SACRAMENTO -- Legislators on Wednesday moved to rein in the Public Utilities Commission, taking the highly unusual step of wiping out its $1.4 billion budget to force the regulatory agency to justify how it spends its money.
The PUC, which one lawmaker called a "fiefdom," would also be stripped of its ability to start nonprofit organizations that generate programs that hike rates without the approval of the Legislature under language approved by the Assembly budget subcommittee on resources and transportation.
Under fire for its lax attitude toward safety, its cozy relations with utilities it's supposed to be regulating and its sloppy internal budgeting, the PUC has for weeks faced the wrath of legislators seething over its response to the 2010 San Bruno gas pipe explosion that left eight people dead and destroyed dozens of homes.
"Maybe the law needs to change so it reads that the Legislature or governor have the ability to remove people, change the dynamic of leadership, or (change) the authority we have so you do report back to us," said Assemblywoman Nora Campos, D-San Jose. "I think it's clear the trust level is not there."
Only PUC commissioners, appointed by the governor, have the ability to remove PUC staff, including the executive director, Paul Clanon, who critics say should resign.
The PUC's role in overseeing limousine safety also came under questioning, as legislators sought to understand how five women died in a fire that erupted so quickly inside a limousine on the San Mateo Bridge last weekend.
When asked what requirements the PUC has on inspections for limousines that have been altered in size -- as was the case with the 28-foot limousine that caught fire -- Clanon could not answer. Lawmakers told him to come back with an answer.
The PUC's proposal to slap PG&E with a $2.25 billion penalty for the San Bruno pipeline explosion rather than impose a fine came under fire from legislators. The reason for the criticism is that by being hit with a "penalty" rather than a fine, PG&E shareholders would be able to recoup at least a third of its losses through federal and state tax deductions.
But Clanon pointed out that money recouped from penalties is used to invest in new safety projects, while fines go directly into the general fund.
Investing in safety projects is important, responded Assemblyman Bob Blumenfield, D-Van Nuys, the chairman of the Budget Committee. But the PUC "also should take an active look at making sure of whose pocket it comes out of."
Though shareholders would take the brunt of the penalties, Californians as a whole will suffer when tax collections drop because of the shareholders' ability to deduct their losses, Blumenfield said.
Saying it would impose a burden on his staff, already steeped in work to shore up its corrective actions on safety regulations, Clanon objected to the proposal to "zero-out" the PUC's $1.4 billion budget for the state's 2014-15 budget -- a process in which every expenditure would be reviewed and justified through audits by the Department of Finance and the state auditor, allowing legislators to go over staffing, program and other decisions.
A Department of Finance official also asked legislators to back off from an immediate overhaul of the PUC's budget, saying it would be impossible to do in just three months as the administration prepares for the following year's budget.
"Zero-basing is a very time-consuming, labor intensive effort," said Jesse McGwinn. "When you add to that the audits, we'd like to make sure zero-based budgeting is done properly and that we start with just a portion of the department and move forward in increments."
But legislators voted 4-0 for the zero-based budgeting, saying they were in no mood to slow down their quest to shake out the lingering effects of years of complacency at the agency.
"The PUC certainly appears to be an imperial fiefdom, and I think we need to have a full and thorough exploration of the activities of the commission -- and budgeting is a great way to do that," said Assemblyman Rick Gordon, D-Menlo Park.
As legislators debated whether to take away the PUC's authority to create nonprofits with funds from settlements without the oversight of the Legislature, Clanon suggested that the PUC's ability to create the nonprofits is constitutionally valid, leading Blumenfield to ask: "Does that mean if we pass this law in our budget that you will ignore it?"
Clanon fired back: "Of course not. Nobody should ever have the impression that the Public Utilities Commission or I personally would ever ignore a law, and frankly, sir, I resent that implication."
Blumenfield said that he'd been given the impression that the PUC didn't care much what the Legislature thought.
Leaders at the PUC have failed to fully acknowledge how grave the situation is, suggesting they "think the controversies surrounding them will simply blow over with time," Blumenfield said "Too often, it seems the PUC feels impervious to the actions of the Legislature. Today is a reality check for an out-of-touch leadership at the PUC."