Hill Introduces State PUC Reforms, Calls for Audit of Utility Accounts

February 22, 2013

Bill Would Prevent Interference in PUC Penalty Cases

What:
State Sen. Jerry Hill, D-San Mateo – joined by San Bruno Mayor Jim Ruane and Mark Toney, Executive Director of The Utility Reform Network (TURN) – will hold a news conference in San Francisco to unveil Senate Bill 611, reform legislation that was prompted by the California Public Utilities Commission’s (CPUC) decision last October to abruptly suspend public hearings that were to determine how much Pacific Gas & Electric Co. will be fined for the fatal San Bruno gas pipeline explosion.

The CPUC’s decision to close the curtain on the hearings after two weeks of testimony – and bring in former U.S. Sen. George Mitchell to mediate – was roundly criticized by Hill and Ruane as an affront to transparency and the residents of San Bruno, and Mitchell ultimately stepped aside.

Hill’s bill would erect an ethical wall, separating the CPUC prosecutorial and judicial functions --just as the Federal Energy Regulatory Commission (FERC), the CPUC’s federal counterpart, separates these powers. This provision was crafted in response to CPUC President Michael Peevey’s decision to direct the commission’s staff, through the commission’s general counsel, to force the parties in the San Bruno proceedings to settle in private with PG&E.

On a related issue – since the CPUC’s two core responsibilities are protecting the public safety and ratepayers’ pocketbooks – Hill will call for state auditors to probe whether the CPUC is properly overseeing special accounts for utility projects totaling billions of dollars. These accounts are designed to ensure utility customers pay only the amounts required for the service they receive.

The non-partisan the Legislative Analyst's Office recently issued a report recommending that the state auditor probe the CPUC’s oversight of the hundreds of “balancing accounts” the utilities have established -- raising the possibility that gas and electric ratepayers may have been overcharged.

When:
Monday, Feb. 25. 2013
10 a.m.

Here:
California Public Utilities Commission courtyard
505 Van Ness Avenue
San Francisco

Contact:
Aurelio Rojas, communications director, 916-747-3199 cell or 916-651-4013 office
Leslie Guevarra, 415-298-3404 cell or 650-212-3313 office

Background:
SB 611 would:

1) Enforce due process by requiring an “ethical wall” between the staff who prosecute violations and staff who advise judges and commissioners. To have a judge directing the prosecution or a prosecutor telling the judge how to rule would be a violation of due process, which is why it is prohibited in FERC regulations and in the California Administrative Procedures Act (APA). When the APA was overhauled in the mid-1990’s the CPUC had successfully lobbied to be exempt from it.

2) Remove the statutory provision that requires all staff to be directed by the president of the CPUC. This provision was inserted in 2000, and yet was not necessary for the first nine decades of the CPUC’s existence, as the California Constitution allows the CPUC to develop its own procedures, subject to statute and due process. Removing this provision allows the CPUC to easily implement the ethical wall concept and ensure due process.

3) Require the CPUC to develop procedures to allow consumer groups, utilities and other parties to challenge the assignment of a case’s overseeing commissioner. In January of last year, President Peevey assigned himself to oversee the San Bruno penalty case against PG&E, despite public outcry that he had been heavily implicated in creating the culture of complacency that allowed PG&E’s problems to go uncorrected for so long. The commissioner assigned to oversee a case determines the case’s scope, and therefore needs to be free of bias and conflicts of interest.

Meanwhile, the non-partisan Legislative Analyst's Office (LAO) issued a report on Feb. 19 recommending that the state auditor probe the CPUC’s oversight of the hundreds of balancing accounts the commission has authorized utilities to establish.

The accounts are designed to ensure utility customers pay only the amounts required for the service they receive. But the LAO discovered that the accounts in question represented amounts that the CPUC had reported to be in the trillions, but are more likely to be in the billions—a number the CPUC has not yet been able to confirm.

This falls on the heels of an audit by the Department of Finance, which found significant weaknesses in the CPUC’s budgetary operations in its own 14 special funds, including an $81- million dollar typo.

“The CPUC has two core functions,” Hill said. “No. 1 is to make sure that the utilities are operating in a safe manner. No 2 is to protect customers’ pocketbook. It is shameful that the PUC can’t seem to do either.”

“Since the San Bruno tragedy, I’ve been blaming the CPUC under President Michael Peevey for failing to do its job because of a ‘culture of complacency.’ Now, I believe that what’s plaguing the commission is a ‘culture of incompetence,’ and that it will continue as long as Mr. Peevey is the commission’s president. For the good of Californians, he needs to step down.”

Assembly Budget Subcommittee #3 (Resources and Transportation) has scheduled an oversight hearing of the CPUC’s accounting issues on March 6.