Sacramento Round-up: Budget Conference Committee Negotiations, Wildfire Costs and Recovery: Who pays?, House-of-Origin Deadline for Legislation

The Budget Conference Committee is expected to reach an agreement on the 2019-20 budget bill that will go before the legislature for a vote next week. The legislature is up against a statutory deadline of June 15th to send a budget to the Governor. As of the time of this writing (Thursday, June 6), the conference committee had yet to reach an agreement with the administration on either the Cap and Trade Expenditure Plan or the Safe and Affordable Drinking Water, two significant policy and budget items that will impact CCM members.

Additionally, CCM is actively lobbying for the inclusion of ongoing General Fund appropriations for the Citrus Pest and Disease Prevention Program. The conference committee is expected to consider the request before Friday, June 7.

We will provide an update on all of the above items as soon as we have information to share.

When it comes to Wildfire Costs and Liability, one questions remains “Who Pays”

In the past four years, equipment owned by California’s three largest investor-owned utilities (IOU) sparked more than 2,000 fires, according to a report released in April by Governor Newsom’s “Strike Force”. Insured losses alone for the 2018 fires exceed $12 billion.

Among other things, the Strike Force report proposed a number of new concepts for allocating costs of utility-caused wildfires. One of the concept proposals involves a modification from the strict liability standard for inverse condemnation to one based on fault.

Under the current framework, when a utility’s equipment causes a wildfire, the utility may be held liable to pay for damages through inverse condemnation lawsuits for property damages brought by property owners or insurance companies, lawsuits by a harmed party, and/or recovery of fire suppression costs from third parties. California’s application of inverse condemnation places 100 percent of the cost of wildfire property damage on a utility if its equipment caused the fire—regardless of fault and without consideration or other contributing factors.

When an IOU such as PG&E or Southern California Edison is found liable for wildfire damages under inverse condemnation, the IOU can recover damages by increasing rates only if the California Public Utilities Commission (CPUC) finds that the utility acted reasonably and prudently in managing its facilities before and during the fire.

Last year in response to the 2017 wildfires, the legislature passed and Governor Brown signed SB 901 which incorporated a “stress test” to allow the CPUC to consider how much a utility can afford to pay when deciding if and how much of the costs an utility is allowed to pass on to ratepayers.

Shortly after SB 901 was enacted, credit rating agencies began to downgrade California’s largest IOUs, citing that the measure failed to adequately address the risks to the utilities’ financial health posed by inverse condemnation.

According to the Strike Force report, two months after the downgrades, the Camp Fire occurred. Two months after that, PG&E stated its intention to seek chapter 11 bankruptcy protection.

Last month, all three IOUs requested substantial rate increases, the largest coming from PG&E who requested an increase in rates profits that, if approved, would raise average customer bills by $20 per month to attract investment capital and implement wildfire safety measures.

Meanwhile, the legislature seems to be at an impasse on how to deal with the issue. In February, the Governor called for the legislature to pass wildfire legislation before the summer recess in July.

Last week, the Commission on Catastrophic Wildfire Cost and Recovery, created by SB 901, said in a draft report that California should overhaul the existing inverse condemnation policy.   The panel also called for the creation of a Wildfire Victims Fund to pay claims to survivors of the Camp Fire and the 2017 fires. The fund would include financial contributions from shareholders as well as ratepayers.

In response to the report, Governor Newsom, Senate Pro Tem Toni Atkins, and Assembly Speaker issued a joint statement in response to the Commission’s report, stating “we must act now to stabilize the energy market and our utilities by addressing the liability faced by utilities after catastrophic wildfires. 

“We will pursue legislation to tackle these important issues. To provide certainty and accountability, we will seek equitable resolution on the prudent manager standard, bridge financing and to allow cost recovery for electricity providers who act responsibly and in the public’s best interest…

“We are committed to continuing the exploration of the impact of strict liability on the costs to ratepayers, on wildfire victims and on the solvency of our utilities.”

It is unclear if there is an appetite in the legislature to crack inverse condemnation, in part due to the perception that doing so provides another “bailout” for PG&E. There are a number of legislative proposals on the table that would create various types of funds that would spread costs across utilities and their investors, insurance companies and other parties to deal with costs resulting from the 2018 wildfires. SB 901 and the “stress test” principle only applies to the 2017 fires.

CCM is represented by the Ag Energy Consumers Association on legislative and regulatory issues regarding energy. Our AECA advocates are working closely with the legislature and advocating on behalf of our members to limit ratepayer costs and liability associated with wildfire damages.

Legislation Update 6/25/2019: House-of-Origin Deadline

With a May 31 House-of-Origin deadline, the Senate and Assembly took action on a number of priority bills last week that CCM is tracking on behalf of our members.

AB 555, a bill by Assemblywoman Lorena Gonzalez to increase the number of mandatory paid sick leave days from 3 to 5 was ordered to the inactive file, meaning the measure will not move forward in the current session year. As this is the first year of a two-year session, it is possible and quite likely that the Assemblywoman will try to move the bill again next year.

SB 1 by Senate Pro Tem Toni Atkins passed out of the Senate on a party-line vote. This bill would require specified state boards to adopt baseline standards for labor, air, water, endangered and threatened species regulations that are no less stringent than the federal standards as of January 19, 2017. In its current form, this bill would lock in the biological opinions issued by the National Marine Fisheries Service and the US Fish and Wildlife Service on the long term operations of the Central Valley Project and the State Water Project, guaranteeing that no additional water would ever be made available to farmers or communities.

Status: 5/29/19 passed out of the Senate on a party-line vote. CCM staff and our Sacramento lobbyists are meeting regularly with the Pro Tem’s office to propose amendments. There is a broad coalition opposed to the bill and actively working to kill it in the Assembly.

SB 559 (Hurtado). Department of Water Resources: grant: Friant-Kern Canal. Support.

This bill would appropriate $400,000,000 to the Department of Water Resources for the purposes of restoring the Friant-Kern Canal to its full capacity. The bill would require the department to make a grant of $400,000,000  to the joint powers authority to restore the capacity of the canal, subject to an appropriation in the Budget Act.

Status: 5/23/19 Senate Floor – Pass, ordered to Assembly.

SB 468 (Jackson). Taxation: tax expenditures: California Tax Expenditure Review Board. Oppose unless amended.

This bill would establish in state government the California Tax Expenditure Review Board as an independent advisory body to comprehensively assess major tax expenditures, as defined, and make recommendations to the Legislature. The bill would require the board to hold annual open and public meetings for the purposes of considering information provided by the public to determine the schedule for a comprehensive assessment of major tax expenditures to be conducted by the Legislative Analyst’s Office.

Under this bill, the sales tax exemption on agricultural implements of husbandry, among other major tax expenditures, would be subject to a review by a new review board and the Legislative Analyst Office, potentially inviting legislative action to alter or cancel the exemption.

CCM is part of a coalition that has offered amendments that any tax expenditure study incorporates “multipliers” or the positive effects on the economy. Additionally, we propose that the assessments also examine California’s policies in the context of competitiveness with other areas of the country. Incorporating these factors into the study, we argue, would result in a more accurate and comprehensive assessment of state revenue impacts which is the stated goal of the bill.

Status: 5/28/2019 Senate Floor – Pass.

Labor Bills

AB 9 (Reyes).  Employee discrimination:  limitation of actions. Watch.

Current law authorizes a person claiming to be aggrieved by an alleged unlawful practice to file a complaint with the Department of Fair Employment and Housing within one year from the date upon which the unlawful practice occurred unless otherwise specified. This bill would extend the above-described period to 3 years for complaints alleging employment discrimination

Status: 5/23/19 Assembly Floor – Pass, ordered to Senate Rules.

AB 51 (Gonzalez). Employee discrimination:  enforcement.  Watch

This bill prohibits an employer from requiring an employee to waive any right, forum, or procedure (mandatory arbitration) for a violation of any provision of the California Fair Employment and Housing Act (FEHA) or the Labor Code as a condition of employment, continued employment or the receipt of any employment-related benefit. This bill also prohibits an employer from retaliating against an employee for refusing to consent to such a waiver.

Status: 5/29/19 – Senate Rules – ordered to Senate Committees on Labor and Judiciary.

AB 170 (Gonzalez). Employment:  sexual harassment: liability. Oppose

Provides that a client employer shall share with a labor contractor all civil legal responsibility and civil liability for harassment, as defined by FEHA to include sexual harassment, gender harassment, and harassment based on pregnancy, childbirth, or related medical conditions, for all workers supplied by the labor contractor.

Status: 5/1/2019 Double referred to Senate Labor, Public Employment and Retirement Committee and Senate Judiciary Committee

AB 171 (Gonzalez). Employment: sexual harassment.  Oppose

Existing law prohibits an employer from discharging or in any manner discriminating or retaliating against an employee who is a victim of domestic violence, sexual assault, or stalking for taking time off work to obtain specified relief if the victim provides notice to the employer of the status or the employer has actual knowledge of the status. Existing law authorizes an employee to file a complaint with the Division of Labor Standards Enforcement for a violation of these prohibitions within one year from the date of occurrence of the violation. This bill would expand the scope of these provisions by defining “employer” for purposes of these provisions to mean any person employing another under any appointment or contract of hire and to include the state, political subdivisions of the state, and municipalities. 

Status: 5/16/19 Assembly Appropriations – Pass.

AB 403 (Kalra).  Division of Labor Standards Enforcement: complaint.  Watch.

Existing law authorizes a person who believes they have been discharged or otherwise discriminated against in violation of any law under the jurisdiction of the Labor Commissioner to file a complaint with the Division of Labor Standards Enforcement within 6 months after the occurrence of the violation. This bill would extend the period to file a complaint to within 2 years after the occurrence of the violation, except that violations of certain provisions may be filed within one year. This bill contains other related provisions and other existing laws.

Status:   5/23/19 Assembly Floor – Pass. In Senate Rules.

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