Open letter to Sen. Bill Monning and Assemblyman Mark Stone
Re: Suggestions Regarding Changes to CPUC Composition and Process
Recently, I forwarded to each of you a copy of a letter that I wrote to Robert MacLean, president of California American Water Co. In that letter, I pointed out some of the serious issues that ratepayers have with the company, and I provided him some suggestions that, if adopted, could help both Cal Am and its Monterey Peninsula ratepayers.
However, there is another equation that, in my opinion, should be considered side-by-side with any analysis of Cal Am’s actions if one is to determine if there are fixes that could result in a future water supply for the Peninsula that would be reliable, affordable and acceptable from all regulatory standpoints. It involves the California Public Utilities Commission. I am sure you know of the problems that have surfaced recently with allegations of conflicts of interest and biases and the resulting great loss in the credibility of the commission and its system of regulating private utilities.
With respect to the CPUC and its relationship with Cal Am, the issues are more localized, but are every bit as concerning as the more global issues that have been making the news. The problem with the CPUC, as far as most Peninsula ratepayers will tell you, is that the agency tends to bend over backwards to approve rate increases for Cal Am, irrespective of certain facts that, on their face, would indicate the applications do not merit positive results for Cal Am.
In my letter to Mr. MacLean, I cite the San Clemente Dam rate case as a terrible example of how the commission disregarded the recommendation of its Division of Ratepayer Advocates, as well as the administrative law judge who actually heard the case, and voted instead for a recommended decision that, for all the world, looked like it was drafted by Cal Am itself.
So here is what I see. The CPUC and its process has several flaws. First, persons appointed as commissioners are not required to have any specific experience in areas that are critical to the making of decisions on complex issues that will come before them.
Second, ratepayers really have no agency or external group that has the power and authority to come to their aid when the commission has stepped over the line with respect to reasonableness and fairness. The Division of Ratepayers Advocates has a very competent and experienced staff, and they frequently analyze and point out many issues in rate cases that bear full attention. Unfortunately, they have no authority beyond making recommendations, and the full commission can accept or reject as it wishes, and it does.
Third, rate cases are most often heard in San Francisco, which does not provide significant access to and participation in the process for ordinary ratepayers. Most ratepayers are unable to participate as parties, which usually requires retention of legal counsel, time and travel costs to San Francisco and back to their homes. In addition, the three-minute rule, while I understand its adoption, works as a further limitation on the ability of most ratepayers to participate and have their serious concerns heard.
I am proposing a general outline of what would be a legislative, and regulatory fix for these issues, and am forwarding them to you in hopes you will give them serious consideration as to changes that should be pursued
In the State of Ohio, where my wife and I have a part-time home, a person appointed as a commissioner to the Public Utilities Commission must have experience in one or more of the following areas: economics, law, accounting, finance, natural and physical science, natural resources, or environmental studies. Presently, under California law, there are no such qualifications required and this should be changed.
An independent body, such as the Ohio Consumers Council, needs to be established, one that undertakes the same roles as the DRA, but one that has the ability to bring suit on behalf of ratepayers, not just one that can make recommendations that can be ignored. In Ohio, for example, the most comparable entity has a staff of about 15 professionals, including attorneys, analysts and public outreach specialists, and has an annual budget of $8.5 million.
If this option is not feasible, for whatever reason, I would recommend that the Commission, if voting to adopt a decision opposed by the DRA, must address each and every point of opposition expressed by the DRA.
With respect to access, I would recommend that a commissioner assigned to a rate case schedule several public meetings in a location that is most favorable for attendance by ratepayers potentially impacted by the outcome. The times would be also set reasonably to promote maximum attendance. In order to get around the three-minute rule, a process would be created whereby ratepayers could identify a limited number of representatives who would speak on behalf of those persons. Such named representatives would be identified to the CPUC and the sitting commissioner would grant such representatives up to 15 minutes to state their positions, plus reasonable time to respond to questions/comments that are raised. If time permitted, the commissioner could also allow individuals to speak, but they would be limited by the three-minute rule.
The ex parte rules currently in use by the CPUC probably present the most significant potential for abuse and the creation and continuation of the perception that regulated utilities have a path, hidden from view, to exert undue influence on the decisions of the commission. This is a sensitive subject, but recent disclosures surrounding the past chairman and his relationships with certain utilities strengthen the need for a close analysis and the implementation of changes that will bring the process more out in the open. If and when there would ever be an intent and agreement between a utility and a commissioner to abuse the system, the ratepayers who bear the brunt of such an action, under current ex parte rules, would have little or no access to protect themselves. So here are my suggestions.
1. Commissioners would not be allowed to meet privately with anyone representing a former employer or anyone with whom they had been associated with as a representative or consultant or anyone who had made contributions of more than $___ to any political campaigns engaged in by said commissioner.
2. In the event of any ex parte meetings, the commissioner shall be required to comply with the existing disclosure requirements and prepare a bullet summary of the key points that were discussed at the meeting for distribution to all parties to the case within three days. The petitioner shall agree to provide be cross-examined, under oath, with respect to the content and nature of the meeting if called for by any party to the case, and shall respond to all relevant questions that are not rejected for cause by the sitting ALJ.
My preference would be to ban all ex parte meetings in a rate case. In lieu of that, my preference would be that all communications between the parties and the commissioners be in writing and directly distributed or made available to all parties. A completely open process, while not infallible against those who want to circumvent it, still provides a stronger potential that behind-the-scenes communications will not be factors that wrongly influence the decisions of the commission in a rate case, where millions of dollars can be on the line.
This is not an indictment of the integrity of anyone. However, events of the past have led to a widely held belief that behind-the-scenes contacts have resulted in unfair results and have caused significant damage to the credibility of the CPUC.
It is clear to me that the CPUC needs to be reprogrammed in such a way that its deliberations and decisions are perceived as fact-based and fair and reasonable to both the utilities that they regulate and the public. Right now, that perception is almost entirely the opposite – that politics and back-door influences are involved, and, as a result, ratepayers cannot rely upon the agency to protect their interests.
In my career, I have drafted proposed regulations and legislation and would be pleased to provide you with a working draft, should you have any interest in pursuing this matter.I can be reached by email at email@example.com.
Hood is a retired lawyer and engineer and former executive director of the Association of Monterey Bay Area Governments.