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COMMUNICATIONS
Senator Ben Hueso, Chair
2017 - 2018 Regular
DIGEST: This bill would require each electrical corporation or gas corporation,
to submit a safety, reliability, and resiliency plan to the CPUC every two years,
require the CPUC to approve the submitted plan by December 31st of the year in
which the plan is submitted, and authorize recovery of the costs of implementing
the plan through rates. This bill would require the CPUC to conduct an annual
proceeding to review all electrical corporation’s and gas corporation’s compliance
with their plan, as provided, and if the CPUC determines that the corporation is in
substantial compliance with its plan, that the CPUC deem the performance,
operations, management, and investment addressed in the plan to be reasonable
and prudent. Additionally, this bill would prohibit an electrical corporation from
delegating, transferring, or contracting out any of its distribution safety or
reliability performance obligations. This bill would also require OES to adopt
standards for reducing risks from a major event and require the office to update the
standards at least once every two years.
ANALYSIS:
Existing law:
1) Provides that the California Public Utilities Commission (CPUC) has regulatory
authority over public utilities, including electric corporations and gas
corporations. (California Constitution, Article 3 and 4)
2) Requires the CPUC if, after a hearing, it finds that the rates charged or collected
by any public utility are insufficient, unlawful, unjust, unreasonable,
discriminatory, or preferential, to determine and fix, by order, the just,
reasonable, or sufficient rates, classifications, rules, practices, or contracts to be
thereafter observed and in force. (Public Utilities Code §728)
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This bill:
January 15, 2019, to be limited to addressing fire risks, with subsequent plans
addressing risks associated with routine operation and all major events.
3) Requires the plan to include specified elements, including all relevant safety
rules, regulations, standards, and practices adopted by the CPUC and those
adopted by the OES, per this bill, wildfire mitigation plans, and several other
elements.
4) Requires the CPUC to review the plans of the utilities in a single consolidated
proceeding. Requires the CPUC to verify that the plans comply with all
applicable rules, regulations, and standards, including those adopted by the OES
pursuant to this bill. Requires the CPUC to evaluate the reasonableness of the
elements of the plans considering the risks involved and the costs to implement
the plan.
5) Requires the CPUC, in reviewing the plans, to make safety and reliability of
electric or gas services the highest priority.
8) Provides that forecasted costs deemed outside the scope of the plan by the
CPUC may be requested and considered in a utility’s GRC or other appropriate
proceeding.
approval of the utility’s plan submitted on or before January 15, 2019, that are
not otherwise covered in the utility’s revenue requirements.
13) Requires the CPUC to conduct an annual proceeding to review each utility’s
compliance with its plan, including a factual analysis of any major events that
occurred.
14) Beginning March 1, 2020, and each March 1 thereafter, requires each utility
to file with the CPUC a report addressing compliance with the plan during the
prior calendar year. Requires the CPUC to make available a list of qualified
independent evaluators with experience in assessing electric and gas operations.
Requires each utility to engage an independent evaluator to review and assess
the utility’s compliance with its plan. Requires the independent evaluator to
consult with and operate under the direction of the Safety and Enforcement
Division of the CPUC. Requires the evaluator to issue a report on July 1 each
year and authorizes the utility to recover in rates the cost of the evaluator.
16) If the CPUC determines, after completing the review, that a utility was in
substantial compliance with its plan, the utility’s performance, operations,
management, and investments addressed in the plan must be deemed reasonable
and prudent for all purposes.
SB 1088 (Dodd) Page 5 of 11
18) Requires the standards OES adopts to include both: model policies to be
undertaken by local governments regarding zoning, defensible space, fire-
resistant materials and others; and actions to be undertaken by electrical
corporations, gas corporations, local publicly owned electric utilities, local
publicly owned gas utilities, and water utilities to reduce the risk of fire during a
major event.
Background
CPUC efforts to address wildfires. After the 2007 fires ravaged several areas of
the state, in 2008, the CPUC initiated a rulemaking proceeding to address fires
related to utility poles. The CPUC’s efforts have resulted in additional
requirements on utilities to reduce the likelihood of fires started by or threatening
utility facilities, including improved vegetation management, as well as, requiring
the utilities to develop electric utility fire prevention plans. The first phase also
adopted fire hazard maps of high-risk areas in Southern California. In May 2015,
the CPUC opened a new rulemaking proceeding to develop and adopt fire-threat
maps and fire-safety regulations (R. 15-05-006). The CPUC tasked CalFire to
oversee and select outside experts to develop a more refined statewide fire hazard
map. Additionally, the CPUC has held at least two safety en bancs related to
utility pole safety and wildfires. The CPUC’s rulemaking efforts to address
wildfires and electric systems have been active since 2008, with several phases, in
two separate proceedings. These efforts have resulted in the adoption of over 70
proposed rule changes with often prescriptive standards – such as dictating
clearances between power lines and trees. More recently, the CPUC has embarked
on an effort to incorporate wildfire mitigation analysis into the RAMP filings of
the utilities. The RAMP filing is meant to incorporate a risk-informed approach
into the GRC.
SB 1028 (Hill, Chapter 598, Statutes of 2016). In 2016, SB 1028 (Hill) was signed
into law. The bill requires electric utilities regulated by the CPUC to submit
wildfire mitigation plans for review and comment by the CPUC and for POU to
have their governing board adopt wildfire mitigation plans, if the utility believes
the operate in an area where there is a threat of wildfires. SB 1028 is an effort to
establish more performance or risk-based safety rules that focus on identification
of hazards and goal setting, while providing utilities flexibility in achieving the
goals. The intent is to have performance-based goals compliment the prescriptive
SB 1088 (Dodd) Page 6 of 11
rules related to wildfire prevention, including the multitude of general orders (such
as GO-95) related to safety.
Other emergencies and disasters. Additionally, the CPUC has a number of other
general orders and requirements of utilities to submit disaster and emergency
response plans. Not to mention the numerous safety requirements regarding gas
pipelines, including those adopted after the San Bruno explosion.
General Rate Case. 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.
Safety Spending and Accountability Reporting. 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), required
under SB 900 (Hill, Chapter 552, Statutes of 2014), aspects of the new risk
management approach are being incorporated into GRCs. 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 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
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While the intent of this bill for improved safety is universally supported by
commenters, those in opposition also state some of the following concerns with
thee bill:
Circumventing GRC. Many of those opposed to the bill take issue with the attempt
by this bill to circumvent the GRC proceeding into a separate proceeding that does
not encompass the evidentiary record requirements of GRCs, thereby limiting the
ability of parties to thoroughly review the plans. Moreover, those opposed raise
concerns about the feasibility of such all-encompassing plans to be reviewed in one
proceeding under a year’s time, when GRCs generally take 18 months to 2 years
for each utility. Additionally, many of those opposed believe the end result will be
a blank check to benefit utilities and their shareholders at the expense of
ratepayers, without the outcome of improved safety. Some of the opposition
contends that the new all-encompassing proceeding with a limited under a year
timeline will allow utilities to game the process by not providing full and detailed
information.
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Ratepayer impacts. Several of the opponents to the bill state their concern for
potential substantial increases to rates. Specifically, those oppose contend that the
bill’s threshold that guarantees full cost recovery of the resiliency plans so long as
the utility is found to be “substantially in compliance” for plans that, as TURN
states, “can never be sufficiently detailed and complete to serve as meaningful
blueprints for prudent utility decision-making.”
Liability and accountability. Some opposed to this bill are concerned with the
language in Section 2899.6 which requires the plan to be “deemed reasonable and
prudent for all purposes.” The sponsor and author have stated their intent not to
limit civil liability. However, they also note their desire to limit civil action should
a utility be in substantial compliance with the plan. Therefore, it is unclear what
“all purposes” is intended to encompass.
Double referral. Should this bill be approved by this committee, it will be re-
referred to the Senate Committees on Governmental Organization.
Prior/Related Legislation
SB 819 (Hill, 2017) would prohibit an electrical corporation from recovering a fine
or penalty through a rate approved by the CPUC. This bill would also prohibit an
electrical corporation or gas corporation from recovering through a rate approved
by the CPUC an uninsured expense from damages caused by the utility’s electric
facilities or gas facilities, if the CPUC determines that the electrical corporation did
not reasonably construct, maintain, manage, control, or operate the facility. The
bill is scheduled to be heard by this committee at this hearing.
SB 900 (Hill, Chapter 552, Statutes of 2014) requires 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.
OPPOSITION:
With regards to ratepayer costs, TURN states the bill is based on a one-sided
bargain that would benefit utilities at the expense of ratepayers, without improving
safety. TURN states that “rather than enhancing safety, SB 1088 would reduce
current energy utility incentives to operate their systems safely and prudently and
would effectively grant the utilities a blank check.
The Consumer Attorneys of America oppose the bill because ‘as written the bill
gives utilities a “get out of jail free” card for all civil liability simply because the
utility was in “substantial compliance” with some obscure and yet to be determined
CPUC utility plan.’
The Consumer Federation of America states that the bill’s regulatory review
timeline “undermines the possibility for a review that is fully vetted by the
regulator and the public” and “leaves almost no room for the regulator to reject a
utility plan.”
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The Silicon Valley Leadership Group opposes the bill’s “requirement for exclusive
investor-owned utility performance of distribution safety and reliability work”
which SVLG states “has nothing to do with being prepared for cataclysmic natural
events. The provision would, however, squelch competition in a number of areas
where third party distributed energy solutions currently flourish, areas like behind
the meter solar, storage, and demand response.”
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