Utility Spending Guardrails; CPUC Cooling Off Period - AB 2054

AB 2054 (Bauer-Kahan) Utility Spending Guardrails; CPUC Cooling Off Period

Author: Assemblymember Rebecca Bauer-Kahan (District 16 – Dem)

Summary

AB 2054 sends a powerful message that the era of unchecked utility spending and cozy relationships between regulators and industry must end. By imposing a cooling-off period before sitting CPUC Commissioners can accept employment at regulated utility companies, this law will help ensure not only that the independence of rate regulators is protected, but also relieve some of the political pressure to approve unnecessary rate increases.

Issue

There are two main categories of cost recovery proceedings at the CPUC: General Rate Cases (GRC) or other proceedings that set rates based on forecasts of future utility expenditures and “reasonableness reviews” that can add to rates amounts based on costs that the utility has already spent. In certain instances, the GRC will approve a forecast for a category of costs but allow the utility to track additional spending in that category and request rate recovery of the spending beyond the forecast approved in the GRC. In recent years, the energy utilities have requested recovery of billions of additional costs from ratepayers for such above-authorized costs recorded for categories where the CPUC had already approved a forecast.

Also, current rules require a two-year cooling-off period before a person leaving a regulated entity can act as a CPUC Commissioner. But there is no rule prohibiting sitting CPUC Commissioners from leaving the agency and taking work at a regulated utility immediately.  This too-cozy connection continues to erode public trust and compromises the independence and autonomy of CPUC regulators.

Solution

AB 2054 introduces a stronger utility spending discipline by requiring utility shareholders to share the risk for utility spending that exceeds the budget forecast approved by the CPUC in a general rate case.

This bill would also add a cooling-off period after a CPUC Commissioner can accept employment with an entity regulated by the CPUC and limit their ability to receive gifts from utilities.