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Legislative Weekly
February 22, 2002
Attorney General Meets With Business on Prop 65 Notices
 Lockyer |
- Lockyer reiterated his office's interpretation that existing law precludes the possibility of a blanket dismissal of the notices by the AG that would have any binding effect on the plaintiffs. Nonetheless, the group requested that he issue a letter of opinion that the batch filings lack merit, citing the many flaws that have been identified to date in individual notices.
- The AG's office is continuing its review of the notices and has secured a written agreement with Kamran Ghalchi on behalf of the Citizens for
- Responsible Business, that they will not proceed with lawsuits until 30 days after terminating the agreement. The AG is seeking similar agreements with the other plaintiffs attorneys, starting with the Consumer Advocacy Group.
- Lockyer encouraged individual recipients to write letters to the plaintiff's attorneys identifying the flaws in their notices and to forward a copy to the AG. Lockyer stated that his office will give serious consideration to requests for letters from the AG attesting to the validity of individual notices.
- He appealed to the business community not to pay any "ransoms" in response to offers by the plaintiff's attorneys to settle out of court.
- Lockyer stated that his office will be issuing draft regulations next week to clarify the reforms established in SB 471 (Sher, 2001). Specifically, he noted that he wants to ensure that the certificate of merit requirement "has teeth" by establishing rules for the content of the certificate. Apparently, some post 1/1/02 certificates simply reiterate the statutory language and do not disclose the factual basis for the case.
- Lockyer also noted that his office will be requesting a budget augmentation in May to add two staff positions for the purpose of reviewing proposed Prop. 65 settlements (required by both SB 1269 (Alpert, 1999) and (SB 471). He requested business support.
CPUC Delays Crucial Votes on Direct Access Suspension
The much anticipated decisions on suspension of Direct Access (DA) were 'put over' by the California Public Utilities Commission (CPUC) yesterday, February 21. The proposed decision (PD) by Administrative Law Judge Barnett and the alternate draft (AD) by Commissioner Brown are scheduled to be taken up March 6. The two week delay could easily be extended, however, given the array of issues the CPUC must grapple with in this proceeding and the CPUC's tendency to put off controversial votes.
The Barnett PD would retroactively suspend DA contracts entered into July 1, 2001 or later (contravening an earlier decision to allow direct access contracts until September 20, 2001). The Brown AD would allow existing DA customers to continue in the DA market, but limit additional load moving to DA. Additionally, the Brown AD paves the way for DA customers to pay an exit fee to deal with Department of Water Resources cost recovery, although it does not presently require exit fees.
The focus of the proceeding will now shift to direct access exit fees. Given that the PD addresses DWR cost recovery from DA customers via retroactive suspension of DA, it is likely that the the AD will become the main vehicle for exit fees.
The establishment of exit fees on DA service would alter the relative value of DA and bundled service, and could make DA uneconomic for some customers. The impact of exit fees on DA customers will depend on the total cost and the time period for collection. If the burden of all costs is too high, companies may reduce production or go out of business, exacerbating an already fragile economy and leaving more debt and stranded power costs on remaining customers.
Electricity Demand and Supply Forecasted
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The California Energy Commission has updated it's November 2001 forecast of electricity demand and supply for years 2002 through 2005. The updated forecast reflects the deferral of new generation due in part to low power prices and lower demand caused by energy efficiency and conservation. Nearly half of the new generation anticipated to be on line by 2004 in the original forecast will be delayed until 2005 or beyond.
The most critical year is 2002, where demand could exceed supply if there is no voluntary conservation. In 2003 and 2004 the combination of new power plants and demand responsive programs will meet system needs even with no voluntary conservation. (This forecast is based on summer peak temperatures expected in one of ten years.)
The findings were presented to the Senate Energy, Utilities and Communications Committee during an informational hearing on Wednesday this week, February 20. Representatives of the CPUC, California Power Authority, SCE and Calpine joined the CEC to discuss the electricity outlook for 2002 to 2012.
Power Authority Approves Scaled Back Investment Plan
Last week, the California Power Authority adopted its Energy Resource Investment Plan. Approved by a unanimous vote, the plan lays out a more limited role for the Power Authority than originally envisioned. Instead of owning power plants, it will help finance them. Instead of stepping in and assuming responsibilities held by others (such as the California Public Utilities Commission), it will merely fill in the gaps.
The plan approved last week is not only less ambitious than the lofty goals espoused by its supporters last year, it is significantly scaled back from the draft plan unveiled just a month ago. The draft plan called for electricity reserves of 22 percent; the approved plan proposes a 15 percent reserve. And instead of helping to create 8,000 MW of additional conservation and generation capacity by 2006, the approved plan has a more modest goal of 3,500 MW. What's more, the plan approved last week dropped the request contained in last month's draft plan for legislative authority to finance transmission lines and for eminent domain powers.
According to the plan, the "key role of the CPA for the immediate future is to be a source of financing and aggregation of about 3,500 MW of smaller renewable projects and needed demand-side projects."
The Silicon Valley Manufacturers Group (SVMG), in a letter sent to the Power Authority prior to last week's vote, noted that commercial and industrial customers "have been unfairly saddled with disproportionate rate hikes," and that the plan "does not adequately address or seek to quantify the cost impact of its recommendations on these already unfair rates as well as the impact of unreliability (dispatchability) of some of the favored technologies."
SBX1 6 (Burton D-San Francisco), which created the Power Authority, requires the Power Authority to "outline a strategy for cost-effective energy resource investments." SVMG called on the Power Authority to more closely examine the potential rate impacts of the proposed plan and its impact on business growth and to conduct further analyses to ensure that the cost-effectiveness standard is being met.
Governor Signs $3.5 Billion Workers' Comp Bill
Governor Davis signed AB 749 (Calderon D-Montebello) on February 15 at a construction job site in Los Angeles surrounded by representatives of organized labor and applicant attorneys who are the big winners in the legislation. Conspicuously absent from the bill signing scene were employer representatives who received few substantive changes to help repair the out of control system and control cost, but who will bear the full economic burden of the bill.
According to the author, the bill will increase employers workers’ compensation costs by $2.4 billion and provide $1.5 billion in savings over four years. On the contrary, CMTA believes that the bill will cost employers over $3.5 billion when you include 1) utilization costs due to high benefit increases; 2) a new $10,000 cash settlement of vocational rehabilitation for represented workers; and 3) more filings of low end soft tissue injuries cases because of the increase in low end permanent partial disability ratings. In addition, CMTA believes that many of the touted reforms that are supposed to cut costs may actually end up increasing them.
AB 749 will increase temporary total disability (TD) and permanent total disability (PTD) weekly maximums from $490 to $602 on January 1, 2003; $728 in 2004, and $840 in 2005. Permanent partial disability (PPD) weekly minimums will go from $70 to $130 and the maximum PPD weekly benefit increases from $230 to $270. Life pension will increase from $153.65 to $307.30. Death benefits will double in 2006, based on the number of dependents, from $125,000 to $250,000 at the low end, and from $160,000 to $320,000 at the high end. TD and PTD are set as an amount certain, then indexed afterwards. Life pension and PTD are also subject to a cost of living adjustment.
A major concern to CMTA is that workers’ compensation in California is highly politicized and the only way that any substantive changes can be made is through negotiations between the various parties in the legislative process. Historically, employers and organized labor have been able to initiate discussions with each other on various reforms and benefit increases. This bill dramatically changes that, and it puts employers at a great disadvantage. AB 749 provides a cost of living increase on disability retirement and indexes other benefits to the Department of Labor average weekly wage after 2006. With automatic benefit increases in statute, there is no reason for organized labor to come to the table to negotiate any changes in the future no matter how poorly the system performs.
California continues to lead the nation in paying permanent partial disability (PPD) benefits to injured workers who have not missed a single day of work. Approximately 90 percent of all PPD claims filed are minor (disability ratings between 1 and 25 percent). The overwhelming majority of these claims are soft tissue injuries with no physical or objective medical findings and the ratings are based on the injured workers complaint of pain. This is already the most costly and controversial provision in the entire workers’ compensation system because of wide spread abuse, wildly varying medical reports and excessive litigation. Instead of fixing the problem as proposed by employers, AB 749 will exacerbate the problem by increasing permanent partial disability benefits at the low end that will make these claims even more attractive for litigation and abuse.
AB 749 is a very large and comprehensive bill. Only a few of the issues in the bill have been covered in this article. The CMTA Legislative Weekly will continue to provide coverage of significant elements of the bill.
CMTA’s Workers’ Compensation Steering Committee is scheduled to meet in Sacramento on March 8 from 9:30 a.m. to 3:00 p.m. in the CMTA conference room. The committee will go through this bill and do a complete analysis that will be made available to members by request or by visiting the CMTA website. If you would like to participate in the steering committee meeting, please contact Willie Washington or Marisa Hull at (916) 441-5420 by February 28.
State Budget Picture Worsens
Legislative Analyst Elizabeth Hill has indicated in a just released detailed analysis of the state budget that the shortfall may reach $14.5 billion. The shortfall would occur in the current budget and next, and takes into account over $2 billion in cuts already approved by the legislature. Hill indicated that even if the Governor's budget were adopted as is, the state would still face a shortfall of $5 billion. She attributes this to overstated revenues ($3.9 billion) and understated expenditures ($1.1 billion).
Her analysis indicates that to address this shortfall an additional $5 billion needs to be cut from the proposed budget. Hill agrees with the administration that California will begin a recovery from its current recession this spring. This is qualified with a belief that the recession and stock market weakness are having a more severe adverse impact on stock options and capital gains than assumed by the administration, which in turn is depressing revenues.
Her analysis further suggests that the economic and revenue outlooks are subject to significant downside risks associated with the timing and strength of the economic recovery, and the severity of the decline in stock options and capital gains this year. She also points out that basic revenue volatility has increased in recent years, giving the revenue forecast greater uncertainty.
Dutra Elected to Lead Moderate Dems
 Dutra |
Caucus members include:
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