The California Constitution establishes the Public Utilities Commission, with jurisdiction over all public utilities. The California Constitution grants the commission certain general powers over all public utilities, subject to control by the Legislature, and, among other things, authorizes the Legislature, unlimited by the other provisions of the Constitution, to confer additional authority and jurisdiction upon the commission that is cognate and germane to the regulation of public utilities, to establish the manner and scope of review of commission action in a court of record, and to enable the commission to fix just compensation for utility property taken by eminent domain. The Public Utilities Act and other provisions of the Public Utilities Code set forth the structure, funding, and responsibilities of the commission.

This measure would authorize the Legislature to reallocate or reassign all or a portion of the functions of the commission to other state agencies, departments, boards, or other entities, consistent with specified purposes. The measure would direct the Legislature to adopt appropriate structures to provide greater accountability for the public utilities of the state and provide the necessary guidance to the commission to focus its regulatory efforts on safety, reliability, and ratesetting and to implement statutorily authorized programs for reducing emissions of greenhouse gases.

This measure would repeal the provisions of the California Constitution pertaining to the commission effective January 1, 2019, while specifying that a statute that was valid at the time the statute was enacted is not invalid by virtue of the repeal of those constitutional provisions.

The California Constitution establishes the Public Utilities Commission, with jurisdiction over all public utilities. The California Constitution grants the commission certain general powers over all public utilities, subject to control by the Legislature, and, among other things, authorizes the Legislature, unlimited by the other provisions of the Constitution, to confer additional authority and jurisdiction upon the commission that is cognate and germane to the regulation of public utilities, to establish the manner and scope of review of commission action in a court of record, and to enable the commission to fix just compensation for utility property taken by eminent domain. The Public Utilities Act and other provisions of the Public Utilities Code set forth the structure, funding, and responsibilities of the commission.

This measure would authorize the Legislature to reallocate or reassign all or a portion of the functions of the commission to other state agencies, departments, boards, or other entities, consistent with specified purposes. The measure would direct the Legislature to adopt appropriate structures to provide greater accountability for the public utilities of the state and provide the necessary guidance to the commission to focus its regulatory efforts on safety, reliability, and ratesetting and to implement statutorily authorized programs for reducing emissions of greenhouse gases.

This measure would repeal the provisions of the California Constitution pertaining to the commission effective January 1, 2019, while specifying that a statute that was valid at the time the statute was enacted is not invalid by virtue of the repeal of those constitutional provisions.

WHEREAS, The 21st century has brought about many changes to technology and to the delivery of services and necessities that were unforeseeable in 1911 when the Railroad Commission was enshrined in the California Constitution; and

WHEREAS, The 1946 constitutional amendment that renamed the Railroad Commission as the Public Utilities Commission, and gave it added authority over our natural gas, electrical, telephone, and water companies, was also the product of a different era, when these utilities and common carriers were grouped together in the hopes that one regulatory body could best regulate services used by the public on a daily basis; and

WHEREAS, The commission has taken the position that its authority can only be expanded, which has resulted in an ever-growing bureaucracy that now has jurisdiction over not only gas, electrical, telecommunications, water utilities, and railroads, but also hot-air balloons, moving companies, moving companies and ride-sharing applications; and

WHEREAS, In the over one hundred years since its establishment, the industries under the oversight of the commission have grown and evolved in ways that have rendered the current structure of the commission inefficient and obsolete, leaving Californians without the oversight and regulatory protections that we need, particularly in matters involving workforce and public safety; and

WHEREAS, Recent events have caused grave concern around our state and have highlighted the ineffectiveness of the current system, specifically, in the Bay Area, the tragic San Bruno pipeline explosion, which took many lives; in the Central Valley and Sacramento, the significant concerns about the oil trains that traverse those regions; in San Diego and Orange County, the serious concerns about San Onofre and nuclear waste storage; and in Los Angeles County, the fact that thousands of residents had to flee their homes because of a gas leak of unprecedented size, which greatly polluted our states air and caused many to worry about the efficacy of the safety and inspection programs designed to stop catastrophes like it; and

WHEREAS, Despite these failures to protect the public, our electrical, gas, water, and telephone rates have continued to rise; and

WHEREAS, The commission has also suffered from ethical lapses, notably the failure to report ex parte communications, and the closeness of commission personnel to the entities they are supposed to regulate; and

WHEREAS, The people of California would be better served with more nimble, focused, and specialized regulators, whose actions would result in far greater accountability; and

WHEREAS, The Legislature should be forced to rethink the manner in which utilities, common carriers, and other related entities are regulated, and to create new structures that would enable regulators to focus on safety, reliability, and affordability of essential services, consumer protections for nonessential services, and protecting and preserving our environment; now, therefore, be it

Resolved by the Assembly, the Senate concurring, That the Legislature of the State of California at its 201516 Regular Session commencing on the first day of December 2014, two-thirds of the membership of each house concurring, hereby proposes to the people of the State of California that the Constitution of the State be amended as follows:

This measure shall be known and may be cited as the Public Utility Reform Act of 2016.

(a)(1)Notwithstanding Section 4, after the date the measure adding this section is enacted, the Legislature has the power and authority to reallocate or reassign all or a portion of the functions of the Public Utilities Commission to other state agencies, departments, boards, or other entities it may create.

(2)The Legislatures reallocation or reassignment of these functions shall be in furtherance of consumer protection, public health, environmental protection, increased transparency, public access, and preserving the ability of third parties to advocate for and intervene on behalf of those that need their advocacy.

(b)The Legislature shall adopt appropriate structures to provide greater accountability for the public utilities of this state and shall provide the necessary guidance to focus regulatory efforts on safety, reliability, and ratesetting and to implement statutorily authorized programs for reducing emissions of greenhouse gases.

A statute that was valid at the time of its enactment is not invalid by virtue of the repeal of the former Article XII by the measure that added this article.

WHEREAS, The 21st century has brought about many changes to technology and to the delivery of services and necessities that were unforeseeable in 1911 when the Railroad Commission was enshrined in the California Constitution; and

WHEREAS, The 1946 constitutional amendment that renamed the Railroad Commission as the Public Utilities Commission, and gave it added authority over our natural gas, electrical, telephone, and water companies, was also the product of a different era, when these utilities and common carriers were grouped together in the hopes that one regulatory body could best regulate services used by the public on a daily basis; and

WHEREAS, The commission has taken the position that its authority can only be expanded, which has resulted in an ever-growing bureaucracy that now has jurisdiction over not only gas, electrical, telecommunications, water utilities, and railroads, but also hot-air balloons, moving companies, and ride-sharing applications; and

WHEREAS, In the over one hundred years since its establishment, the industries under the oversight of the commission have grown and evolved in ways that have rendered the current structure of the commission inefficient and obsolete, leaving Californians without the oversight and regulatory protections that we need, particularly in matters involving workforce and public safety; and

WHEREAS, Recent events have caused grave concern around our state and have highlighted the ineffectiveness of the current system, specifically, in the Bay Area, the tragic San Bruno pipeline explosion, which took many lives; in the Central Valley and Sacramento, the significant concerns about the oil trains that traverse those regions; in San Diego and Orange County, the serious concerns about San Onofre and nuclear waste storage; and in Los Angeles County, the fact that thousands of residents had to flee their homes because of a gas leak of unprecedented size, which greatly polluted our states air and caused many to worry about the efficacy of the safety and inspection programs designed to stop catastrophes like it; and

WHEREAS, Despite these failures to protect the public, our electrical, gas, water, and telephone rates have continued to rise; and

WHEREAS, The commission has also suffered from ethical lapses, notably the failure to report ex parte communications, and the closeness of commission personnel to the entities they are supposed to regulate; and

WHEREAS, The people of California would be better served with more nimble, focused, and specialized regulators, whose actions would result in far greater accountability; and

WHEREAS, The Legislature should be forced to rethink the manner in which utilities, common carriers, and other related entities are regulated, and to create new structures that would enable regulators to focus on safety, reliability, and affordability of essential services, consumer protections for nonessential services, and protecting and preserving our environment; now, therefore, be it

Resolved by the Assembly, the Senate concurring, That the Legislature of the State of California at its 201516 Regular Session commencing on the first day of December 2014, two-thirds of the membership of each house concurring, hereby proposes to the people of the State of California that the Constitution of the State be amended as follows:

This measure shall be known and may be cited as the Public Utility Reform Act of 2016.

(a)(1)Notwithstanding Section 4, after the date the measure adding this section is enacted, the Legislature has the power and authority to reallocate or reassign all or a portion of the functions of the Public Utilities Commission to other state agencies, departments, boards, or other entities it may create.

(2)The Legislatures reallocation or reassignment of these functions shall be in furtherance of consumer protection, public health, environmental protection, increased transparency, public access, and preserving the ability of third parties to advocate for and intervene on behalf of those that need their advocacy.

(b)The Legislature shall adopt appropriate structures to provide greater accountability for the public utilities of this state and shall provide the necessary guidance to focus regulatory efforts on safety, reliability, and ratesetting and to implement statutorily authorized programs for reducing emissions of greenhouse gases.

A statute that was valid at the time of its enactment is not invalid by virtue of the repeal of the former Article XII by the measure that added this article.

SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS

Senator Ben Hueso, Chair

2015 - 2016 Regular

Bill No: ACA 11 Hearing Date: 6/27/2016

SUBJECT: Public Utilities Commission

DIGEST: This measure authorizes the Legislature to reallocate or reassign all or a portion of the functions of the California Public Utilities Commission (CPUC) to other state agencies, departments, boards, or other entities, consistent with specified purposes and repeals the provisions of the California Constitution pertaining to the CPUC effective January 1, 2019.

ANALYSIS:

Existing law:

1. Establishes the CPUC with jurisdiction over all public utilities and grants the CPUC certain general powers over all public utilities, subject to control by the Legislature. (California Constitution, Article 12)
   1. Establishes the CPUC consists of five members appointed by the Governor and approved by the Senate, a majority of the membership concurring, for staggered six-year terms. A vacancy is filled for the remainder of the term. The Legislature may remove a member for incompetence, neglect of duty, or corruption, two thirds of the membership of each house concurring.
   2. Provides that subject to statute and due process, the CPUC may establish its own procedures. Any commissioner as designated by the CPUC may hold a hearing or investigation or issue an order subject to CPUC approval.
   3. Establishes that private corporations and persons that own, operate, control, or manage a line, plant, or system for the transportation of people or property, the transmission of telephone and telegraph messages, or the production, generation, transmission, or furnishing of heat, light water, power, storage, or wharfage directly or indirectly to or for the public, and common carriers, are public utilities subject to control by the Legislature.
   4. Authorizes the Legislature to prescribe additional classes of private corporations or other persons are public utilities.
   5. Authorizes the CPUC to fix rates and establish rules for the transportation of passengers and property by transportation companies, prohibit discrimination, and award reparation for the exaction of unreasonable, excessive, or discriminatory charges.
   6. Prohibits a transportation company from raising a rate or incidental charge except after a showing to and a decision by the CPUC that the increase is justified, and this decision shall not be subject to judicial review except as to whether confiscation of property will result.
   7. Provides that the Legislature has plenary power, unlimited by the other provisions of this constitution but consistent with this article, to confer additional authority and jurisdiction upon the CPUC, to establish the manner and scope of review of CPUC action in a court of record, and to enable it to fix just compensation for utility property taken by eminent domain.
   8. Authorizes the CPUC to fix rates, establish rules, examine records, issue subpoenas, administer oaths, take testimony, punish for contempt, and prescribe a uniform system of accounts for all public utilities subject to its jurisdiction.
   9. Prohibits a transportation company from granting free passes or discounts to anyone holding an office in the state.
   10. Prohibits a CPUC commissioner from holding an official relation to nor have a financial interest in a person or corporation subject to regulation by the CPUC.
   11. Prohibits a city or county from regulating matters over which the legislature grants regulatory power to the CPUC.
2. Authorizes the legislature to propose an amendment or revision of the California Constitution by rollcall vote entered into the journal, two-thirds of the membership of each house concurring. (California Constitution, Article 18, §1)
3. Requires that a proposed amendment or revision of the Constitution to be submitted to the electors and if approved by a majority of votes takes effect the day after the election, unless the measure provides otherwise. (California Constitution, Article 18, §4)

This bill:

1. Authorizes the Legislature with the power and authority to reallocate or reassign all or a portion of the functions of the CPUC to other state agencies, departments, boards, or other entities the legislature may create.
2. Requires the Legislature to reallocate or reassign functions.

Background

CPUC history. The history of the CPUC dates back to the late 19^th century, when in 1875 statutes were adopted to establish an Act to provide for the appointment of Commissioners of Transportation to fix the maximum charges for freights and fares, and to prevent extortion and discrimination on railroads.^[1] In subsequent years, several statutes and or constitutional amendments were adopted that would rename, tweak or expand the commission, resulting in the Railroad Commission in 1911, which was subsequently repealed in its entirety by passage of the Public Utilities Act in extraordinary session of 1911. The Public Utilities Act has formed the primary basis for the legal code that governs the CPUC.

A product of the Progressive Era. 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. In 1946, the CPUC was provided its current name with the passage of Proposition 17.

Quasi-independent, but still accountable to the Legislature. The CPUC has historically been afforded much independence. Commissioners are appointed for staggered six-year terms to limit the potential for a single Governor to appoint a majority of commissioners within a four-year gubernatorial term. The Legislature, not the governor, may remove a commissioner. The CPUC has been given broad latitude to set its own procedures, and any review of CPUC decisions has historically been limited to courts of appeal and the Supreme Court, not trial courts.

CPUC mission. The mission of the CPUC is to serve “the public interest by protecting consumers and ensuring the provision of safe, reliable utility service and infrastructure at reasonable rates, with a commitment to environmental enhancement and a healthy California economy. We regulate utility services, stimulate innovation, and promote competitive markets, where possible, in the communications, energy, transportation, and water industries.” In recent years, public and legislative confidence in the CPUC has been affected in light of some serious life-threatening incidents, questionable ethical behavior by some at the agency, and a number of state audits that have found some areas of the agency lacking.

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 the PG&E.

Power outages. In December 2011, nearly 500,000 Californians experienced widespread power outages of up to six days in the Los Angeles region due to windstorms. According to the author, the Assembly Utilities and Commerce Committee's investigation revealed that the CPUC allowed Southern California Edison (SCE) to keep unspent maintenance funds and that the CPUC does not check to make sure that the maintenance work was performed.

Leaking nuclear generator. In January 2012, a leak of contaminated steam was detected at one of the two new replacement generators at the San Onofre Nuclear Generation Station (SONGS). In June 2013, SCE decided to permanently shut down SONGS as a result of design flaws affecting both generators. SCE is seeking damages from the manufacturer, Mitsubishi. In a meeting held in Warsaw, Poland in March 2012 between then-CPUC President Peevey and an SCE executive outlined a settlement framework. In November 2014, the CPUC allocated three quarters of the cost of the SONGS generators to be paid by ratepayers "without review of the expenses for the steam generator replacement projects" and consistent with the notes from the Warsaw meeting.

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 revealed efforts by PG&E executives to influence the CPUC’s assignment of ALJ to a ratemaking proceeding. Many of the other emails exposed regular, private, familiar communications between PG&E and certain CPUC commissioners, including former CPUC President Michael Peevey and current Commissioner Mike Florio, as well as senior CPUC officials.

Criminal investigations opened. Since PG&E’s initial release of the emails, both the state Attorney General and the United States Department of Justice have opened investigations into communications between the CPUC and regulated entities. As of this analysis, the investigations remain opened. 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. Attorneys in CPUC’s legal division requested CPUC commissioner’s direct staff on how to properly cooperate with ongoing law enforcement investigations and to ensure CPUC staff preserves evidence relative to the investigations. Investigators working with the Attorney General’s Office have raided the CPUC offices and the homes of former CPUC Commissioner President Peevey and PG&E former-Vice President Brian Cherry. In early February, only after a newspaper published details of the search warrant, SCE disclosed a meeting that occurred a year prior in Warsaw, Poland between then-CPUC President Peevey and a utility executive in which they discussed how to resolve the shutdown plans for SONGS. CPUC President Michael Picker acknowledged the communications have damaged the public’s trust in the regulatory agency and that changes are needed.

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 the 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.

Aliso Canyon. The recent natural gas storage well leak in Aliso Canyon, which displaced thousands of residents in Porter Ranch and surrounding communities and resulted in over 87,000 metric tons of methane being pumped into the air, has reinvigorated these concerns. The investigation into the Aliso Canyon gas storage well leak is still ongoing, but according to the author, the CPUC's response to the crisis has frustrated many in the community. While CPUC has general oversight of the gas utility, the primary responsibility for overseeing the integrity of storage wells lies with the Department of Conservation's Division of Oil, Gas, and Geothermal Resources (DOGGR) – not the CPUC.

CPUC in 2016. The CPUC is governed by five full-time commissioners, appointed by the governor and confirmed by the Senate, and staffed by approximately 1,000 individuals who, together, regulate privately owned electric, natural gas, telecommunications, water, railroad, rail transit, and passenger transportation companies. CPUC staff includes four personal advisors to each commissioner, except five to the president, as well as the 42 judges of the Administrative Law Division – attorneys, engineers and accountants who prepare the docket for all CPUC official filings, including maintenance of the official record of proceedings. Most staff is located in the CPUC’s San Francisco headquarters, with other staff in offices in Sacramento and Los Angeles. The CPUC is a regulatory agency with a large and complex portfolio of responsibilities that includes regulation of privately owned electric, natural gas, telecommunications, water, railroad, rail transit, and passenger transportation companies.

Need for reform. In response to the increased scrutiny, the CPUC has made a number of personnel changes, including the resignation of former CPUC president, the former executive director, replaced other management and staff positions. The CPUC has also initiated internal reforms to better address safety, including requiring safety to be assessed in all proceedings. The agency has also recently proposed a Division of Safety Analysis to further bolster safety issues in ratemaking proceedings. The agency has also been undergoing a strategic planning process to better focus its efforts. Assuming the current budget is approved, the CPUC will also be hiring about a quarter of its workforce in the coming year – nearly 250 staff positions in areas of information technology, safety, energy analysts, and others. The CPUC has also been working to implement the many audits and third-party expert recommendations from improving the oversight of natural gas pipelines, to improving overall management processes, to establishing procedures for reviewing balancing accounts and several others. However, as evidenced by the various active legislative bills, including SB 215 (Leno-Hueso) and SB 512 (Hill) the desire for additional reforms, although, potentially much more surgical than what is proposed by this measure.

Spread too thin? A valid concern about the CPUC has been raised several times, including by the current president: is the CPUC spread too thin and handling too many varied areas? The notion that one agency would handle issues related to railroads, transportation, electric and water utilities and phone service does raise concerns. Interestingly, the plethora of issues is not unique to the CPUC and similar to some other states’ public utilities commissions. Perhaps the biggest exception is the inclusion of transportation network companies (TNCs) under a statewide public utilities commission which does seem to be unique to California. It would be critically important to better understand the existing efforts/authority of the CPUC prior to any efforts to reorganize. Of particular importance is better understanding the many areas where the CPUC shares responsibility with other state or federal agencies and the specific role of the CPUC. For example, the CPUC administers a federal rail safety program to enforce federal rules, as the state is largely preempted to adopt rules related to railroad activity. This program involves deploying staff to audit and inspect specified rail tracks and crossings. The CPUC is also responsible for handling the federal natural gas pipeline safety rules promulgated from the federal Pipeline and Hazardous Materials Safety Administration (PHMSA) whereby CPUC staff audit investor-owned gas utilities’ books and records to ensure the utility is complying with the pipeline requirements. As discussed above, while the CPUC has oversight of utilities, DOGGR has primary responsibility for the safety of natural gas storage wells – such as Aliso Canyon. Another example is the role of the CPUC in rate-setting versus the role of the California Energy Commission (CEC) in adopting statewide energy policy. This measure recognizes that such exploration requires time, as evidenced by the two year interim between when the CPUC’s existing authorities would be reshaped by a future legislative body.

Is this the right solution? This measure seeks to remove the constitutional powers of the CPUC as the solution to address the series of life-threatening and ethical scandals that have plagued the agency of late. However, not knowing what the future agency(ies) would look like and do, makes it difficult to determine with any confidence that this is the right solution.

It cuts both ways. Some of the existing constitutional powers of the CPUC, including the ability to set rates and others, provide some level of helpful independence from the political influence that is often peddled by well-resourced interests. The issue is whether the existing processes and procedures appropriately protect ratepayers, and Californian’s generally, from relationships between the regulated and the regulated that could inappropriately undermine public safety and consumer protections.

Cart before the horse? This measure would provide a future legislature the opportunity to adopt a reorganization of the CPUC, but strip the constitutional powers of the agency this fall. While this “choose your own adventure” approach is an opportunity, it’s one that may engender more confidence from the public if the new organization was articulated in a complimentary statute. The idea of combining a constitutional amendment with complimentary statutory measure(s) has been the case in previous experiences with constitutional amendments of the CPUC, including the most recent – Proposition 12 (ACA 36) in 1974 whose companion legislation was AB 4024.

Another approach. Existing statutory authority in Government Code §§12080-12081 provides the Governor the power to reorganize the executive branch by using the executive reorganization process. Such efforts begin with a Governor’s submittal of a reorganization plan to the Legislative Counsel for drafting into bill language, and to the Little Hoover Commission, which examines the plan and reports its recommendations. Thirty days after submission to the Little Hoover Commission, the Governor may submit the plan to the Legislature. While it’s unclear if the CPUC, as a quasi-independent agency, would be eligible for such a process, a similar approach would be beneficial to provide more clarity as to the new agency(s) that would assume the powers and responsibilities of the CPUC.

Prior/Related Legislation

ACA 36 (Proposition 12) Measure that shortened, eliminated obsolete provisions, and simplified Article XII of the State Constitution relating to the CPUC.

AB 4024 (Chapter 489, Statutes of 1974) established in statute some of the previous provisions included in the constitutional powers of the CPUC which would be repealed by ACA 36.

AB 825 (Rendon, 2015) proposed a suite of reforms of the CPUC largely directed at increased transparency of the activities of the agency, including requiring the California State Auditor's Office to appoint an Inspector General within its office for the CPUC, expanding the roles and responsibilities of the CPUC public advisor, specifying additional requirements of commissioners, and increased transparency of electric utilities' procurement, among others. The bill was vetoed by the Governor.

AB 895 (Rendon, 2015) would have required 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, and provides 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. The bill was vetoed by the Governor.

AB 1023 (Rendon, 2015) would have required the CPUC to establish and maintain a weekly communications log summarizing all oral or written ex parte communications. The bill was vetoed by the Governor.

SB 18 (Hill, 2015) would have required any contract entered into by the CPUC for outside legal counsel services to represent it in a criminal investigation to be submitted to the Joint Legislative Budget Committee (JLBC) for review, with specified information, and approved by a vote of the CPUC no sooner than 30 days after the contract has been submitted to the JLBC. The bill was vetoed by the Governor.

SB 48 (Hill, 2015) proposed a suite of reforms of the governance and operations of the CPUC, including, among others, requiring sessions in Sacramento, applying the Code of Ethics from the Administrative Procedures Act to administrative law judges, clarifying and augmenting the information the CPUC must provide the Legislature in its annual report, and others. The bill was vetoed by the Governor.

SB 215 (Leno-Hueso) proposes a suite of reforms of the rules, operations and procedures of the California Public Utilities Commission (CPUC) pertaining to the laws and rules related to ex parte communications and criteria and process for disqualification of commissioners to a proceeding. The bill is scheduled to be heard in the Assembly Committee on Utilities and Commerce on July 29^th.

SB 512 (Hill, 2016) proposes a suite of reforms of the operations and governance of the CPUC, including requiring the CPUC to hold no less than six sessions per year in Sacramento, expand the information required of the CPUC in its annual report and workplan to the Legislature and Governor, authorize local governments, under specified conditions, to be eligible to participate in the CPUC’s intervenor compensation program and others. The bill is scheduled to be heard in the Assembly Committee on Utilities and Commerce on July 29^th.

SB 660 (Leno-Hueso, 2015) would have proposed a suite of reforms of the governance, rules, operations and procedures of the CPUC, including:  reform of laws and rules related to ex parte communications, criteria and process for disqualification of commissions to a proceeding, and authorizes the Commission to appoint the chief administrative law judge. The bill was vetoed by the Governor.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

SUPPORT:

San Francisco Taxi Workers Alliance

OPPOSITION:

California Association of Competitive Telecommunications Companies

Service Employees International Union

ARGUMENTS IN SUPPORT: The author asserts that “the CPUC status as a Constitutionally-authorized agency is unique and has enabled the CPUC to pick and choose which policies to enact and enforce. CPUC’s ability to regulate these wide-ranging and diverse industries – from electric and natural gas companies to limousines and transportation network companies – has been called into question. The disasters resulting from our broken system of regulation over just the past few years are well documented covering virtually every area under CPUC jurisdiction – gas line explosion at San Bruno; power outages of up to six days in Los Angeles region due to windstorms; contaminated steam leaks at San Onofre Nuclear Power Station (SONGS); the gas well leak in Aliso Canyon; and just over the last month, double-digit deaths on rail tracks in the Bay Area.”

In support of ACA 11, the San Francisco Taxi Workers Alliance states: “the CPUC has proved itself incapable of fairly and effectively regulating charter-party carriers, including limousines and TNCs. It allowed TNCs to operate in violation of law for several years before granting them approval in a highly flawed and biased process…The CPUC has ignored other major concerns in its regulation of TNCs, such as service to the disabled and protection to the environment.”

ARGUMENTS IN OPPOSITION: In opposition to ACA 11, the SEIU Local 1000 states they have a number of major concerns with the bill, specifically: “1) this bill lacks specifics while asking for a constitutional change; 2) this bill does not address the neglected human resources which is at the heart of many of the problems at the CPUC; 3) this bill does nothing to address oversight concerns; 4) this bill would potentially cause more problems than it is trying to fix as it leaves many questions left unanswered.”

CalTel expresses their opposition to this measure because of “significant concerns that ACA 11 will jeopardize the ability of the CPUC to protect and promote competition as well as create significant marketplace uncertainty related to what state agency, if any, will perform federally delegated responsibilities in overseeing the wholesale market. Unfortunately, the passage of ACA 11 will create significant uncertainty around the continued existence of the CPUC and its important role with regards to the duties and authority delegated to it in the Act.”

-- END --

1. West’s Annotated California Codes. Public Utilities: Section 1 to 699. 2004, p. 13. ↑

ASSEMBLY THIRD READING

ATR Bill Id:ACA 11

Author:(Gatto, et al.)

As Amended Ver:May 27, 2016

2/3 vote

SUMMARY: Authorizes the Legislature to reallocate or reassign all or a portion of the functions of the California Public Utilities Commission (CPUC) to other state agencies, departments, boards, or other entities, consistent with specified purposes. Specifically, this constitutional amendment:

1. Repeals the provisions of the California Constitution pertaining to the CPUC effective January 1, 2019. Specifies that a statute that was valid at the time the statute was enacted is not invalid by virtue of the repeal of those constitutional provisions.
2. Authorizes the Legislature to reallocate or reassign all or a portion of the functions of the CPUC to other state agencies, departments, boards, or other entities, in furtherance of consumer protection, public health, environmental protection, increased transparency, public access, and preserving the ability of third parties to advocate or intervene.
3. Directs the Legislature to adopt appropriate structures to provide greater accountability for the public utilities of the state and provide the necessary guidance to the CPUC to: 1) focus its regulatory efforts on safety, reliability, and ratesetting; and 2) implement statutorily authorized programs for reducing emissions of greenhouse gases.
4. Requires a two-thirds vote of the Legislature and approval of the voters in a statewide election.

FISCAL EFFECT: According to the Assembly Appropriations Committee:

1. One-time General Fund costs of around $220,000 to include the text and analysis of the constitutional and arguments for and against the measure in the statewide voter information guide.
2. Unknown potential costs or savings resulting from any future legislative actions to provide more accountability and reorganize or reassign the functions of the CPUC to other state entities.

COMMENTS:

1. Purpose: According to the author, the 21st century no longer requires the CPUC to be enshrined in the California Constitution. This measure will place before the voters an initiative to strike Article 12 from the Constitution, thereby removing the CPUC's constitutional protections. This bill further directs the Legislature to reform and modernize the CPUC.
2. Background: In 1911, the voters established the Railroad Commission in the California Constitution. In 1912, the Legislature passed the Public Utilities Act, expanding the Railroad Commission's regulatory authority to include natural gas, electric, telephone, and water companies, in addition to railroads and marine transportation companies. In 1946, it was renamed the California Public Utilities Commission.

The CPUC is comprised of five Commissioners appointed by the Governor and confirmed by the Senate Rules Committee for six year terms.

The CPUC's status as a Constitutionally-authorized agency is somewhat unique and has empowered the CPUC to enact and enforce policies and programs it finds cognate germane. Limitations on the CPUC's broad authority are those that have been enacted by statute.

1. Problems at the CPUC: According to the author, the CPUC's ability to regulate wide-ranging and diverse industries – from electric and natural gas companies to limousines and transportation network companies – has been called into question. The author provides numerous examples to substantiate this view.

Following the 2010 explosion of a Pacific Gas and Electric gas line that resulted in numerous injuries and deaths in San Bruno, an independent study found the CPUC had not been adequately overseeing gas pipeline safety.

In December 2011, nearly 500,000 Californians experienced widespread power outages of up to six days in the Los Angeles region due to windstorms. The Assembly Utilities and Commerce Committee's investigation revealed that the CPUC allowed Southern California Edison (SCE) to keep unspent maintenance funds and that the CPUC did not check to make sure that the maintenance work was performed.

In January 2012, a leak of contaminated steam was detected at one of the two new replacement generators at the San Onofre Nuclear Power Station (SONGS). In June 2013, SCE decided to permanently shut down SONGS as a result of design flaws affecting both generators. In a meeting held in Warsaw, Poland in March 2012 between then-CPUC President Peevey and an SCE executive outlined a settlement framework. In November 2014, the CPUC allocated three quarters of the cost of the SONGS generators to be paid by ratepayers without review of the expenses for the steam generator replacement projects.

Analysis Prepared by: Sue Kateley / U. & C. / (916) 319-2083 FN: 0003235

Date of Hearing: May 18, 2016

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

ABPCA Bill Id:ACA 11

Author:(Gatto) – As Introduced Ver:March 9, 2016

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This constitutional amendment authorizes the Legislature to reallocate or reassign all or a portion of the functions of the California Public Utilities Commission (PUC) to other state agencies, departments, boards, or other entities, consistent with specified purposes. Specifically, this constitutional amendment:

1. Repeals the provisions of the California Constitution pertaining to the PUC effective January 1, 2019. Specifies that a statute that was valid at the time the statute was enacted is not invalid by virtue of the repeal of those constitutional provisions.
2. Authorizes the Legislature to reallocate or reassign all or a portion of the functions of the PUC to other state agencies, departments, boards, or other entities, in furtherance of consumer protection, public health, environmental protection, increased transparency, public access, and preserving the ability of third parties to advocate or intervene.
3. Directs the Legislature to adopt appropriate structures to provide greater accountability for the public utilities of the state and provide the necessary guidance to the PUC to: 1) focus its regulatory efforts on safety, reliability, and ratesetting; and 2) implement statutorily authorized programs for reducing emissions of greenhouse gases.
4. Requires a 2/3 vote of the Legislature and approval of the voters in a statewide election.

FISCAL EFFECT:

1. One-time General Fund costs of around $220,000 to include the text and analysis of the constitutional and arguments for and against the measure in the statewide voter information guide.
2. Unknown potential costs or savings resulting from any future legislative actions to provide more accountability and reorganize or reassign the functions of the PUC to other state entities.

COMMENTS:

1. Purpose. According to the author, the 21^st century no longer requires the PUC to be enshrined in the California Constitution. This measure will place before the voters an initiative to strike Article 12 from the Constitution, thereby removing the PUC's constitutional protections. This bill further directs the Legislature to reform and modernize the PUC

1. Background. In 1911, the voters established the Railroad Commission in the California Constitution. In 1912, the Legislature passed the Public Utilities Act, expanding the Railroad Commission's regulatory authority to include natural gas, electric, telephone, and water companies, in addition to railroads and marine transportation companies. In 1946, it was renamed the California Public Utilities Commission.

The PUC is comprised of five Commissioners appointed by the Governor and confirmed by the Senate Rules Committee for six year terms.

The PUC's status as a Constitutionally-authorized agency is somewhat unique and has empowered the PUC to enact and enforce policies and programs it finds cognate germane. Limitations on the PUC's broad authority are those that have been enacted by statute.

1. Problems at the PUC. According to the author, the PUC's ability to regulate wide-ranging and diverse industries – from electric and natural gas companies to limousines and transportation network companies – has been called into question. The author provides numerous examples to substantiate this view.

Following the 2010 explosion of a Pacific Gas and Electric gas line that resulted in numerous injuries and deaths in San Bruno, an independent study found the CPUC had not been adequately overseeing gas pipeline safety.

In December 2011, nearly 500,000 Californians experienced widespread power outages of up to six days in the Los Angeles region due to windstorms. The Assembly Utilities and Commerce Committee's investigation revealed that the PUC allowed Southern California Edison (SCE) to keep unspent maintenance funds and that the PUC did not check to make sure that the maintenance work was performed.

In January 2012, a leak of contaminated steam was detected at one of the two new replacement generators at the San Onofre Nuclear Power Station (SONGS). In June 2013, SCE decided to permanently shut down SONGS as a result of design flaws affecting the both generators. In a meeting held in Warsaw, Poland in March 2012 between then-PUC President Peevey and an SCE executive outlined a settlement framework. In November 2014, the PUC allocated three quarters of the cost of the SONGS generators to be paid by ratepayers without review of the expenses for the steam generator replacement projects.

Analysis Prepared by: Jennifer Galehouse / APPR. / (916) 319-2081

Date of Hearing: April 20, 2016

ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE

Mike Gatto, Chair

ABPCA Bill Id:ACA 11 (

Author:Gatto) – As Introduced Ver:March 9, 2016

SUBJECT: Public Utilities Commission

SUMMARY: Authorizes the Legislature to reallocate or reassign all or a portion of the functions of the California Public Utilities Commission (CPUC) to other state agencies, departments, boards, or other entities, consistent with specified purposes. Specifically, this constitutional amendment:

1. Repeals the provisions of the California Constitution pertaining to the CPUC effective January 1, 2019.
2. Specifies that a statute that was valid at the time the statute was enacted is not invalid by virtue of the repeal of those constitutional provisions.
3. Authorizes the Legislature to reallocate or reassign all or a portion of the functions of the CPUC to other state agencies, departments, boards, or other entities, consistent with specified purposes.
4. Directs the Legislature to adopt appropriate structures to provide greater accountability for the public utilities of the state and provide the necessary guidance to the CPUC to focus its regulatory efforts on safety, reliability, and ratesetting and to implement statutorily authorized programs for reducing emissions of greenhouse gases.

EXISTING LAW:

1. Establishes the CPUC with jurisdiction over all public utilities. (California Constitution, Article XII)
2. Grants the CPUC certain general powers over all public utilities, subject to control by the Legislature. (California Constitution, Article XII)
3. Authorizes the Legislature, unlimited by the other provisions of the Constitution, to confer additional authority and jurisdiction upon the CPUC that is cognate and germane to the regulation of public utilities, to establish the manner and scope of review of CPUC action in a court of record, and to enable the CPUC to fix just compensation for utility property taken by eminent domain. (California Constitution, Article XII)

FISCAL EFFECT: Unknown.

COMMENTS:

1. Author's Statement: "ACA 11 will place before the voters an initiative to strike Article 12 from the Constitution, thereby removing the constitutional protections currently enjoyed by the CPUC. It will require the Legislature reassign the functions of the CPUC by 2019, when Article 12 will sunset. ACA 11 recognizes that the 21st Century no longer requires the CPUC be enshrined in the California Constitution. It will allow for reforms to the Public Utilities Code to modernize the CPUC, reassign regulation of industries unrelated to the CPUC’s core functions to more appropriate state bodies, and provide greater accountability to Californians. The legislation specifies that these reforms shall be in furtherance of consumer protection, public health, environmental protection, increased transparency, public access, and shall preserve the ability of third parties to advocate for and intervene on behalf of those that need advocacy."
2. Background: The CPUC is charged with ensuring the provision of safe, reliable service at reasonable rates. In 1911, the voters established the Railroad Commission in the California Constitution. In 1912, the Legislature passed the Public Utilities Act, expanding the Commission's regulatory authority to include natural gas, electric, telephone, and water companies, in addition to railroads and marine transportation companies. In 1946, it was renamed the California Public Utilities Commission.

The CPUC's status as a Constitutionally-authorized agency is unique and has enabled the CPUC to enact and enforce policies and program if it finds the policies and programs cognate and germane. Limitations on the CPUC's broad authority are those that have been enacted by statute.

Recently, the CPUC's ability to regulate these wide-ranging and diverse industries – from electric and natural gas companies to limousines and transportation network companies – has been called into question. Following the 2010 explosion of a Pacific Gas and Electric gas line that resulted in numerous injuries and deaths in San Bruno, an independent study commissioned by the CPUC found that the CPUC had not been adequately overseeing gas pipeline safety.

In December 2011, nearly 500,000 Californians experienced widespread power outages of up to six days in the Los Angeles region due to windstorms. The Assembly Utilities and Commerce Committee's investigation revealed that the CPUC allowed Southern California Edison (SCE) to keep unspent maintenance funds and that the CPUC does not check to make sure that the maintenance work was performed.

In January 2012, a leak of contaminated steam was detected at one of the two new replacement generators at the San Onofre Nuclear Power Station (SONGS). In June 2013, SCE decided to permanently shut down SONGS as a result of design flaws affecting the both generators. In a meeting held in Warsaw, Poland in March 2012 between then-CPUC President Peevey and an SCE executive outlined a settlement framework. In November 2014, the CPUC allocated three quarters of the cost of the SONGS generators to be paid by ratepayers "without review of the expenses for the steam generator replacement projects" and consistent with the notes from the Warsaw meeting.

The recent gas well leak in Aliso Canyon, which displaced thousands of residents in Porter Ranch, Granada Hills, Bernal Heights, and surrounding communities and resulted in over 87,000 metric tons of methane being pumped into the air, has reinvigorated these concerns. The investigation into the Aliso Canyon gas well leak is still ongoing, but the CPUC's response to the crisis has frustrated many in the community. Californians are not confident that CPUC regulators are able to properly exercise oversight of utilities or act decisively to protect communities under the current system, which cannot be changed without this initiative.

1. Related Legislation.

AB 825 (Rendon) 2015: Proposes a suite of reforms of the CPUC largely directed at increased transparency of the activities of the agency, including requiring the California State Auditor's Office to appoint an Inspector General within its office for the CPUC, expanding the roles and responsibilities of the CPUC public advisor, specifying additional requirements of commissioners, and increased transparency of electric utilities' procurement, among others. Vetoed by the Governor.

AB 895 (Rendon) 2015: 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, and provides 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. Vetoed by the Governor.

AB 1023 (Rendon):  Requires the CPUC to establish and maintain a weekly communications log summarizing all oral or written ex parte communications. Vetoed by the Governor.

SB 18 (Hill) 2015: Requires any contract entered into by the CPUC for outside legal counsel services to represent it in a criminal investigation to be submitted to the Joint Legislative Budget Committee (JLBC) for review, with specified information, and approved by a vote of the CPUC no sooner than 30 days after the contract has been submitted to the JLBC. Vetoed by the Governor.

SB 48 (Hill) 2015: Proposes a suite of reforms of the governance and operations of the CPUC, including, among others, requiring sessions in Sacramento, applying the Code of Ethics from the Administrative Procedures Act to administrative law judges, clarifying and augmenting the information the CPUC must provide the Legislature in its annual report, and others. Vetoed by the Governor.

SB 660 (Leno) 2015: Proposes a suite of reforms of the governance, rules, operations and procedures of the CPUC, including:  reform of laws and rules related to ex parte communications, criteria and process for disqualification of commissions to a proceeding, and authorizes the Commission to appoint the chief administrative law judge. Vetoed by the Governor.

1. Support and Opposition. Supporters state that the CPUC has proved itself incapable of fairly and effectively regulating charter-party carriers, including limousines and TNCs and has limited enforcement capacity.

While there is no formal opposition to ACA 11, one party expressed concern with regard to competition in communication services and that the CPUC is charged with removing "the barriers to open and competitive markets" and promoting "fair product and price competition in a way that encourages greater efficiency, lower prices and more consumer price." They encourage the author to include "preserving and promoting competition" to the list of critical CPUC functions listed in Section 10 (a)(2) of the measure.

REGISTERED SUPPORT / OPPOSITION:

Support

San Francisco Taxi Workers Alliance

Opposition

None on file

Analysis Prepared by: Sue Kateley / U. & C. / (916) 319-2083