
saying, "Prior to the CPUC reforms of 1996, the
California Supreme Court was the court of original
jurisdiction for the appeal of all CPUC decisions.
Reforms enacted in that year allow an appeal of decisions
involving enforcement or customer complaints for all
utilities to be heard in either the District Courts of
Appeal or the state Supreme Court. Legislation enacted
in 1998 (SB 779) extended the option of lower court
review for all CPUC decisions relating to energy, telecom
and transportation utilities, because (as the Legislative
findings and declarations note), the conversion of those
industries from traditional regulated markets to
competitive markets 'require expanded access to the court
system at all levels.' The measure delayed availability
of lower court review for decisions pertaining to water
corporations until January 1, 2001.
"Water utilities, however, remain the only fully
regulated utilities subject to traditional, rigorous CPUC
regulation. As such, they forgo certain marketplace
prerogatives, but remain fully under the regulatory
umbrella for their financial stability and for ratepayer
protection. The CPUC's broader regulatory authority over
water corporations makes greater judicial involvement
unnecessary; statewide continuity and consistency is
obtained through Commission regulation. Indeed, the
Legislative findings of SB 779
note: "inasmuch as the water supply industry continues
to operate in a traditional, noncompetitive utility
market, . . . changes in judicial review of competitive
utility markets are inappropriate in their application to
Public Utilities Commission decisions and proceedings
that pertain to water corporations until January 1, 2001.
"As January 1, 2001, approaches, the water supply
industry remains 'a traditional, noncompetitive utility
market,' making it unique among the utility industry.
The CPUC's broader regulatory authority over water
corporations makes greater judicial involvement, as might
occur with the advent of lower court review of
'quasi-legislative' decisions, inappropriate until such
time as the water supply industry is deregulated. AB
AB 1398 (Papan)
Page 5
1398 would maintain the status quo for judicial review of
CPUC decisions pertaining to water corporations, while
the industry continues to function as traditional,
noncompetitive, regulated utility service suppliers."
2. Current standards of review
Existing law confers original jurisdiction upon the
Supreme Court to hear appeals from PUC decisions. Where
the decision of the commission is issued in an
adjudicatory proceeding, a petition for Writ of Review
may be filed in the Court of Appeal. Appeals of a court
of appeal decision may be made to the Supreme Court by a
petition for review.
Generally speaking, the standards for review of questions
decided by the PUC are those as in administrative
mandamus for quasi-judicial (adjudicative) decisions --
which is the substantial evidence test. This test posits
the question whether the PUC's decision rests upon a base
of substantial evidence. For quasi-legislative (rule
making) and rate setting decisions, the standard is as in
traditional mandamus -- abuse of discretion. This test
asks if the commission acted lawfully, or if its action
was arbitrary and capricious.
For decisions regarding the water industry the standard
is the "any evidence" standard articulated in the Meeker
decision, (infra) which means if there is any evidence to
support the PUC decision, it will stand, regardless of
the amount of evidence contrary to the findings.
3. Prior related legislation created current judicial
review scheme
SB 653 (Calderon), Statutes of 1997, proposed substantial
reform to the PUC review process. That measure was
vetoed, with the Governor expressing his concern that the
bill would hinder utility competition under then-new
deregulation.
The bill attempted to address two key aspects of judicial
review of PUC decisions: which court may review PUC
decisions, and the scope of review to be applied by the
reviewing court.
AB 1398 (Papan)
Page 6
First, the bill would have provided for court of appeal
review of Public Utilities Commission (PUC) decisions in
addition to Supreme Court review authorized under current
law, with the exception of quasi-legislative decisions
affecting water corporations which would remain
exclusively with the Supreme Court. It would have
clarified that review would come
through acceptance of a writ of review.
The bill would also have declared the Legislature's
intention that the standard for judicial review of
decisions of the PUC regarding the communications and
energy industries is to be consistent with the standard
of review of decisions
by other state agencies.
That measure was vetoed, with then-Governor Wilson
saying, "I agree with the proponents that unrestricted
judicial review of CPUC decisions will be beneficial
after competitive marketplaces have in fact been put in
place. But, the value of expanded judicial review does
not presently outweigh the risk it poses of fatal delay
to the CPUC in completing its agenda of opening
competitive markets. California's economic promise will
be best and earliest achieved by creation of competitive
markets in which economic interests compete and consumers
have the opportunity to shop for price, products and
services. It is simply too important to risk its
derailment by a welter of lawsuits by competing economic
interests and self-appointed 'consumer' representatives
that can unnecessarily prolong the creation of these
competitive markets."
SB 1322 (Calderon) Ch. 855, Stats. of 1996 was
substantially similar to SB 653. It represented a
compromise between the business interests who had opposed
SB 653, and the consumer advocates who supported PUC
reform.
SB 1322 granted jurisdiction to the courts of appeal to
hear appeals of adjudicative decisions of the PUC under
the substantial evidence test. In doing so, the bill
overturned the Camp Meeker Water System, Inc. v. Public
Utilities Commn. (1990) 51 Cal.3d 845, decision, but
only as applied to adjudicative acts of the PUC. The
AB 1398 (Papan)
Page 7
Camp Meeker decision held that review of Commission
decisions was limited to a determination of whether there
exists "any evidence" supporting the factual findings and
conclusions upon which the PUC decision was based.
Under SB 1322, all non-adjudicatory PUC decisions, as
well as those adjudicatory PUC decisions relating to
electric industry restructuring, may still be reviewed
only at the Supreme Court.
In its most relevant provisions, SB 1322 excluded
decisions affecting water companies from heightened
judicial scrutiny. While the record is silent on why, an
inference may be drawn from the prior veto message and
legislative history that the water industry was not
sufficiently competitive to be hindered by the burdens of
litigation. Indeed, the rationale offered by the sponsor
in support of AB 1398 is that their industry remains
uncompetitive.
Support: None Known
Opposition: None Known
HISTORY
Source: California Association of Water Agencies
Related Pending Legislation: None Known
Prior Legislation: SB 1322 (Calderon) Ch. 855, Stats of
1996; SB 653 (Calderon),
Stats. 1997, vetoed; SB 779 (Calderon)
Ch. 886, Stats. of 1998
Prior Vote: Senate Energy, Utilities and Communications
Committee (8-0) Assembly Utilities and Commerce
Committee (9-0)
Assembly Floor (74-1)
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