Bill Text: CA SB48 | 2013-2014 | Regular Session | Amended

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Public utilities: research and development projects.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Engrossed - Dead) 2014-06-23 - Set, final hearing. Failed passage in committee. [SB48 Detail]

Download: California-2013-SB48-Amended.html

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BILL NUMBER: SB 48	AMENDED
	BILL TEXT

	AMENDED IN SENATE  APRIL 8, 2013

INTRODUCED BY   Senator Hill

                        DECEMBER 19, 2012

   An act to  amend Section 854 of, and to add Sections 740.5
and 854.5 to,   add Section 740.5 to  the Public
Utilities Code, relating to  energy   public
utilities  .



	LEGISLATIVE COUNSEL'S DIGEST


   SB 48, as amended, Hill.  Energy-related research:
mergers: entities formed to receive benefits on behalf of ratepayers.
  Public utilities: research and development projects.

   Under existing law, the Public Utilities Commission  (PUC)
 has regulatory authority over public utilities, including
electrical corporations  and   ,  gas
corporations,  heat corporations, and telephone corporations,
 as defined. Existing law authorizes the  PUC 
 commission  to fix the rates and charges for every public
utility, and requires that those rates and charges be just and
reasonable. Existing law authorizes  certain public
utilities, including  electrical corporations  and
  ,  gas corporations,  heat corporations, and
telephone corporations  to voluntarily adopt certain research
and development programs and authorizes the  PUC 
 commission to allow inclusion of expenses for research and
development in rates. Existing law requires the  PUC
  commission  to consider specified guidelines in
evaluating the research, development, and demonstration programs
proposed by electrical corporations and gas corporations. 
   This bill would require that any research and development or
research, development, and demonstration project that is performed by
a 3rd party, as defined, and is funded in whole or in part by the
ratepayers of an electrical or gas corporation be subject to a merit
review, as defined. The bill would require the State Energy Resources
Conservation and Development Commission to select the persons to
perform the merit review. The bill would require the PUC to prepare
and submit to the policy and fiscal committees of the Legislature, by
February 1 of each year, a written report listing all research and
development, or research, development, and demonstration projects,
including specified information, that were funded in whole or in part
by the ratepayers of an electrical or gas corporation during the
previous 5 years.  
   The Public Utilities Act, prohibits any person or corporation from
acquiring or controlling, directly or indirectly, any public utility
organized and doing business in this state, without first securing
authorization to do so from the PUC. The act requires the PUC, before
authorizing the merger, acquisition, or change in control of an
electric, gas, or telephone utility having revenues in excess of a
specified amount, to consider, among other things, that the proposal
provides short-term and long-term economic benefits to ratepayers,
and equitably allocates the short-term and long-term forecasted
economic benefits of the proposed merger, acquisition, or control, as
determined by the PUC, between shareholders and ratepayers, where
the PUC has ratemaking authority. Existing law requires that the
ratepayers receive not less than 50% of the benefits. 

   This bill would prohibit the PUC, when authorizing a merger,
acquisition, or change in control, from establishing an entity to
receive benefits on behalf of ratepayers without first obtaining
statutory authorization from the Legislature. The bill would prohibit
a commissioner of the PUC from being an officer or director of an
entity formed to receive benefits of behalf of ratepayers resulting
from approval of a merger, acquisition, or change in control of an
electrical, gas, or telephone corporation.  
   The bill would require the commission, by no later than January 1,
2016, to consolidate all review and approval of research and
development projects into a single research investment planning
proceeding that would be required to recur no more frequently than
every 2 years. The bill would prohibit the commission from allowing
cost recovery of expenses for funding any research and development
project outside the consolidated proceeding, except for the excluded
projects and programs, as defined, for which a public utility applied
for research and development funding prior to January 1, 2013. The
bill would require the commission, when reviewing any request for
authorization of expenses for research and development projects where
the expenses are to be recovered from ratepayers, to place a
preference on projects if the application was solicited in a manner
that provides for the maximum amount of competition, unless limited
and unique circumstances exist where it is not possible or desirable
to maximize competition, and the proposed project encourages the use
and leveraging of matching funds where possible. The bill would
require that certain research and development projects first undergo
peer review, as defined, that considers specified matter. The bill
would require the commission, before initiating a consolidated
research planning proceeding, to prepare and submit a report to the
relevant policy and fiscal committees of the Legislature listing all
research and development projects where the expenses of the project
were or are recovered from ratepayers during the previous 5 years.

   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

   SECTION 1.    Section 740.5 is added to the 
 Public Utilities Code   , to read:  
   740.5.  (a) For purposes of this section, the following terms have
the following meanings:
   (1) "Excluded projects and programs" means research and
development or research, development, and demonstration projects and
programs that are the subject of Application 12-11-009, Application
11-03-001, Application 11-03-002, Application 11-03-003, Application
12-07-001, Application 12-07-002, Application 12-07-003, Application
12-07-004, Application 11-06-006, Application 11-06-029, and
Application 11-07-001.
   (2) "Peer review" means a thorough, consistent, and objective
examination based on preestablished criteria by persons who are
independent of persons submitting an application, or conducting the
research and development, and who are knowledgeable in the field of
endeavor to which the application or research and development
pertains. Peer reviewers shall be free of any financial or other
interest which could significantly impair the individual's
objectivity or create and unfair competitive advantage for any person
or organization.
   (3) "Research and development project" includes a research,
development, and demonstration project or program.
   (b) No later than January 1, 2016, the commission shall
consolidate all review and approval of research and development
projects into a single research investment planning proceeding that
shall recur no more frequently than every two years. Commencing
January 1, 2014, the commission shall not allow cost recovery of
expenses for funding any research and development project outside the
consolidated proceeding, except for the excluded projects and
programs for which a public utility applied for research and
development funding prior to January 1, 2013.
   (c) When reviewing any request for authorization of expenses for
research and development projects where the expenses are to be
recovered from ratepayers, the commission shall place a preference on
projects where both of the following are true:
   (1) The application was solicited in a manner that provides for
the maximum amount of competition, unless limited and unique
circumstances exist where it is not possible or desirable to maximize
competition.
   (2) The proposed project encourages the use and leveraging of
matching funds where possible.
   (d) Unless the proposed research and development project has been
selected by the public utility through an open solicitation of
proposals, the commission shall not authorize expenses for a project
that will be recovered from ratepayers in an amount in excess of one
million five hundred thousand dollars ($1,500,000) without the
project first undergoing peer review. The peer review shall consider
all of the following:
   (1) The extent to which the same or similar research, development,
and demonstration work could be performed by entities that the
public utility does not select.
   (2) The appropriateness of the level of requested funding in
camparison to other projects by similarly experience individuals
using similar facilities performing in similar timeframes and
circumstances.
   (3) The likelihood that the proposed work can be accomplished
within the proposed time and budget by the investigators or the
technical staff, given their experience and expertise and available
resources.
   (e) (1) Notwithstanding Section 10231.5 of the Government Code,
before initiating a consolidated research planning proceeding, the
commission shall prepare and submit a report to the relevant policy
and fiscal committees of the Legislature listing all research and
development projects where the expenses of the project were or are
recovered from ratepayers during the previous five years, including
for each project the citations of all published papers, all oral and
poster presentations given at public meetings, and all patents
awarded for the funded research. For an electrical corporation, the
report may be included in the report made to the Legislature pursuant
to Section 910.
   (2) A report to be submitted pursuant to paragraph (1) shall be
submitted in compliance with Section 9795 of the Government Code.
   (f) The requirements of this section do not apply to research and
development projects or programs managed by an independent contractor
pursuant to subdivision (b) of Section 2851, or to those managed by
the Energy Commission.
   (g) Except for those research and development projects exempt
pursuant to subdivision (f), any research and development project for
which recovery of expenses is requested pursuant to Section 740,
that furthers the goals of Section 740.1, or that advances the public
interest consistent with subdivision (c) of Section 399, is subject
to the requirements of subdivisions (b), (c), (d), and (e).
   (h) Nothing in this section authorizes funding of research and
development projects through the rates of a gas corporation that is
not in compliance with subdivision (a) of Section 890.  

  SECTION 1.    Section 740.5 is added to the Public
Utilities Code, to read:
   740.5.  (a) For purposes of this section, the following terms have
the following meanings:
   (1) "Merit review" means a thorough, consistent, and objective
examination based on preestablished criteria by persons who are
independent of persons submitting an application, or conducting the
research and development, and who are knowledgeable in the field of
endeavor to which the application or research and development
pertains.
   (2) "State agency" includes every state office, officer,
department, division, bureau, board, and commission. "State agency"
does not include the University of California or California State
University.
   (3) "Third party" means a person, corporation, or other entity
that is not a state agency or an electrical corporation or gas
corporation regulated by the commission.
   (b) Any research and development or research, development, and
demonstration project that is performed by a third party and is
funded in whole or in part by the ratepayers of an electrical or gas
corporation shall be subject to a merit review. The Energy Commission
shall select the persons to perform the merit review. The Energy
Commission shall use the most recent Merit Review Guide for Financial
Assistance, or successor guide, issued by the federal Department of
Energy pursuant to Section 600.13 of Subpart A of Part 600 of Chapter
II of Title 10 of the Code of Federal Regulations (10 CFR 600.13) as
a guide for conducting merit reviews.
   (c) (1) Notwithstanding Section 10231.5 of the Government Code, by
February 1 of each year, the commission shall prepare and submit to
the policy and fiscal committees of the Legislature a written report
listing all research and development, or research, development, and
demonstration projects that were funded in whole or in part by the
ratepayers of an electrical or gas corporation during the previous
five years, including for each project the citations of all published
papers and all oral and poster presentations given at public
meetings. For an electrical corporation, the report may be included
in the report made to the Legislature pursuant to Section 910.
   (2) A report to be submitted pursuant paragraph (1) shall be
submitted in compliance with Section 9795 of the Government Code.
 
  SEC. 2.    Section 854 of the Public Utilities
Code is amended to read:
   854.  (a) No person or corporation, whether or not organized under
the laws of this state, shall merge, acquire, or obtain control,
either directly or indirectly, of any public utility organized and
doing business in this state without first securing authorization to
do so from the commission. The commission may establish by order or
rule the definitions of what constitute merger, acquisition, or
control activities which are subject to this section. Any merger,
acquisition, or change in control without that prior authorization
shall be void and of no effect. No public utility organized and doing
business under the laws of this state, and no subsidiary or
affiliate of, or corporation holding a controlling interest in a
public utility, shall aid or abet any violation of this section.
   (b) Before authorizing the merger, acquisition, or a change in
control of any electrical, gas, or telephone corporation organized
and doing business in this state, where any of the utilities that are
parties to the proposed transaction has gross annual California
revenues exceeding five hundred million dollars ($500,000,000), the
commission shall find that the proposal does all of the following:
   (1) Provides short-term and long-term economic benefits to
ratepayers.
   (2) Equitably allocates, where the commission has ratemaking
authority, the total short-term and long-term forecasted economic
benefits, as determined by the commission, of the proposed merger,
acquisition, or control, between shareholders and ratepayers.
Ratepayers shall receive not less than 50 percent of those benefits.
   (3) Not adversely affect competition. In making this finding, the
commission shall request an advisory opinion from the Attorney
General regarding whether competition will be adversely affected and
what mitigation measures could be adopted to avoid this result.
   (c) Before authorizing the merger, acquisition, or a change in
control of any electrical, gas, or telephone corporation organized
and doing business in this state, where any of the entities that are
parties to the proposed transaction has gross annual California
revenues exceeding five hundred million dollars ($500,000,000), the
commission shall consider each of the criteria listed in paragraphs
(1) to (8), inclusive, and find, on balance, that the merger,
acquisition, or control proposal is in the public interest.
   (1) Maintain or improve the financial condition of the resulting
public utility doing business in the state.
   (2) Maintain or improve the quality of service to public utility
ratepayers in the state.
   (3) Maintain or improve the quality of management of the resulting
public utility doing business in the state.
   (4) Be fair and reasonable to affected public utility employees,
including both union and nonunion employees.
   (5) Be fair and reasonable to the majority of all affected public
utility shareholders.
   (6) Be beneficial on an overall basis to state and local
economies, and to the communities in the area served by the resulting
public utility.
   (7) Preserve the jurisdiction of the commission and the capacity
of the commission to effectively regulate and audit public utility
operations in the state.
   (8) Provide mitigation measures to prevent significant adverse
consequences which may result.
   (d) When reviewing a merger, acquisition, or change in control
proposal, the commission shall consider reasonable options to the
proposal recommended by other parties, including no new merger,
acquisition, or control, to determine whether comparable short-term
and long-term economic savings can be achieved through other means
while avoiding the possible adverse consequences of the proposal.
   (e) The person or corporation seeking acquisition or control of a
public utility organized and doing business in this state shall have,
before the commission, the burden of proving by a preponderance of
the evidence that the requirements of subdivisions (b) and (c) are
met.
   (f) In determining whether an acquiring utility has gross annual
revenues exceeding the amount specified in subdivisions (b) and (c),
the revenues of that utility's affiliates shall not be considered
unless the affiliate was utilized for the purpose of effecting the
merger, acquisition, or control.
   (g) Paragraphs (1) and (2) of subdivision (b) shall not apply to
the formation of a holding company.
   (h) For purposes of paragraphs (1) and (2) of subdivision (b), the
legislature does not intend to include acquisitions or changes in
control that are mandated by either the commission or the Legislature
as a result of, or in response to any electric industry
restructuring. However, the value of an acquisition or change in
control may be used by the commission in determining the costs or
benefits attributable to any electrical industry restructuring and
for allocating those costs or benefits for collection in rates.
 
  SEC. 3.    Section 854.5 is added to the Public
Utilities Code, to read:
   854.5.  (a) When authorizing a merger, acquisition, or change in
control pursuant to this chapter, the commission shall not establish
an entity to receive benefits on behalf of ratepayers without first
obtaining statutory authorization from the Legislature.
   (b) No commissioner shall be a director or officer of an entity
formed to receive benefits on behalf of ratepayers. The holding of
simultaneous positions as a commissioner and as a director or officer
of an entity formed to receive benefits of behalf of ratepayers
resulting from approval of a merger, acquisition, or change in
control pursuant to this chapter is the holding of public offices
that are incompatible pursuant to Section 1099 of the Government
Code.