Existing law establishes the Public Utilities Commission, with regulatory jurisdiction and authority over public utilities, including electrical and gas corporations. Existing law places various responsibilities upon the commission to ensure that public utility services are provided in a manner that protects the public safety and the safety of utility employees.

This bill would require an electrical or gas corporation to annually notify the commission, as part of an ongoing proceeding or in a report otherwise required to be submitted to the commission, of each time that capital or expense revenue authorized by the commission for maintenance, safety, or reliability was redirected by the electrical or gas corporation to other purposes. The bill would require the commission to ensure that the notification is also made available in a timely fashion to the Office of the Safety Advocate, Office of Ratepayer Advocates, and parties on the service list of any relevant proceeding.

Under existing law, a violation of the Public Utilities Act or any order, decision, rule, direction, demand, or requirement of the commission is a crime.

Because the provisions of this bill would be a part of the act and because a violation of an order, decision, rule, direction, demand, or requirement of the commission implementing the bills requirements would be a crime, the bill would impose a state-mandated local program by creating a new crime.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law establishes the Public Utilities Commission, with regulatory jurisdiction and authority over public utilities, including electrical and gas corporations. Existing law places various responsibilities upon the commission to ensure that public utility services are provided in a manner that protects the public safety and the safety of utility employees.

This bill would require an electrical or gas corporation to annually notify the commission, as part of an ongoing proceeding or in a report otherwise required to be submitted to the commission, of each time that capital or expense revenue authorized by the commission for maintenance, safety, or reliability was redirected by the electrical or gas corporation to other purposes. The bill would require the commission to ensure that the notification is also made available in a timely fashion to the Office of the Safety Advocate, Office of Ratepayer Advocates, and parties on the service list of any relevant proceeding.

Under existing law, a violation of the Public Utilities Act or any order, decision, rule, direction, demand, or requirement of the commission is a crime.

Because the provisions of this bill would be a part of the act and because a violation of an order, decision, rule, direction, demand, or requirement of the commission implementing the bills requirements would be a crime, the bill would impose a state-mandated local program by creating a new crime.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law establishes the Public Utilities Commission, with regulatory jurisdiction and authority over public utilities, including electrical and gas corporations. Existing law places various responsibilities upon the commission to ensure that public utility services are provided in a manner that protects the public safety and the safety of utility employees.

This bill would require an electrical or gas corporation to annually submit a report to the commission reporting notify the commission, as part of an ongoing proceeding or in a report otherwise required to be submitted to the commission, of each time that capital or expense revenue authorized by the commission for maintenance, safety, or reliability is was redirected by the electrical or gas corporation to other purposes. The bill would require the commission to establish a process and procedure by which the electrical or gas corporation would be required to submit the report. The bill would require the process and procedure commission to ensure that the report notification is also made available in a timely fashion to the Office of the Safety Advocate, Office of Ratepayer Advocates, and parties on the service list of any relevant proceeding.

Under existing law, a violation of the Public Utilities Act or any order, decision, rule, direction, demand, or requirement of the commission is a crime.

Because the provisions of this bill would be a part of the act and because a violation of an order, decision, rule, direction, demand, or requirement of the commission implementing the bills requirements would be a crime, the bill would impose a state-mandated local program by creating a new crime.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law establishes the Public Utilities Commission, with regulatory jurisdiction and authority over public utilities, including electrical and gas corporations. Existing law places various responsibilities upon the commission to ensure that public utility services are provided in a manner that protects the public safety and the safety of utility employees.

This bill would require an electrical or gas corporation to annually submit a report to the commission reporting each time that capital or expense revenue authorized by the commission for maintenance, safety, or reliability is redirected by the electrical or gas corporation to other purposes. The bill would require the commission to set a monetary threshold under which that redirected revenue would not be required to be reported. The bill would require the commission to establish a process and procedure by which the electrical or gas corporation would be required to submit the report. The bill would require the process and procedure to ensure that the report is also made available in a timely fashion to the Office of the Safety Advocate, Office of Ratepayer Advocates, and parties on the service list of any relevant proceeding.

Under existing law, a violation of the Public Utilities Act or any order, decision, rule, direction, demand, or requirement of the commission is a crime.

Because the provisions of this bill would be a part of the act and because a violation of an order, decision, rule, direction, demand, or requirement of the commission implementing the bills requirements would be a crime, the bill would impose a state-mandated local program by creating a new crime.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law establishes the Public Utilities Commission, with regulatory jurisdiction and authority over public utilities, including electrical and gas corporations. Existing law places various responsibilities upon the commission to ensure that public utility services are provided in a manner that protects the public safety and the safety of utility employees.

This bill would require an electrical or gas corporation to annually submit a report to the commission, within 60 days, each time moneys commission reporting each time that capital or expense revenue authorized by the commission for maintenance or safety are maintenance, safety, or reliability is redirected for by the electrical or gas corporation to other purposes. The bill would require the commission to set a monetary threshold under which that redirected revenue would not be required to be reported. The bill would require the commission to establish a process and procedure by which the electrical or gas corporation would be required to submit the report. The bill would require the process and procedure to ensure that the report is also made available in a timely fashion to the Office of the Safety Advocate, Office of Ratepayer Advocates, and parties on the service list of any relevant proceeding.

Under existing law, a violation of the Public Utilities Act or any order, decision, rule, direction, demand, or requirement of the commission is a crime.

Because the provisions of this bill would be a part of the act and because a violation of an order, decision, rule, direction, demand, or requirement of the commission implementing the bills requirements would be a crime, the bill would impose a state-mandated local program by creating a new crime.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law establishes the Public Utilities Commission, with regulatory jurisdiction and authority over public utilities, including electrical and gas corporations. Existing law places various responsibilities upon the commission to ensure that public utility services are provided in a manner that protects the public safety and the safety of utility employees.

This bill would require an electrical or gas corporation to submit a report to the commission, within 60 days, when each time moneys authorized by the commission for maintenance or safety are reprioritized redirected for other purposes. The bill would require the commission to include the report in the docket of an appropriate proceeding and serve the report pursuant to the establish a process and procedure by which the electrical or gas corporation would be required to submit the report. The bill would require the process and procedure to ensure that the report is also made available in a timely fashion to the Office of the Safety Advocate, Office of Ratepayer Advocates, and service list of that any relevant proceeding.

Existing law establishes the Public Utilities Commission, with regulatory jurisdiction and authority over public utilities, including electrical and gas corporations. Existing law places various responsibilities upon the commission to ensure that public utility services are provided in a manner that protects the public safety and the safety of utility employees.

This bill would require an electrical or gas corporation to report to the commission, within 60 days, when moneys authorized by the commission for maintenance or safety are reprioritized for other purposes. The bill would require the commission to include the report in the docket of an appropriate proceeding and serve the report pursuant to the service list of that proceeding.

 UNFINISHED BUSINESS  

Bill No: SB 549

Author:

:

Vote:

SENATE ENERGY, U. & C. COMMITTEE: 11-0, 3/21/17

AYES: Hueso, Morrell, Bradford, Cannella, Hertzberg, Hill, McGuire, Skinner, Stern, Vidak, Wiener

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

SENATE FLOOR: 40-0, 4/20/17

AYES: Allen, Anderson, Atkins, Bates, Beall, Berryhill, Bradford, Cannella, De León, Dodd, Fuller, Gaines, Galgiani, Glazer, Hernandez, Hertzberg, Hill, Hueso, Jackson, Lara, Leyva, McGuire, Mendoza, Mitchell, Monning, Moorlach, Morrell, Newman, Nguyen, Nielsen, Pan, Portantino, Roth, Skinner, Stern, Stone, Vidak, Wieckowski, Wiener, Wilk

ASSEMBLY FLOOR: 76-0, 8/31/17 - See last page for vote

SUBJECT:

SOURCE: Author

DIGEST:

This bill requires an electrical or gas corporation to annually notify the California Public Utilities Commission (CPUC) of each time that capital or expense revenue authorized by the CPUC for maintenance, safety, or reliability was redirected by the electrical or gas corporation to other purposes.

Assembly Amendments require annual reporting, instead of within 60 days of each incident, when utilities redirect funds authorized for maintenance or safety, and add include approved funds related to reliability.

ANALYSIS:

Existing law:

1. Requires the CPUC to develop formal procedures to consider safety in a rate case application by an electrical corporation or gas corporation. Requires the procedures include a means by which safety information acquired by the CPUC through monitoring, data tracking and analysis, accident investigations, and audits of an applicant’s safety programs may inform the CPUC’s consideration of the application. (Public Utilities Code §750)
2. Requires that the CPUC and each gas corporation place safety of the public and gas corporation employees as the top priority and further requires that CPUC take all reasonable and appropriate actions necessary to carry out safety as a priority consistent with the principle of just and reasonable cost-based rates. (Public Utilities Code §963(b)3)
3. Requires, in any ratemaking proceeding in which the CPUC authorizes a gas corporation to recover expenses for the maintenance and repair of transmission pipelines, that the CPUC require the gas corporation to establish and maintain a balancing account for the recovery of those expenses. (Public Utilities Code §969)
4. Requires each gas corporation to demonstrate to the satisfaction of the CPUC, in its general rate case proceeding, that the requested revenue requirements will be sufficient to enable the gas corporation to fund those projects and activities necessary to maintain safe and reliable service and to meet federal and state safety requirements applicable to its gas plant, in a cost-effective manner. (Public Utilities Code §958.5)

This bill:

1. Requires the CPUC to require an electrical or gas corporation to annually notify the CPUC, as part of an ongoing proceeding or in a report otherwise required to be submitted to the CPUC, of each time that capital or expense revenue authorized by the CPUC for maintenance, safety, or reliability was redirected by the electrical or gas corporation to other purposes.
2. Requires the CPUC to ensure that the notification provided by each electrical or gas corporation is also made available in a timely fashion to the Office of Safety Advocate, Office of Ratepayer Advocates, and parties on the service list of any relevant proceeding.

Background

Safety-related Incidents. Recent events have revealed that at varying times, utilities have not been expending funds authorized by the CPUC in the general rate case (GRC) for safety-related purposes or diverting funds to non-safety-related purposes or not expended. The author has noted instances where utilities had not expended funds that had been authorized which may have contributed to instances of damage, injury or fatality, including extended power outages in Southern California Edison (SCE) territory during a windstorm and, most notably, the fatal San Bruno Pacific Gas & Electric (PG&E) natural gas pipeline explosion in 2010. In the aftermath of the explosion it was revealed that PG&E had diverted funds earmarked for gas pipeline maintenance to other purposes, including executive bonuses. This bill attempts to help prevent tragic situations by requiring the utilities to notify the CPUC when they reprioritize safety-related funding.

General Rate Case (GRC). All utilities that are regulated by the CPUC are required to undergo a GRC whereby the utility requests funding for distribution, generation and operation costs associated with their service. The GRCs are major regulatory proceedings and provide the CPUC an opportunity to perform an exhaustive examination of a utility’s operations and costs with input from all stakeholders, representing consumers, business and other interests, including the Office of Ratepayer Advocates (ORA) whose accountants and analysts closely exam the requests of the utilities. Usually performed every three years and conducted over roughly 18 months, the GRC allows the CPUC to conduct a broad and detailed review of a utility’s revenues, expenses, and investments in plant and equipment to establish an approved revenue requirement. Through the GRC, a utility forecasts how they will structure their operations and make investments for the next three years. Within the adopted GRC decision, a utility may be allocated funds by broad categories, although specific projects are not detailed out or monitored.

Office of Safety Advocate and Office of Ratepayer Advocates. As set forth in SB 62 (Hill, Chapter 806, Statutes of 2016) and pursuant to positions approved within the 2016-17 CPUC budget, the CPUC is in the process of establishing the Office of Safety Advocate (OSA) which is “a small advocacy unit within the CPUC which will be staffed with engineers and policy analysts who will advocate for the continuous and cost-effective improvement of the safety management and safety performance of public utilities.” (CPUC Annual Report, February 2017) In the meantime, the over 100 staff at ORA continues its efforts to thoroughly analyze the GRCs of CPUC-regulated utilities, including the requests for safety-related items. ORA recently mentioned that they are further bolstering their efforts on safety components of the rate-case. Considering the CPUC is often the arbiter of the GRC proceedings, but ORA is (and, it’s hoped, OSA will) analyzes the utility’s funding requests, a notification to both entities and other parties to a relevant proceeding arealso merited.

Safety Spending and Accountability Reporting. As the CPUC continues its efforts to better incorporate safety risk assessment into its rate case decision making as part of the on-going Safety Model Assessment Proceeding (S-MAP), aspects of the new risk management approach are being incorporated into general rate cases, including a requirement for “safety spending accountability reports” to verify whether the utilities have spent funds for safety projects and programs as approved. Recent GRC filings from PG&E and SCE, for the first time, included extensive testimony on utility management of identified safety risks, development of risk mitigation programs and projects, and prioritizing infrastructure and operational spending to enhance safety. Also, as part of a June 2016 decision on the Sempra utilities’ previous GRC (D.16-06-054), the CPUC ordered a first-of-its kind accountability reporting requirement to ensure that utility spending comports with approved activities and that the safety impacts can be meaningfully assessed.

Gas Corporation Balancing Accounts. In response to the San Bruno tragedy AB 56 (Hill, Chapter 519, Statutes of 2011) requires gas corporations to establish and maintain balancing accounts for the recovery of expenses related to capital expenditures for maintenance and repair. These balancing accounts act as a record of expenditures but it is still difficult to decipher when money approved by the CPUC for one project has been diverted to another project. Therefore the author argues SB 549 would clearly show when capital or expense revenue authorized for maintenance, safety or reliability is redirected for another purpose through this annual report. The author notes that current law only applies to gas corporations and SB 549 would apply to both electric and gas corporations.

Related/Prior Legislation

SB 900 (Hill, Chapter 552, Statutes of 2014) required the CPUC to develop formal procedures, as specified, to consider safety in a rate case application by an electrical corporation or gas corporation.

AB 56 (Hill, Chapter 519, Statutes of 2011) required the CPUC, in any ratemaking proceeding in which the CPUC authorizes a gas corporation to recover expenses for a federal transmission pipeline integrity management program, or for related capital expenditures for the maintenance and repair of transmission pipelines, to require the gas corporation to establish and maintain a balancing account for the recovery of those expenses.

SB 879 (Padilla, Chapter 523, Statutes of 2011) among its provisions, included the same provision related to maintaining a balancing account for gas pipeline safety maintenance and repair as in AB 56.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

According to the Assembly Appropriations Committee any additional costs are absorbable within existing resources.

SUPPORT: (Verified 8/31/17)

Office of Ratepayer Advocates

OPPOSITION: (Verified 8/31/17)

None received

ARGUMENTS IN SUPPORT: The author states:

“The CPUC normally learns of utility budget redirections through the GRC, audits, or safety investigations, all of which can occur years after safety and maintenance funds have been redirected. By requiring an electrical or gas corporation to notify the CPUC when funds are redirected the corporation will acknowledge it was aware of the redirection and the CPUC will receive information regarding the redirection in real time.”

ASSEMBLY FLOOR: 76-0, 8/31/17

AYES: Acosta, Aguiar-Curry, Travis Allen, Arambula, Baker, Berman, Bigelow, Bloom, Bocanegra, Bonta, Brough, Burke, Caballero, Calderon, Cervantes, Chau, Chávez, Chen, Chiu, Choi, Chu, Cooley, Cooper, Cunningham, Dababneh, Dahle, Daly, Eggman, Flora, Fong, Frazier, Friedman, Gallagher, Cristina Garcia, Gipson, Gloria, Gonzalez Fletcher, Gray, Grayson, Harper, Holden, Irwin, Jones-Sawyer, Kalra, Kiley, Lackey, Levine, Limón, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Muratsuchi, Nazarian, Obernolte, O'Donnell, Patterson, Quirk, Reyes, Rodriguez, Rubio, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Voepel, Waldron, Weber, Wood, Rendon

NO VOTE RECORDED: Eduardo Garcia, Quirk-Silva, Ridley-Thomas

Prepared by:

8/31/17 18:16:13

**** END ****

SENATE THIRD READING

STR Bill Id:SB 549

Author:(Bradford)

As Amended Ver:July 20, 2017

Majority vote

SENATE VOTE: 40-0

SUMMARY: This bill requires an electrical or gas corporation (IOU) to annually notify the California Public Utilities Commission (CPUC) of each time capital or expense revenue authorized by the CPUC is maintenance, safety, or reliability is redirected for other purposes. Additionally, this bill:

FISCAL EFFECT: According to the Assembly Appropriations Committee, any additional costs are absorbable within existing resources.

COMMENTS:

1. Purpose. According to the author's office, "It's well understood by those who have been around the state's energy infrastructure that it is old, outdated and needs to be repaired and maintained. While we fund many modern uses for the electric grid, such as self-generation and two-way power flows, we don't necessarily make sure that the infrastructure to support day-to-day services are kept up to safe standards. The same can be said for gas pipeline and storage infrastructure aging silently underground. When the CPUC approves a GRC it should ensure funds are sufficient to address safety, maintenance, and reliability. Making sure that the utilities do a gut-check before they divert maintenance and safety funds that they requested in the GRC may help ensure that any such diversions are well-thought out and do not compromise the safe and reliable operation of our state's energy system."
2. History of monies marked for safety and maintenance. The author's office notes a number of incidents involving fatalities, injuries, property damage, and prolonged energy service interruptions have occurred where later it was learned that the IOU had directed funds authorized for safety and maintenance to another purpose. Examples include:
   1. In 2015 Southern California Edison spent 17.9% less than what the CPUC authorized for safety-related projects;
   2. An October 2016 CPUC report of Pacific Gas & Electric's (PG&E) general rate case safety related spending found that PG & E's actual spending on safety related projects from 2014 to 2015 was 3% less than the authorized amount; and
   3. Most notably following the tragic 2010 PG&E gas pipeline exposing that occurred in San Bruno, California the CPUC reported that PG&E had diverted funds for pipeline maintenance and used them for utility executive bonuses instead.

Analysis Prepared by: Elle Hoxworth / U. & E. / (916) 319-2083 FN: 0001295

Date of Hearing: July 19, 2017

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez Fletcher, Chair

SBPCA Bill Id:SB 549

Author:(Bradford) – As Amended Ver:June 27, 2017

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

SUMMARY:

This bill requires an electrical or gas corporation to submit a report to the California Public Utilities Commission (PUC) annually detailing each time capital or expense revenue authorized by the PUC is for maintenance, safety, or reliability is redirected for other purposes. Additionally, this bill:

1. Requires the PUC to establish a process and procedure for the electrical or gas corporation to submit the report.
2. Requires the process or procedure to ensure the report is made available to the Office of the Safety Advocate, Office of Ratepayer Advocates, and parties on the service list of any relevant proceeding in a timely manner.

FISCAL EFFECT:

Any additional costs are absorbable within existing resources.

COMMENTS:

1. Background and Purpose. The author’s office notes a number of incidents involving fatalities, injuries, property damage, and prolonged energy service interruptions have occurred where later it was learned that the investor-owned utility (IOU) had redirected funds authorized for safety and maintenance to another purpose. Examples include:
2. In 2015 Southern California Edison spent 17.9% less than what the CPUC authorized for safety-related projects;
3. An October 2016 CPUC report of Pacific Gas & Electric’s (PG&E) general rate case safety related spending found that PG&E’s actual spending on safety related projects from 2014 to 2015 was 3% less than the authorized amount; and
4. Most notably following the tragic 2010 PG&E gas pipeline exposing that occurred in San Bruno, California the CPUC reported that PG&E had diverted funds for pipeline maintenance and used them for utility executive bonuses instead.

According to the author, “Making sure that the utilities do a gut-check before they divert maintenance and safety funds that they requested in the general rate case (GRC) may help ensure that any such diversions are well-thought out and do not compromise the safe and reliable operation of our state’s energy system.”

1. Suggested Amendment. The PUC has several safety-related proceedings underway as well as proceedings related to GRCs. The author may wish to consider an amendment that allows the requirements of this bill to be addressed in an existing relevant PUC proceeding.

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

Date of Hearing: June 21, 2017

ASSEMBLY COMMITTEE ON UTILITIES AND ENERGY

Chris Holden, Chair

SBPCA Bill Id:SB 549

Author:(Bradford) – As Amended Ver:May 31, 2017

SENATE VOTE: 40-0

SUBJECT: Public utilities: reports: moneys for maintenance, safety, and reliability

SUMMARY: Requires electrical or gas corporations (investor-owned utility or IOU) to submit a report to the California Public Utilities Commission (CPUC) annually that details each time capital or expense revenue authorized for maintenance, safety or reliability is redirected for another purpose.

EXISTING LAW:

1. Requires the CPUC to develop formal procedures to consider safety in a rate case application by an IOU. Requires the procedures to include a means by which safety information acquired by the CPUC through monitoring, data tracking and analysis, accident investigations, and audits of an applicant’s safety programs may inform the CPUC’s consideration of the application. (Public Utilities Code §750)
2. Requires that the CPUC and each gas corporation place safety of the public and gas corporation employees as the top priority and further requires that the CPUC take all reasonable and appropriate actions necessary to carry out safety as a priority consistent with the principle of just and reasonable cost-based rates. (Public Utilities Code §963)
3. Requires, in any ratemaking proceeding in which the CPUC authorizes a gas corporation to recover expenses for the maintenance and repair of transmission pipelines, that the the gas corporation establish and maintain a balancing account for the recovery of those expenses. (Public Utilities Code §969)
4. Requires each gas corporation to demonstrate to the satisfaction of the CPUC, in its general rate case proceeding, that the requested revenue requirements will be sufficient to enable the gas corporation to fund those projects and activities necessary to maintain safe and reliable service and to meet federal and state safety requirements applicable to its gas plant, in a cost-effective manner. (Public Utilities Code §958.5)

FISCAL EFFECT: This bill is keyed fiscal and will be referred to the Assembly Committee on Appropriations for its review. This bill passed out of Senate Appropriations under Senate Rule 28.8 due to a determination that this measure has minimum impact to state costs or revenues.

BACKGROUND:

History of monies marked for safety and maintenance. The author’s office notes a number of incidents involving fatalities, injuries, property damage, and prolonged energy service interruptions have occurred where later it was learned that the IOU had directed funds authorized for safety and maintenance to another purpose. Examples include:

• In 2015 Southern California Edison spent 17.9% less than what the CPUC authorized for safety-related projects;
• An October 2016 CPUC report of Pacific Gas & Electric’s (PG&E) general rate case safety related spending found that PG & E’s actual spending on safety related projects from 2014 to 2015 was 3% less than the authorized amount; and
• Most notably following the tragic 2010 PG&E gas pipeline exposing that occurred in San Bruno, California the CPUC reported that PG&E had diverted funds for pipeline maintenance and used them for utility executive bonuses instead.

General Rate Cases (GRCs). In a GRC a utility must present detailed evidence regarding how much money it needs to safely and reliably operate its system, including how much money was spent in the past. After a thorough review of the utility’s request, the CPUC establishes the authorized level of revenues the utility can collect for the next three future years. If the utility actually spends more than its authorized budget, it has to absorb the excess spending. If it spends less, it is allowed to keep the money. The rationale behind this ratemaking is that it provides an incentive to the utility to manage its business more efficiently and cut costs where possible. The efficiency and lower costs can be captured in the next GRC to the benefit of ratepayers. Because the utilities are responsible for running their businesses safely and reliably, the CPUC allows them the flexibility within their budgets to spend more or less on a particular project.^[1]

Risk Assessment and Safety Advisory: The Risk Assessment and Safety Advisory Section (RASA) consists of a team of senior engineers and senior analysts, who serve many critical functions within the Safety and Enforcement Division (SED). RASA provides advisory support to commissioner offices and administrative law judges on safety proceedings as well as any energy proceedings that have safety implications. In 2015 and 2016, RASA identified safety concerns or considerations in over 25 new regulatory proceedings. The RASA section also promotes safety by improving the ways that IOUs integrate risk analysis and risk management into their operational, planning and other decision-making processes. In addition, RASA suggests improvements in audits and inspections performed by SED. RASA also identifies safety hazards and suggests improvements to general orders and safety inspection protocols. RASA regularly coordinates with other CPUC divisions and/or state agencies to promote safety in regulated utility operations and research expenditures.^[2]

COMMENTS:

1. Author’s Comments. According to the author’s office, “It’s well understood by those who have been around the state’s energy infrastructure that it is old, outdated and needs to be repaired and maintained. While we fund many modern uses for the electric grid, such as self-generation and two-way power flows, we don’t necessarily make sure that the infrastructure to support day-to-day services are kept up to safe standards. The same can be said for gas pipeline and storage infrastructure aging silently underground. When the CPUC approves a GRC it should ensure funds are sufficient to address safety, maintenance, and reliability. Making sure that the utilities do a gut-check before they divert maintenance and safety funds that they requested in the GRC may help ensure that any such diversions are well-thought out and do not compromise the safe and reliable operation of our state’s energy system.”
2. Gas Corporation Balancing Accounts. In response to the San Bruno tragedy AB 56 (Hill, Chapter 519, Statutes of 2011) requires gas corporations to establish and maintain balancing accounts for the recovery of expenses related to capital expenditures for maintenance and repair. These balancing accounts act as a record of expenditures but it is still difficult to decipher when money approved by the CPUC for one project has been diverted to another project. Therefore the author argues SB 549 would clearly show when capital or expense revenue authorized for maintenance, safety or reliability is redirected for another purpose through this annual report. The author notes that current law only applies to gas corporations and SB 549 would apply to both electric and gas corporations.
3. Safety Spending Accountability Reports. The CPUC, as a result of decisions in the Risk Informed Decision-making OIR (D.14-12-025) which directed the IOUs to file applications to initiate the Safety Model Assessment Proceeding (S-MAP), and subsequent GRC decisions, already requires “safety spending accountability reports,” to verify whether the IOUs have spent funds for safety projects and programs as approved, and to explain any variance. A second accountability report is required to show how that spending has impacted safety of operations. Also, since 2016, the Energy Division – under an action item of the CPUC Safety Action Plan – has conducted and issued a safety spending accountability report for utilities that are in a GRC proceeding, explaining variances from approved spending levels. The CPUC is currently rolling out annual reports, Risk Spending Accountability Reports, that show any variances in safety spending from what was approved in the GRC generated by the IOUs. Sempra will be the first utility to report under this new requirement at the end of the month.

The commission has ordered the IOUs to develop and submit safety spending related reports as called for in this bill. However, the CPUC has required all variances to be reported regardless of amount and the CPUC’s order and this bill are inconsistent on this requirement. To avoid a new CPUC proceeding as a result of this bill and ensure that this bill does not weaken the CPUC order, the committee may wish to consider amending the bill to remove the requirement that the CPUC establish a “threshold” for reporting spending variances.

1. Prior Legislation.

SB 900 (Hill) Requires the CPUC to develop formal procedures, as specified, to consider safety in a rate case application by an electrical corporation or gas corporation. Status: Chapter 552, Statutes of 2014

AB 56 (Hill) Requires the CPUC, in any ratemaking proceeding in which the CPUC authorizes a gas corporation to recover expenses for a federal transmission pipeline integrity management program, or for related capital expenditures for the maintenance and repair of transmission pipelines, to require the gas corporation to establish and maintain a balancing account for the recovery of those expenses. Status: Chapter 519, Statutes of 2011

SB 879 (Padilla) Among its provisions, included the same provision related to maintaining a balancing account for gas pipeline safety maintenance and repair as in AB 56. Status: Chapter 523, Statutes of 2011

REGISTERED SUPPORT / OPPOSITION:

Support

None on file.

Opposition

None on file.

Analysis Prepared by: Elle Hoxworth / U. & E. /

1. Joint Legislative Committee on Emergency Management, February 3, 2012 ↑

2. http://cpuc.ca.gov/riskassessment/ ↑

 THIRD READING  

Bill No: SB 549

Author:

:

Vote:

SENATE ENERGY, U. & C. COMMITTEE: 11-0, 3/21/17

AYES: Hueso, Morrell, Bradford, Cannella, Hertzberg, Hill, McGuire, Skinner, Stern, Vidak, Wiener

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

SUBJECT:

SOURCE: Author

DIGEST: This bill requires an electrical or gas corporation to report to the California Public Utilities Commission (CPUC), within 60 days, each time moneys previously authorized for maintenance or safety are reprioritized for other purposes.

ANALYSIS:

Existing law:

1. Requires the CPUC to develop formal procedures to consider safety in a rate case application by an electrical corporation or gas corporation. Requires the procedures include a means by which safety information acquired by the CPUC through monitoring, data tracking and analysis, accident investigations, and audits of an applicant’s safety programs may inform the CPUC’s consideration of the application. (Public Utilities Code §750)
2. Requires that the CPUC and each gas corporation place safety of the public and gas corporation employees as the top priority and further requires that CPUC take all reasonable and appropriate actions necessary to carry out safety as a priority consistent with the principle of just and reasonable cost-based rates. (Public Utilities Code §963(b)3)
3. Requires, in any ratemaking proceeding in which the CPUC authorizes a gas corporation to recover expenses for the maintenance and repair of transmission pipelines, that the CPUC require the gas corporation to establish and maintain a balancing account for the recovery of those expenses. (Public Utilities Code §969)
4. Requires each gas corporation to demonstrate to the satisfaction of the CPUC, in its general rate case proceeding, that the requested revenue requirements will be sufficient to enable the gas corporation to fund those projects and activities necessary to maintain safe and reliable service and to meet federal and state safety requirements applicable to its gas plant, in a cost-effective manner. (Public Utilities Code §958.5)

This bill:

1. Requires the CPUC to require an electrical or gas corporation to report to the CPUC, within 60 days, each time moneys authorized by the CPUC for maintenance and safety are reprioritized for other purposes.
2. Requires the CPUC to establish a process and procedure by which the electrical or gas corporation must submit the report to the CPUC and ensure the report is made available in a timely fashion to the Office of Safety Advocate, Office of Ratepayer Advocates, and the service list of any relevant proceeding.

Background

Safety-related Incidents. Recent events have revealed that at varying times, utilities have not been expending funds authorized by the CPUC in the general rate case (GRC) for safety-related purposes or diverting funds to non-safety-related purposes or not expended. The author has noted instances where utilities had not expended funds that had been authorized which may have contributed to instances of damage, injury or fatality, including extended power outages in Southern California Edison (SCE) territory during a windstorm and, most notably, the fatal San Bruno Pacific Gas & Electric (PG&E) natural gas pipeline explosion in 2010. In the aftermath of the explosion it was revealed that PG&E had diverted funds earmarked for gas pipeline maintenance to other purposes, including executive bonuses. This bill attempts to help prevent tragic situations by requiring the utilities to notify the CPUC when they reprioritize safety-related funding.

General Rate Case (GRC). All utilities that are regulated by the CPUC are required to undergo a GRC whereby the utility requests funding for distribution, generation and operation costs associated with their service. The GRCs are major regulatory proceedings and provide the CPUC an opportunity to perform an exhaustive examination of a utility’s operations and costs with input from all stakeholders, representing consumers, business and other interests, including the Office of Ratepayer Advocates (ORA) whose accountants and analysts closely exam the requests of the utilities. Usually performed every three years and conducted over roughly 18 months, the GRC allows the CPUC to conduct a broad and detailed review of a utility’s revenues, expenses, and investments in plant and equipment to establish an approved revenue requirement. Through the GRC, a utility forecasts how they will structure their operations and make investments for the next three years. Within the adopted GRC decision, a utility may be allocated funds by broad categories, although specific projects are not detailed out or monitored.

Office of Safety Advocate and Office of Ratepayer Advocates. As set forth in SB 62 (Hill, Chapter 806, Statutes of 2016) and pursuant to positions approved within the 2016-17 CPUC budget, the CPUC is in the process of establishing the Office of Safety Advocate (OSA) which is “a small advocacy unit within the CPUC which will be staffed with engineers and policy analysts who will advocate for the continuous and cost-effective improvement of the safety management and safety performance of public utilities.” (CPUC Annual Report, February 2017) In the meantime, the over 100 staff, ORA continues its efforts to thoroughly analyze the GRCs of CPUC-regulated utilities, including the requests for safety-related items. ORA recently mentioned to this committee that they are further bolstering their efforts on safety components of the rate-case. Considering the CPUC is often the arbiter of the GRC proceedings, but ORA is (and, its hoped, OSA will) analyzes the utility’s funding requests, a notification to both entities and other parties to a relevant proceeding are merited, once the utility has reported to the CPUC.

Safety Spending and Accountability Reporting. Per the CPUC’s Annual Report: As the CPUC continues its efforts to better incorporate safety risk assessment into its rate case decision making as part of the on-going Safety Model Assessment Proceeding (S-MAP), aspects of the new risk management approach are being incorporated into general rate cases. Recent GRC filings from PG&E and SCE, for the first time, included extensive testimony on utility management of identified safety risks, development of risk mitigation programs and projects, and prioritizing infrastructure and operational spending to enhance safety. In the first full application of the new S-MAP paradigm, San Diego Gas & Electric and Southern California Gas Company in November 2016, made their initial Risk Assessment Mitigation Phase (RAMP) filings in advance of their 2018 GRC applications due in September 2017 (I.16-10-015/I.16- 10-016). CPUC Safety and Enforcement Department (SED) staff and intervenors will assess how well the utilities are incorporating risk mitigations into their GRC spending proposals. Also, as part of the June 2016 decision on the Sempra utilities’ previous GRC (D.16-06-054), the CPUC ordered a first-of-its kind accountability reporting requirement to ensure that utility spending comports with approved activities and that the safety impacts can be meaningfully assessed. SED staff have been deeply involved in the development of these new policies, conducting data requests, issuing evaluation reports, and convening working groups to develop safety performance metrics and accountability report templates, as well as providing advisory support for the S-MAP proceeding (A.15-05-002, et al.).” While there’s much hope for improved tracking of safety-related measures in utility budgets and rate cases, a requirement of utilities for more immediate notification when they redirect funds is warranted.

Related/Prior Legislation

SB 900 (Hill, Chapter 552, Statutes of 2014) required the CPUC to develop formal procedures, as specified, to consider safety in a rate case application by an electrical corporation or gas corporation.

AB 56 (Hill, Chapter 519, Statutes of 2011) required the CPUC, in any ratemaking proceeding in which the CPUC authorizes a gas corporation to recover expenses for a federal transmission pipeline integrity management program, or for related capital expenditures for the maintenance and repair of transmission pipelines, to require the gas corporation to establish and maintain a balancing account for the recovery of those expenses.

SB 879 (Padilla, Chapter 523, Statutes of 2011) among its provisions, included the same provision related to maintaining a balancing account for gas pipeline safety maintenance and repair as in AB 56.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 4/17/17)

Office of Ratepayer Advocates

OPPOSITION: (Verified 4/17/17)

None received

ARGUMENTS IN SUPPORT: The author states: “The CPUC normally learns of utility budget redirections through the GRC, audits, or safety investigations, all of which can occur years after safety and maintenance funds have been redirected. By requiring an electrical or gas corporation to notify the CPUC when funds are redirected the corporation will acknowledge it was aware of the redirection and the CPUC will receive information regarding the redirection in real time.”

Prepared by:

4/19/17 14:39:27

**** END ****

SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS

Senator Ben Hueso, Chair

2017 - 2018 Regular

Bill No: SB 549 Hearing Date: 3/21/2017

SUBJECT: Public utilities: reports: moneys for maintenance and safety

DIGEST: This bill would require an electrical or gas corporation to report to the California Public Utilities Commission (CPUC), within 60 days, when moneys previously authorized for maintenance or safety are reprioritized for other purposes.

ANALYSIS:

Existing law:

1. Requires the CPUC to develop formal procedures to consider safety in a rate case application by an electrical corporation or gas corporation. Requires the procedures include a means by which safety information acquired by the CPUC through monitoring, data tracking and analysis, accident investigations, and audits of an applicant’s safety programs may inform the CPUC’s consideration of the application. (Public Utilities Code §750)
2. Requires that the CPUC and each gas corporation place safety of the public and gas corporation employees as the top priority and further requires that CPUC take all reasonable and appropriate actions necessary to carry out safety as a priority consistent with the principle of just and reasonable cost-based rates. (Public Utilities Code §963(b)3)
3. Requires, in any ratemaking proceeding in which the CPUC authorizes a gas corporation to recover expenses for the maintenance and repair of transmission pipelines, that the CPUC require the gas corporation to establish and maintain a balancing account for the recovery of those expenses. (Public Utilities Code §969)
4. Requires each gas corporation to demonstrate to the satisfaction of the CPUC, in its general rate case proceeding, that the requested revenue requirements will be sufficient to enable the gas corporation to fund those projects and activities necessary to maintain safe and reliable service and to meet federal and state safety requirements applicable to its gas plant, in a cost-effective manner. (Public Utilities Code §958.5)

This bill:

1. Requires the CPUC to require an electrical or gas corporation to report to the CPUC, within 60 days, when moneys authorized by the CPUC for maintenance and safety are reprioritized for other purposes.
2. Requires the CPUC to include the report in the docket of an appropriate proceeding and serve the report to the service list of that proceeding.

Background

Safety-related incidents. Recent events have revealed that at varying times, utilities have not been expending funds authorized by the CPUC in the general rate case (GRC) for safety-related purposes or diverting funds to non-safety-related purposes or not expended. The author has noted instances where utilities had not expended funds that had been authorized which may have contributed to instances of damage, injury or fatality, including extended power outages in Southern California Edison (SCE) territory during a windstorm and, most notably, the fatal San Bruno Pacific Gas & Electric (PG&E) natural gas pipeline explosion in 2010. In the aftermath of the explosion it was revealed that PG&E had diverted funds earmarked for gas pipeline maintenance to other purposes, including executive bonuses. This bill attempts to help prevent tragic situations by requiring the utilities to notify the CPUC when they reprioritize safety-related funding.

General Rate Case (GRC). All utilities that are regulated by the CPUC are required to undergo a GRC whereby the utility requests funding for distribution, generation and operation costs associated with their service. The GRCs are major regulatory proceedings and provide the CPUC an opportunity to perform an exhaustive examination of a utility’s operations and costs with input from all stakeholders, representing consumers, business and other interests, including the Office of Ratepayer Advocates (ORA) whose accountants and analysts closely exam the requests of the utilities. Usually performed every three years and conducted over roughly 18 months, the GRC allows the CPUC to conduct a broad and detailed review of a utility’s revenues, expenses, and investments in plant and equipment to establish an approved revenue requirement. Through the GRC, a utility forecasts how they will structure their operations and make investments for the next three years. Within the adopted GRC decision, a utility may be allocated funds by broad categories, although specific projects are not detailed out or monitored.

Office of Safety Advocate and Office of Ratepayer Advocates. As set forth in SB 62 (Hill, Chapter 806, Statutes of 2016) and pursuant to positions approved within the 2016-17 CPUC budget, the CPUC is in the process of establishing the Office of Safety Advocate (OSA) which is “a small advocacy unit within the CPUC which will be staffed with engineers and policy analysts who will advocate for the continuous and cost-effective improvement of the safety management and safety performance of public utilities.” (CPUC Annual Report, February 2017) In the meantime, the over 100 staff, ORA continues its efforts to thoroughly analyze the GRCs of CPUC-regulated utilities, including the requests for safety-related items. ORA recently mentioned to this committee that they are further bolstering their efforts on safety components of the rate-case. Considering the CPUC is often the arbiter of the GRC proceedings, but ORA is (and, its hoped, OSA will) analyzes the utility’s funding requests, a notification to both entities and other parties to a relevant proceeding are merited, once the utility has reported to the CPUC.

Safety Spending and Accountability Reporting. Per the CPUC’s Annual Report: As the CPUC continues its effort to better incorporate safety risk assessment into its rate case decision making as part of the on-going Safety Model Assessment Proceeding (S-MAP), aspects of the new risk management approach are being incorporated into general rate cases. Recent GRC filings from PG&E and SCE for the first time included extensive testimony on utility management of identified safety risks, development of risk mitigation programs and projects, and prioritizing infrastructure and operational spending to enhance safety. In the first full application of the new S-MAP paradigm, San Diego Gas & Electric and Southern California Gas Company in November 2016, made their initial Risk Assessment Mitigation Phase (RAMP) filings in advance of their 2018 GRC applications due in September 2017 (I.16-10-015/I.16- 10-016). CPUC Safety and Enforcement Department (SED) staff and intervenors will assess how well the utilities are incorporating risk mitigations into their GRC spending proposals. Also, as part of the June 2016 decision on the Sempra utilities’ previous GRC (D.16-06-054), the CPUC ordered a first-of-its kind accountability reporting requirement to ensure that utility spending comports with approved activities and that the safety impacts can be meaningfully assessed. SED staff have been deeply involved in the development of these new policies, conducting data requests, issuing evaluation reports, and convening working groups to develop safety performance metrics and accountability report templates, as well as providing advisory support for the S-MAP proceeding (A.15-05-002, et al.).” While there’s much hope for improved tracking of safety-related measures in utility budgets and rate cases, a requirement of utilities for more immediate notification when they redirect funds is warranted.

The author and committee may wish to make the following technical amendments:

SECTION 1.

 Section 591 is added to the Public Utilities Code, to read:

591.

 (a) The commission shall require an electrical or gas corporation to report to the commission, within 60 days, when moneys authorized by the commission for maintenance or safety are reprioritized redirected for other purposes.

(b) The commission shall include the report in the docket of an adopt by rule the process and procedures for a utility to report to the commission, pursuant to (a), including notification to the office of safety advocates, office of ratepayer advocates, and to the any appropriate proceeding and serve the report pursuant to the service list(s) of that any relevant proceeding(s).

Prior/Related Legislation

SB 900 (Hill, Chapter 552, Statutes of 2014) required the CPUC to develop formal procedures, as specified, to consider safety in a rate case application by an electrical corporation or gas corporation.

AB 56 (Hill, Chapter 519, Statutes of 2011) required the CPUC, in any ratemaking proceeding in which the CPUC authorizes a gas corporation to recover expenses for a federal transmission pipeline integrity management program, or for related capital expenditures for the maintenance and repair of transmission pipelines, to require the gas corporation to establish and maintain a balancing account for the recovery of those expenses.

SB 879 (Padilla, Chapter 523, Statutes of 2011) among its provisions, included the same provision related to maintaining a balancing account for gas pipeline safety maintenance and repair as in AB 56.

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

SUPPORT:

Office of Ratepayer Advocates

OPPOSITION:

None received

ARGUMENTS IN SUPPORT: The author states: the CPUC normally learns of utility budget redirections through the GRC, audits, or safety investigations, all of which can occur years after safety and maintenance funds have been redirected. By requiring an electrical or gas corporation to notify the CPUC when funds are redirected the corporation will acknowledge it was aware of the redirection and the CPUC will receive information regarding the redirection in real time

-- END --