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HomeMy WebLinkAboutAgenda Report - May 16, 2018 C-14TM CITY OF LODI COUNCIL COMMUNICATION AGENDA ITEM C-14 AGENDA TITLE: Receive Report Regarding Communication Pertaining to California Public Employees Retirement System Finance and Administration Committee Item 6C (AB 1912) MEETING DATE: May 16, 2018 PREPARED BY: City Clerk RECOMMENDED ACTION: Receive report regarding communication pertaining to California Public Employees Retirement System (CaIPERS) Finance and Administration Committee Item 6C (AB 1912). BACKGROUND INFORMATION: The City received a request for communication from the League of California Cities regarding the CaIPERS Finance and Administration Committee Item 6C relating to AB 1912. There was a need to send a letter immediately in light of a pending hearing. AB 1912 would require that if a member agency of a Joint Powers Agency (JPA) were to leave a retirement fund, then the remaining current and former members of the JPA would become liable for the unfunded liability of that agency. There is no set formula for splitting the liability. If the remaining and former agencies cannot come up with an equitable agreement, the retirement agency will do so. Cities throughout California rely on JPAs to perform a number of mission -critical functions that they could not otherwise support on their own. In Lodi, one such JPA is the Northern California Power Agency (NCPA). NCPA owns and operates all of the power plants that produce power for its more than 14 municipal members. It would be cost prohibitive for the City to run power plants without the economies of scale created by joint action. AB 1912 would assign Joint and Several Liability to the City, which means the City would be liable for its share of the liability and liable for any other defaulting parties' share. If, for example, every member agency but Lodi were bankrupt, the City of Lodi's ratepayers would be liable for 100 percent of the pension liability even though it only uses about 10 percent of the services NCPA provides to its members. Such a result is inequitable, renders JPA's inherently and excessively risky as a tool for cities to accomplish their mission, and in the case of utility JPA's, is also illegal. The attached letter was sent on May 8, 2018. A copy of the initial request, along with the text of the bill, is also attached. This report is provided for informational purposes only, pursuant to policy. FISCAL IMPACT: Not applicable. FUNDING AVAILABLE: Not applicable. APPROVED: 1 \ •tk ug) ifer M. 'iC raiolo City Clerk wird � c wa•. • _ y Manager N:\Administration\CLERK\Council\COUNCOM\LeagueReceiveReportMaster.doc CITY COUNCIL ALAN NAKANISHI, Mayor JOANNE MOUNCE, Mayor Pro Tempore MARK CHANDLER BOB JOHNSON DOUG KUEHNE CITY OF LODI CITY HALL, 221 WEST PINE STREET P.O. BOX 3006 LODI, CALIFORNIA 95241-1910 (209) 333-6702 / FAX (209) 333-6807 www.lodi.pov cityclerklodi.gov May 8, 2018 Priya Mathur, President CaIPERS Board of Administration 400 Q Street Sacramento, CA 95812 Re: CaIPERS Finance and Administration Committee Item 6C STEPHEN SCHWABAUER City Manager JENNIFER M. FERRAIOLO City Clerk JANICE D. MAGDICH City Attorney The City of Lodi applauds CaIPERS' recent actions to shore up the funded status of California's pension system. We do not, however, support your introduction of AB 1912 proposing that cities bear retroactive Joint and Several Liability for the pension liabilities of any joint powers agencies they belong to. Cities throughout California rely on joint powers agencies to perform a number of mission critical functions that they could not otherwise support on their own. In Lodi, one such JPA is the Northern California Power Agency (NCPA). NCPA owns and operates all of the power plants that produce power for its more than 14 municipal members. It would be cost prohibitive for the City to run power plants without the economies of scale created by joint action. Yet NCPA's pension liabilities are significant. According to CaIPERS' own actuarial, NCPA is 54% funded as of June 30, 2016, largely as a result of its relatively high plan value. Plan's Funded Status 1. Present Value of Projected Benefits 2. Entry Age Norma Accrued Liability 3. Flarket Value of Assets (MVA) 4. Unfunded Acci ued Liability (UAL) [(2) — (3)] 5. Funded Ratio [(3) / (2)] $ $ lune 30, 2015 161,010,847 138,917,719 77,970,925 60,946,794 56.1% June 30, 2016 $ 169,787,150 146,696,486 $ 79,154,505 67,541,981 54.0% While Lodi recognizes we are ultimately responsible for our share of that liability and will honor it, AB 1912 assigns Joint and Several Liability to the City for that obligation. Joint and Several Liability is a distinct legal concept that means the City is liable for our share of the liability and liable for any other defaulting parties' share. If, for example, every member agency but Lodi were bankrupt, the City of Lodi's ratepayers would be liable for 100 percent of the pension liability even though we only use about 10 percent of the services NCPA provides to its members. Such a result is inequitable, renders JPA's inherently and excessively risky as a tool for cities to accomplish their mission, and in the case of utility JPA's, is also illegal. Proposition 218 and Proposition 26 together establish the legal principal that ratepayers cannot be charged for a service they do not receive. Since Lodi's ratepayers only receive a portion of NCPA's services, they cannot be charged for the services NCPA provides to other utilities. CaIPERS Finance and Administration Committee Item 6C May 8, 2018 Page Two CaIPERS Board member Richard Costigan has repeatedly reminded cities that your Board's last major legislative effort was SB 400 as a means to convince cities that this Board should not pursue further legislative solutions to the pension crisis. That foreboding and prescient warning is equally applicable here. You may solve the pension problem for your Board, but render public services nearly impossible to provide for your local government partners. Sincerely, OL/ /J4-7 Alan Nakanishi Mayor, City of Lodi AN/SS/jmf cc: Theresa Taylor, Chair, Finance and Administration Committee, CaIPERS Board of Administration, theresa.tavlor�7a calpers.ca.gov Bill Slaton, Local Government Employer Appointee, CaIPERS Board of Administration, bill.slatonMca Ipers. ca.gov Marcie Frost, Chief Executive Officer, CaIPERS, rnarcie.frastpcalpers.ca.gov Dane Hutchings, Legislative Representative, League of California Cities, dhutchings o()cacities.org Jennifer Ferraiolo From: Stephen R. Qualls <squalls@cacities.org> Sent: Wednesday, May 2, 2018 11:42 AM Subject: URGENT: AB 1912 and CaIPERS Position In short, AB 1912 would require that if a member agency of a JPA were to leave a retirement fund, then the remaining current and former members of the JPA would become liable for the unfunded liability of that agency. There is no set formula for splitting the liability. If the remaining and former agencies can't come up with an equitable agreement, the retirement agency will do so. ACTION ALERT!! AB 1912 (Rodriguez) Public Employees' Retirement: JPA: Liability CaIPERS Considering a Formal Position on Tuesday May 15, 2018: Finance and Administration Committee Agenda Item 6 C BACKGROUND: Joint Powers Authorities (JPAs) play a vital role in promoting regional and, in some cases, statewide collaboration in addressing public needs that cannot be effectively achieved by each local government agency acting on its own. These activities include regional public improvements, local and statewide infrastructure for water and roadways, emergency communications systems, law enforcement, fire protection, emergency medical services, and public financing, among others. We are deeply concerned that JPAs will no longer be a viable tool should AB 1912 become law. The League of California Cities has been working to defeat AB 1912 in the legislature. However, CaIPERS is going to consider adopting a formal position on the bill. The CaIPERS Board of Administration's Finance and Administration committee will be meeting on Tuesday May 15, 2018. We will be expressing our OPPOSITION to AB 1912 and we are asking the CaIPERS Board and Committee to adopt a NO POSITION on this measure. ACTION There are two ways to engage on this measure before the CaIPERS Board: 1. Testify at the CaIPERS Finance and Administration Committee on May 15 (see talking points below). Please coordinate with Johnnie Pina<mailto:jpina@cacities.org> and/or Dane Hutchings<mailto:dhutchings@cacities.org> if you wish to testify. The meeting starts at 10am, however, this item may not be taken up until the afternoon. The meeting may go well into the afternoon, please plan accordingly. See parking information below. 2. Submit a Letter to the CaIPERS Board of Administration no later than Tuesday May 8, 2018 1 If member -cities are unable to attend, they have an option of writing a letter to the board, which will be acknowledged during the public comment period. A letter can reflect the talking points outlined below. If your members are unable to attend the meeting, please draft a brief letter addressed to the CaIPERS board president: Priya Mathur, President CaIPERS Board of Administration 400 Q Street Sacramento, CA 95812 [Subject line:] CaIPERS Finance and Administration Committee Item 6C [Body of your letter: Form letters are NOT effective with the CaIPERS board; therefore, we will not have a sample letter available.] CC: Theresa Taylor, Chair, Finance and Administration Committee, CaIPERS Board of Administration, theresa.taylor@calpers.ca.gov<mailto:theresa.taylor@calpers.ca.gov> Bill Slaton, Local Government Employer Appointee, CaIPERS Board of Administration, bill.slaton@calpers.ca.gov<mailto:bill.slaton@calpers.ca.gov> Marcie Frost, Chief Executive Officer, CaIPERS, marcie.frost@calpers.ca.gov<mailto:marcie.frost@calpers.ca.gov> Dane Hutchings, Legislative Representative, League of California Cities, dhutchings@cacities.org<mailto:dhutchings@cacities.org> Where to send your letter: Please scan and email your letter to Brad.Pacheco@calpers.ca.gov<mailto:Brad.Pacheco@calpers.ca.gov> who will distribute directly to the president and board members. Talking Points/Key Points for Your Letter: JPA's play a vital role in addressing public needs that cannot be effectively achieved by a local agency acting on its own At a time when CaIPERS has made changes in asset allocation, discount rate reductions and amortization schedule—all resulting in increased employer contribution rates, AB 1912 would only add more debt and liabilities to cities struggling to make their required contributions. Attaches prospective as well as retroactive joint and several liability to any new or current JPA agreements for all unfunded pension liabilities including active and retiree healthcare (OPEB) for any public retirement system (not just CaIPERS). * Requires that CaIPERS or any public retirement agency seek a private right of action to any (current or former) agency members of a JPA seeking damages for unfunded liabilities as well as attorney's fees. 2 * As amended AB 1912 would still give the retirement agency unilateral authority to assign "equitable" liability amongst current and former JPA members if agencies cannot agree how to apportion liabilities. * This vague and ambiguous direction demonstrates a fundamental misunderstanding of the formation, management and purpose of a JPA which will inevitability lead to a perpetual cycle of protracted and costly litigation contesting the retirement agency's discretion of proportional liability. This is a massive departure from current law. The City/Town of are deeply concerned that JPAs will no longer be a viable tool should AB 1912 become law. Parking Information for May 15 Board Meeting Please coordinate with Johnnie Pina<mailto:jpina@cacities.org> and/or Dane Hutchings<mailto:dhutchings@cacities.org> if you wish to attend the board meeting. A link to the full parking map with instructions can be found HERE<https://www.calpers.ca.gov/img/lincoln-plaza- building-guide-street-map.pdf> The board room is located in the Lincoln Plaza North Public parking garages are located both in Lincoln Plaza North and East Q Street is a one-way road. The parking structures will be on your left (North entrance) and right (East entrance) and the parking garage is located on the right hand side. If you use the Lincoln Plaza East lot, you will enter the underground parking structure and follow the signs for visitor parking. o Once you've parked, follow the directional arrows to the building (street level) to 400 Q and walk across the street. There is also street parking (metered) if you prefer, located on P Street as well as 4th street. Thank you, Stephen Qualls Central Valley Division Regional Public Affairs Manager League of California Cities c. 209-614-0118 f. 209-883-0653 squalls@cacities.org 1 www.cacities.org<http://www.cacities.org/> 3 AMENDED IN ASSEMBLY APRIL 19, 2018 AMENDED IN ASSEMBLY MARCH 19, 2018 CALIFORNIA LEGISLATURE -2017-18 REGULAR SESSION ASSEMBLY BILL No. 1912 Introduced by Assembly Member Rodriguez January 23, 2018 An act to amend Section 6508.1 of, to add Sections 6508.2, 20461.1, 20574.1, and 20575.1 to, and to repeal and add Section 20577.5 of, the Government Code, and to amend Section 366.2 of the Public Utilities Code, relating to public agencies, and making an appropriation therefor. LEGISLATIVE COUNSEL'S DIGEST AB 1912, as amended, Rodriguez. Public employees' retirement: joint powers agreements: liability. (1) Existing law establishes various public agency retirement systems, including, among others, the Public Employees' Retirement System, the State Teachers' Retirement System, the Judges' Retirement System II, and various county retirement systems pursuant to the County Employees Retirement Law of 1937. These systems provide defined pension benefits to public employees based on age, service credit, and amount of final compensation. The Joint Exercise of Powers Act generally authorizes 2 or more public agencies, by agreement, to jointly exercise any common power. Under the act, if the agency is not one or more of the parties to the agreement but is a public entity, commission, or board constituted pursuant to the agreement, the debts, liabilities, and obligations of the agency are the debts, liabilities, and obligations of the parties to the agreement, unless the agreement specifies othcrwisc. Existing law also 97 AB 1912 —2— permits otherwise and except as otherwise provided with respect to certain community choice aggregator joint powers agencies. The act also authorizes a party to -an a joint powers agreement to separately contract for, or assume responsibilities for, specific debts, liabilities, or obligations of the agency. Existing law, with rcspcct to electrical loads, permits cntitics authorizcd to be community choicc aggrcgators to participatc as a group through a joint powcrs agcncy and to also spccify in thcir joint powcrs agrccmcnt that thc dcbts, liabilitics, and obligations IP IP IP 111 This bill would eliminate thc above provisions within thc Joint Excrcisc of Powcrs Act and thosc related provisions for community to spccify othcrwisc as to thcir dcbts, liabilitics, and obligations and that permit a party to scparatcly contract for thosc dcbts, liabilitics, or The This bill would additionally eliminate that authorization, would specify that if an agency to a joint powers agreement participates in a public retirement system, all parties, both current and former to the agreement, would be jointly and severally liable for all obligations to the retirement systcm. system, and would eliminate the authority of those parties to agree otherwise with respect to the retirement liabilities of the agency. The bill would also provide that if a judgment is rendered against an agency or a party to the agreement for a breach of its obligations to the retirement system, the time within which a claim for injury may be presented or an action commenced against the other party that is subject to the liability determined by the judgment begins to run when the judgment is rendered. The bill would specify that those provisions apply retroactively to all parties, both current and former, to the joint powers agreement. (2) The Public Employees' Retirement Law (PERL) creates the Public Employees' Retirement System (PERS), which provides a defined benefit to members of the system, based on final compensation, credited service, and age at retirement, subject to certain variations. PERL vests management and control of PERS in its Board of Administration. Under PERL, the board may refuse to contract with, or to agree to an amendment proposed by, any public agency for any benefit provisions that are not specifically authorized by that law and that the board determines would adversely affect the administration of the retirement system. 97 -3— AB 1912 This bill would prohibit the board from contracting with any public agency formed under the Joint Exercise of Powers Act unless all the parties to that agreement are jointly and severally liable for all of the public agency's obligation to the system. The bill would specify that those provisions apply retroactively to all parties, both current and former, to the agreement. The bill would also require any current agreement that does not meet these requirements to be reopened to include a provision holding all member agencies party to the agreement jointly and severally liable for all of the public agency's obligations to the system. (3) Existing law authorizes the governing board of a contracting agency to terminate its membership with PERS, subject to specified criteria. Existing law requires the PERS board to enter into a specified agreement with the governing body of a terminating agency, upon request of that agency, to ensure that final compensation is calculated in the same manner as benefits of nonterminating agencies, and that related necessary adjustments in the employer's contribution rate are made and benefits adequately funded, including a lump -sum payment at termination, if agreed to by the terminating agency and the board. Existing law requires a terminating agency to notify the PERS board of its intention to enter into this agreement within a specified period of time. Existing law authorizes the PERS board to choose not to enter into an agreement to terminate if the board determines that it is not in the best interests of PERS. Existing law requires all plan assets and liabilities of a terminating agency to be deposited in a single pooled account, the terminated agency pool subaccount within the Public Employees' Retirement Fund, a continuously appropriated fund. This bill would also require the PERS board to enter into the above-described agreement upon request of a member agency of a terminating agency formed under the Joint Exercise of Powers Act, and would require a member agency to notify the PERS board of its intention to enter into this agreement within a specified period of time. The bill would authorize the board, if it determines that it is not in the best interests of the retirement system, to choose not to enter into that agreement. To the extent that the bill would increase any lump -sum payments made by a terminating agency and deposited into a subaccount within the Public Employees' Retirement Fund, the bill would make an appropriation. The bill would also provide that if the governing body of a terminating agency or the governing bodies of its member agencies do not enter into an agreement, the member agencies would then assume 97 AB 1912 —4— the retirement obligations for their retirement systems, which thc board would be required to apportion equitably among thc mcmbcr agcncics. systems, by apportionment among the member agencies as mutually agreed to by those agencies, or as determined by the board if the member agencies are unable to mutually agree, as prescribed. (4) Existing law makes a terminated agency liable to the system for any deficit in funding for earned benefits, interest, and for reasonable and necessary costs of collection, including attorney's fees. Existing law provides that the board has a lien on the assets of a terminated contracting agency, as specified, and that assets shall also be available to pay actual costs, including attorney's fees necessarily expended for collection on the lien. This bill would extend that liability and lien to all of the parties of a terminating agency that was formed under the Joint Exercise of Powers Act. The bill would specify that the liability of those parties is joint and several. To the extent that these changes would increase deposits in the Public Employees' Retirement Fund, the bill would make an appropriation. (5) Existing law authorizes the board of PERS to elect not to impose a reduction, or to impose a lesser reduction, on a terminated plan if the board has made all reasonable efforts to collect the amount necessary to fully fund the liabilities of the plan and the board finds that not reducing the benefits, or imposing a lesser reduction, will not impact the actuarial soundness of the terminated agency pool. This bill would eliminate that provision. The bill would require the board to bring a civil action against any member agencies to a terminated agency formed by an agreement under the Joint Exercise of Powers Act to compel payment of the terminated public agency's pension obligations. The bill would also specify that the board is entitled to reasonable attorney's fees in addition to other costs. The bill would also set forth related legislative findings. Vote: majority. Appropriation: yes. Fiscal committee: yes. State -mandated local program: no. The people of the State of California do enact as follows: 1 SECTION 1. The Legislature finds and declares as follows: 2 (a) Retirement security is important to families, workers, and 3 communities, as well as to the local, regional, and statewide 97 -5— AB 1912 1 economies, and provides financial security and dignity to those 2 who retire. 3 (b) A defined benefit plan offers, among other types of 4 retirement plans, a guarantee of financial security in retirement. 5 (c) A Joint Power Authority (JPA) created pursuant to the Joint 6 Exercise of Powers Act (Chapter 5 (commencing with Section 7 6500) of Division 7 of Title 1 of the Government Code) provides 8 important services and benefits to its geographical areas and 9 communities. 10 (d) A JPA may offer a defined benefit plan to attract, recruit, 11 and retain highly skilled employees toward providing services and 12 fulfilling its purpose. 13 (e) Employees who have been promised a retirement allowance 14 and the other benefits of a defined benefit plan by their employer 15 should be provided those benefits after reaching the requisite age, 16 based on years of service and an established benefit formula, as 17 promised by that employer. 18 (f) Further, an employee who accepts employment with a JPA 19 employer that promises a defined benefit plan may detrimentally 20 rely on the retirement benefit, as committed by the employer, 21 during his or her employment and retirement from that employer. 22 (g) Moreover, a JPA might have limited sources of revenue, 23 and an inability to increase, or secure additional sources of revenue, 24 that may lead to financial distress or insolvency of the JPA, absent 25 the financial surety of its member agencies and for the retirement 26 benefits of the JPA's employees. 27 (h) Additionally, employees who rely on a promise by a JPA 28 employer to provide retirement benefits by accepting and 29 maintaining employment with the employer based partly on the 30 employer's promise may do so to their own retirement detriment. 31 (i) Thus, member agencies of a JPA should not be permitted to 32 absolve themselves of financial liability, in whole or in part, of 33 the financial distress or insolvency of a JPA that results in 34 reductions in a defined benefit plan retirement allowance of a 35 retired JPA employee, of which the agencies are members. 36 (j) Therefore, in order to ensure that the Board ofAdministration 37 of the Public Employees' Retirement System is meeting its 38 fiduciary duties and responsibilities to its members and the system, 39 the board should be permitted to seek legal redress on behalf of 40 its members as a result of the financial insolvency of a JPA that 97 AB 1912 —6- 1 contracts with the retirement system if the financial distress or 2 insolvency of the JPA may result in a reduction of retirement 3 benefits to its members. 4 (k) Further, to ensure that the board is meeting its fiduciary 5 duties and responsibilities, both current and future contracts with 6 the retirement system by a JPA must include joint and several 7 liability provisions that apply to all agencies under the agreement 8 in order to protect the members of the retirement system against 9 financial insolvency. 10 SEC. 2. Section 6508.1 of the Government Code is amended 11 to read: 12 6508.1. If the agency is not one or more of the parties to the 13 agreement but is a public entity, commission, or board constituted 14 pursuant to the agreement, the debts, liabilities, and obligations of 15 the agency shall be debts, liabilities, and obligations of the parties 16 to the agrccmcnt. agreement, unless the agreement species 17 otherwise. However the parties to the agreement may not agree 18 otherwise with respect to the retirement liabilities of the agency 19 if the agency contracts with a public retirement system. 20 SEC. 3. Section 6508.2 is added to the Government Code, to 21 read: 22 6508.2. (a) Notwithstanding Section 6508.1, if the agency 23 participates in a public retirement system, all parties, both current 24 and former, to the agreement, including all amendments thereto, 25 shall be jointly and severally liable for all obligations to the 26 retirement system. 27 (b) Notwithstanding any other law, if a judgment is rendered 28 against an agency or a party to the agreement for a breach to its 29 obligations to the public retirement system, the time within which 30 a claim for injury may be presented or an action commenced 31 against any other party that is subject to the liability determined 32 by the judgment begins to run when the judgment is rendered. 33 (c) This section shall apply retroactively to all parties, both 34 current and former, to the agreement. 35 SEC. 4. Section 20461.1 is added to the Government Code, to 36 read: 37 20461.1. (a) The board shall not contract with any public 38 agency formed by an agreement under Chapter 5 (commencing 39 with Section 6500) of Division 7 of Title 1 unless all the parties 40 to that agreement, including all amendments thereto, are jointly 97 -7— AB 1912 1 and severally liable for all of the public agency's obligations to 2 this system. 3 (b) This section shall apply retroactively to all parties, both 4 current and former, to the agreement. Any current agreement 5 forming a public agency under Chapter 5 (commencing with 6 Section 6500) of Division 7 of Title 1 that does not meet the 7 requirements set forth in this section shall be reopened to include 8 a provision holding all member agencies party to the agreement 9 jointly and severally liable for all of the public agency's obligations 10 to this system. 11 SEC. 5. Section 20574.1 is added to the Government Code, to 12 read: 13 20574.1. In lieu of the procedure set forth in Section 20574, 14 all parties to a terminating agency that was formed by an agreement 15 under Chapter 5 (commencing with Section 6500) of Division 7 16 of Title 1 shall be jointly and severally liable to the system for any 17 deficit in funding for earned benefits, as determined pursuant to 18 Section 20577, interest at the actuarial rate from the date of 19 termination to the date the agency pays the system, and reasonable 20 and necessary costs of collection, including attorneys' fees. The 21 board shall have a lien on the assets of a terminated contracting 22 agency and on the assets of all parties to the terminating contracting 23 agency, subject only to a prior lien for wages, in an amount equal 24 to the actuarially determined deficit in funding for earned benefits 25 of the employee members of the agency, interest, and collection 26 costs. The assets shall also be available to pay actual costs, 27 including attorney's fees, necessarily expended for collection of 28 the lien. 29 SEC. 6. Section 20575.1 is added to the Government Code, to 30 read: 31 20575.1. (a) Notwithstanding any other provision of this part 32 to the contrary, upon request of a terminating agency formed by 33 an agreement under Chapter 5 (commencing with Section 6500) 34 of Division 7 of Title 1 or of any member agency to the agreement, 35 the board shall enter into an agreement with the governing body 36 of a terminating agency or the governing body of the member 37 agency in order to ensure that (1) the final compensation used in 38 the calculation of benefits of its employees shall be calculated in 39 the same manner as the benefits of employees of agencies that are 40 not terminating, regardless of whether they retire directly from 97 AB 1912 —8- 1 employment with the terminating agency or continue in other 2 public service; and (2) related necessary adjustments in the 3 employer's contribution rate are made, from time to time, by the 4 board prior to the date of termination to ensure that benefits are 5 adequately funded or any other actuarially sound payment 6 technique, including a lump -sum payment at termination, is agreed 7 to by the governing body of the terminating agency and the board. 8 (b) A terminating agency formed by an agreement under Chapter 9 5 (commencing with Section 6500) of Division 7 of Title 1 that 10 will cease to exist or its member agency shall notify the board not 11 sooner than three years nor later than one year prior to the 12 terminating agency's termination date of its intention to enter into 13 agreement pursuant to this section. The terms of the agreement 14 shall be reflected in an amendment to the agency's contract with 15 the board. 16 (c) If the board, itself, determines that it is not in the best 17 interests of the system, it may choose not to enter into an agreement 18 pursuant to this section. 19 (d) If the governing body of a terminating agency formed by 20 an agreement under Chapter 5 (commencing with Section 6500) 21 of Division 7 of Title 1 or the governing bodies of its member 22 agencies do not enter into an agreement pursuant to this section, 23 the member agencies shall assume the retirement obligations on 24 their retirement systems. The board shall apportion thc obligations 25 among thc mcmbcr agcncics in an cquitablc manncr. Member 26 agencies of the agency shall mutually agree as to the 27 apportionment of the agency's retirement obligations among 28 themselves provided that the agreement equals the total retirement 29 liability of the agency. A copy of this mutual agreement signed by 30 all parties thereto shall be provided to the board, which shall be 31 reflected in the agreement with the board. If the member agencies 32 are unable to mutually agree to apportionment of the total 33 retirement liability of the agency, the board shall, in its discretion, 34 apportion the retirement liability of the agency to each member 35 agency such that the apportionment equals the total retirement 36 liability of the agency, which shall be reflected in the agreement 37 with the board. However, if after the board apportions the 38 retirement liability, the member agencies mutually agree to 39 apportionment that equals the total retirement liability of the 40 agency, a copy of that agreement signed by all parties thereto shall 97 -9— AB 1912 1 be provided to the board, which shall supersede the apportionment 2 made by the board, and be reflected in the agreement with the 3 board. 4 SEC. 7. Section 20577.5 of the Government Code is repealed. 5 SEC. 8. Section 20577.5 is added to the Government Code, to 6 read: 7 20577.5. The board shall bring a civil action against any and 8 all of the member agencies that are parties to a terminated agency 9 formed by an agreement under Chapter 5 (commencing with 10 Section 6500) of Division 7 of Title 1 to compel payment of the 11 terminated agency's pension obligations, and shall be entitled to 12 reasonable attorneys' fees in addition to other costs. 13 SEC. 9. Section 366.2 of the Public Utilities Code is amended 14 to read: 15 366.2. (a) (1) Customers shall be entitled to aggregate their 16 electric loads as members of their local community with 17 community choice aggregators. 18 (2) Customers may aggregate their loads through a public 19 process with community choice aggregators, if each customer is 20 given an opportunity to opt out of his or her community's 21 aggregation program. 22 (3) If a customer opts out of a community choice aggregator's 23 program, or has no community choice aggregation program 24 available, that customer shall have the right to continue to be served 25 by the existing electrical corporation or its successor in interest. 26 (4) The implementation of a community choice aggregation 27 program shall not result in a shifting of costs between the customers 28 of the community choice aggregator and the bundled service 29 customers of an electrical corporation. 30 (5) A community choice aggregator shall be solely responsible 31 for all generation procurement activities on behalf of the 32 community choice aggregator's customers, except where other 33 generation procurement arrangements are expressly authorized by 34 statute. 35 (b) If a public agency seeks to serve as a community choice 36 aggregator, it shall offer the opportunity to purchase electricity to 37 all residential customers within its jurisdiction. 38 (c) (1) Notwithstanding Section 366, a community choice 39 aggregator is hereby authorized to aggregate the electrical load of 40 interested electricity consumers within its boundaries to reduce 97 AB 1912 —10- 1 transaction costs to consumers, provide consumer protections, and 2 leverage the negotiation of contracts. However, the community 3 choice aggregator may not aggregate electrical load if that load is 4 served by a local publicly owned electric utility. A community 5 choice aggregator may group retail electricity customers to solicit 6 bids, broker, and contract for electricity and energy services for 7 those customers. The community choice aggregator may enter into 8 agreements for services to facilitate the sale and purchase of 9 electricity and other related services. Those service agreements 10 may be entered into by an entity authorized to be a community 11 choice aggregator, as defined in Section 331.1. 12 (2) Under community choice aggregation, customer participation 13 may not require a positive written declaration, but each customer 14 shall be informed of his or her right to opt out of the community 15 choice aggregation program. If no negative declaration is made 16 by a customer, that customer shall be served through the 17 community choice aggregation program. If an existing customer 18 moves the location of his or her electric service within the 19 jurisdiction of the community choice aggregator, the customer 20 shall retain the same subscriber status as prior to the move, unless 21 the customer affirmatively changes his or her subscriber status. If 22 the customer is moving from outside to inside the jurisdiction of 23 the community choice aggregator, customer participation shall not 24 require a positive written declaration, but the customer shall be 25 informed of his or her right to elect not to receive service through 26 the community choice aggregator. 27 (3) A community choice aggregator establishing electrical load 28 aggregation pursuant to this section shall develop an 29 implementation plan detailing the process and consequences of 30 aggregation. The implementation plan, and any subsequent changes 31 to it, shall be considered and adopted at a duly noticed public 32 hearing. The implementation plan shall contain all of the following: 33 (A) An organizational structure of the program, its operations, 34 and its funding. 35 (B) Ratesetting and other costs to participants. 36 (C) Provisions for disclosure and due process in setting rates 37 and allocating costs among participants. 38 (D) The methods for entering and terminating agreements with 39 other entities. 97 -11— AB 1912 1 (E) The rights and responsibilities of program participants, 2 including, but not limited to, consumer protection procedures, 3 credit issues, and shutoff procedures. 4 (F) Termination of the program. 5 (G) A description of the third parties that will be supplying 6 electricity under the program, including, but not limited to, 7 information about financial, technical, and operational capabilities. 8 (4) A community choice aggregator establishing electrical load 9 aggregation shall prepare a statement of intent with the 10 implementation plan. Any community choice load aggregation 11 established pursuant to this section shall provide for the following: 12 (A) Universal access. 13 (B) Reliability. 14 (C) Equitable treatment of all classes of customers. 15 (D) Any requirements established by state law or by the 16 commission concerning aggregated service, including those rules 17 adopted by the commission pursuant to paragraph (3) of 18 subdivision (b) of Section 8341 for the application of the 19 greenhouse gases emission performance standard to community 20 choice aggregators. 21 (5) In order to determine the cost -recovery mechanism to be 22 imposed on the community choice aggregator pursuant to 23 subdivisions (d), (e), and (f) that shall be paid by the customers of 24 the community choice aggregator to prevent shifting of costs, the 25 community choice aggregator shall file the implementation plan 26 with the commission, and any other information requested by the 27 commission that the commission determines is necessary to develop 28 the cost -recovery mechanism in subdivisions (d), (e), and (f). 29 (6) The commission shall notify any electrical corporation 30 serving the customers proposed for aggregation that an 31 implementation plan initiating community choice aggregation has 32 been filed, within 10 days of the filing 33 (7) Within 90 days after the community choice aggregator 34 establishing load aggregation files its implementation plan, the 35 commission shall certify that it has received the implementation 36 plan, including any additional information necessary to determine 37 a cost -recovery mechanism. After certification of receipt of the 38 implementation plan and any additional information requested, 39 the commission shall then provide the community choice 40 aggregator with its findings regarding any cost recovery that must 97 AB 1912 —12- 1 be paid by customers of the community choice aggregator to 2 prevent a shifting of costs as provided for in subdivisions (d), (e), 3 and (f). 4 (8) No entity proposing community choice aggregation shall 5 act to furnish electricity to electricity consumers within its 6 boundaries until the commission determines the cost recovery that 7 must be paid by the customers of that proposed community choice 8 aggregation program, as provided for in subdivisions (d), (e), and 9 (0. The commission shall designate the earliest possible effective 10 date for implementation of a community choice aggregation 11 program, taking into consideration the impact on any annual 12 procurement plan of the electrical corporation that has been 13 approved by the commission. 14 (9) All electrical corporations shall cooperate fully with any 15 community choice aggregators that investigate, pursue, or 16 implement community choice aggregation programs. Cooperation 17 shall include providing the entities with appropriate billing and 18 electrical load data, including, but not limited to, electrical 19 consumption data as defined in Section 8380 and other data 20 detailing electricity needs and patterns of usage, as determined by 21 the commission, and in accordance with procedures established 22 by the commission. The commission shall exercise its authority 23 pursuant to Chapter 11 (commencing with Section 2100) to enforce 24 the requirements of this paragraph when it finds that the 25 requirements of this paragraph have been violated. Electrical 26 corporations shall continue to provide all metering, billing, 27 collection, and customer service to retail customers that participate 28 in community choice aggregation programs. Bills sent by the 29 electrical corporation to retail customers shall identify the 30 community choice aggregator as providing the electrical energy 31 component of the bill. The commission shall determine the terms 32 and conditions under which the electrical corporation provides 33 services to community choice aggregators and retail customers. 34 (10) If the commission finds that an electrical corporation has 35 violated this section, the commission shall consider the impact of 36 the violation upon community choice aggregators. 37 (11) The commission shall proactively expedite the complaint 38 process for disputes regarding an electrical corporation's violation 39 of its obligations pursuant to this section in order to provide for 40 timely resolution of complaints made by community choice 97 -13— AB 1912 1 aggregation programs, so that all complaints are resolved in no 2 more than 180 days following the filing of a complaint by a 3 community choice aggregation program concerning the actions of 4 the incumbent electrical corporation. This deadline may only be 5 extended under either of the following circumstances: 6 (A) Upon agreement of all of the parties to the complaint. 7 (B) The commission makes a written determination that the 8 deadline cannot be met, including findings for the reason for this 9 determination, and issues an order extending the deadline. A single 10 order pursuant to this subparagraph shall not extend the deadline 11 for more than 60 days. 12 (12) (A) An entity authorized to be a community choice 13 aggregator, as defined in Section 331.1, that elects to implement 14 a community choice aggregation program within its jurisdiction 15 pursuant to this chapter, shall do so by ordinance. A city, county, 16 or city and county may request, by affirmative resolution of its 17 governing council or board, that another entity authorized to be a 18 community choice aggregator act as the community choice 19 aggregator on its behalf. If a city, county, or city and county, by 20 resolution, requests another authorized entity be the community 21 choice aggregator for the city, county, or city and county, that 22 authorized entity shall be responsible for adopting the ordinance 23 to implement the community choice aggregation program on behalf 24 of the city, county, or city and county. 25 (B) (i) Two or more entities authorized to be a community 26 choice aggregator, as defined in Section 331.1, may participate as 27 a group in a community choice aggregation program pursuant to 28 this chapter, through a joint powers agency established pursuant 29 to Chapter 5 (commencing with Section 6500) of Division 7 of 30 Title 1 of the Government Code, if each entity adopts an ordinance 31 pursuant to subparagraph (A). 32 (ii) Pursuant to Section 6508.1 of the Government Code, 33 members of a joint powers agency that is a community choice 34 aggregator may specify in their joint powers agreement that, unless 35 otherwise agreed by the members of the agency, the debts, 36 liabilities, and obligations of the agency shall not be the debts, 37 liabilities, and obligations, either jointly or severally, of the 38 members of the agency. 97 AB 1912 —14- 1 (iii) Notwithstanding clause (ii), if the agency contracts with a 2 public retirement system, the members of the agency shall be jointly 3 and severally liable for the retirement liabilities of the agency. 4 (iv) Except as provided in clause (iii), the commission shall not, 5 as a condition of registration or otherwise, require an agency's 6 members to voluntarily assume the debts, liabilities, and 7 obligations of the agency to the electrical corporation unless the 8 commission finds that the agreement by the agency's members is 9 the only reasonable means by which the agency may establish its 10 creditworthiness under the electrical corporation 's tariff to pay 11 charges to the electrical corporation under the tariff. 12 (13) Following adoption of aggregation through the ordinance 13 described in subparagraph (A) of paragraph (12), the program 14 shall allow any retail customer to opt out and to continue to be 15 served as a bundled service customer by the existing electrical 16 corporation, or its successor in interest. Delivery services shall be 17 provided at the same rates, terms, and conditions, as approved by 18 the commission, for community choice aggregation customers and 19 customers that have entered into a direct transaction where 20 applicable, as determined by the commission. Once enrolled in 21 the aggregated entity, any ratepayer that chooses to opt out within 22 60 days or two billing cycles of the date of enrollment may do so 23 without penalty and shall be entitled to receive default service 24 pursuant to paragraph (3) of subdivision (a). Customers that return 25 to the electrical corporation for procurement services shall be 26 subject to the same terms and conditions as are applicable to other 27 returning direct access customers from the same class, as 28 determined by the commission, as authorized by the commission 29 pursuant to this code or any other provision of law, except that 30 those customers shall be subject to no more than a 12 -month stay 31 requirement with the electrical corporation. Any reentry fees to 32 be imposed after the opt -out period specified in this paragraph, 33 shall be approved by the commission and shall reflect the cost of 34 reentry. The commission shall exclude any amounts previously 35 determined and paid pursuant to subdivisions (d), (e), and (f) from 36 the cost of reentry. 37 (14) Nothing in this section shall be construed as authorizing 38 any city or any community choice retail load aggregator to restrict 39 the ability of retail electricity customers to obtain or receive service 97 -15— AB 1912 1 from any authorized electric service provider in a manner consistent 2 with law. 3 (15) (A) The community choice aggregator shall fully inform 4 participating customers at least twice within two calendar months, 5 or 60 days, in advance of the date of commencing automatic 6 enrollment. Notifications may occur concurrently with billing 7 cycles. Following enrollment, the aggregated entity shall fully 8 inform participating customers for not less than two consecutive 9 billing cycles. Notification may include, but is not limited to, direct 10 mailings to customers, or inserts in water, sewer, or other utility 11 bills. Any notification shall inform customers of both of the 12 following: 13 (i) That they are to be automatically enrolled and that the 14 customer has the right to opt out of the community choice 15 aggregator without penalty. 16 (ii) The terms and conditions of the services offered. 17 (B) The community choice aggregator may request the 18 commission to approve and order the electrical corporation to 19 provide the notification required in subparagraph (A). If the 20 commission orders the electrical corporation to send one or more 21 of the notifications required pursuant to subparagraph (A) in the 22 electrical corporation's normally scheduled monthly billing 23 process, the electrical corporation shall be entitled to recover from 24 the community choice aggregator all reasonable incremental costs 25 it incurs related to the notification or notifications. The electrical 26 corporation shall fully cooperate with the community choice 27 aggregator in determining the feasibility and costs associated with 28 using the electrical corporation's normally scheduled monthly 29 billing process to provide one or more of the notifications required 30 pursuant to subparagraph (A). 31 (C) Each notification shall also include a mechanism by which 32 a ratepayer may opt out of community choice aggregated service. 33 The opt out may take the form of a self-addressed return postcard 34 indicating the customer's election to remain with, or return to, 35 electrical energy service provided by the electrical corporation, or 36 another straightforward means by which the customer may elect 37 to derive electrical energy service through the electrical corporation 38 providing service in the area. 39 (16) A community choice aggregator shall have an operating 40 service agreement with the electrical corporation prior to furnishing 97 AB 1912 —16- 1 electric service to consumers within its jurisdiction. The service 2 agreement shall include performance standards that govern the 3 business and operational relationship between the community 4 choice aggregator and the electrical corporation. The commission 5 shall ensure that any service agreement between the community 6 choice aggregator and the electrical corporation includes equitable 7 responsibilities and remedies for all parties. The parties may 8 negotiate specific terms of the service agreement, provided that 9 the service agreement is consistent with this chapter. 10 (17) The community choice aggregator shall register with the 11 commission, which may require additional information to ensure 12 compliance with basic consumer protection rules and other 13 procedural matters. 14 (18) Once the community choice aggregator's contract is signed, 15 the community choice aggregator shall notify the applicable 16 electrical corporation that community choice service will 17 commence within 30 days. 18 (19) Once notified of a community choice aggregator program, 19 the electrical corporation shall transfer all applicable accounts to 20 the new supplier within a 30 -day period from the date of the close 21 of the electrical corporation's normally scheduled monthly 22 metering and billing process. 23 (20) An electrical corporation shall recover from the community 24 choice aggregator any costs reasonably attributable to the 25 community choice aggregator, as determined by the commission, 26 of implementing this section, including, but not limited to, all 27 business and information system changes, except for 28 transaction -based costs as described in this paragraph. Any costs 29 not reasonably attributable to a community choice aggregator shall 30 be recovered from ratepayers, as determined by the commission. 31 All reasonable transaction -based costs of notices, billing, metering, 32 collections, and customer communications or other services 33 provided to an aggregator or its customers shall be recovered from 34 the aggregator or its customers on terms and at rates to be approved 35 by the commission. 36 (21) At the request and expense of any community choice 37 aggregator, electrical corporations shall install, maintain, and 38 calibrate metering devices at mutually agreeable locations within 39 or adjacent to the community choice aggregator's political 40 boundaries. The electrical corporation shall read the metering 97 -17— AB 1912 1 devices and provide the data collected to the community choice 2 aggregator at the aggregator's expense. To the extent that the 3 community choice aggregator requests a metering location that 4 would require alteration or modification of a circuit, the electrical 5 corporation shall only be required to alter or modify a circuit if 6 such alteration or modification does not compromise the safety, 7 reliability, or operational flexibility of the electrical corporation's 8 facilities. All costs incurred to modify circuits pursuant to this 9 paragraph, shall be borne by the community choice aggregator. 10 (d) (1) It is the intent of the Legislature that each retail end-use 11 customer that has purchased power from an electrical corporation 12 on or after February 1, 2001, should bear a fair share of the 13 Department of Water Resources' electricity purchase costs, as well 14 as electricity purchase contract obligations incurred as of the 15 effective date of the act adding this section, that are recoverable 16 from electrical corporation customers in commission -approved 17 rates. It is further the intent of the Legislature to prevent any 18 shifting of recoverable costs between customers. 19 (2) The Legislature finds and declares that this subdivision is 20 consistent with the requirements of Division 27 (commencing with 21 Section 80000) of the Water Code and Section 360.5 of this code, 22 and is therefore declaratory of existing law. 23 (e) A retail end-use customer that purchases electricity from a 24 community choice aggregator pursuant to this section shall pay 25 both of the following: 26 (1) A charge equivalent to the charges that would otherwise be 27 imposed on the customer by the commission to recover 28 bond -related costs pursuant to any agreement between the 29 commission and the Department of Water Resources pursuant to 30 Section 80110 of the Water Code, which charge shall be payable 31 until any obligations of the Department of Water Resources 32 pursuant to Division 27 (commencing with Section 80000) of the 33 Water Code are fully paid or otherwise discharged. 34 (2) Any additional costs of the Department of Water Resources, 35 equal to the customer's proportionate share of the Department of 36 Water Resources' estimated net unavoidable electricity purchase 37 contract costs as determined by the commission, for the period 38 commencing with the customer's purchases of electricity from the 39 community choice aggregator, through the expiration of all then 97 AB 1912 —18- 1 existing electricity purchase contracts entered into by the 2 Department of Water Resources. 3 (f) A retail end-use customer purchasing electricity from a 4 community choice aggregator pursuant to this section shall 5 reimburse the electrical corporation that previously served the 6 customer for all of the following: 7 (1) The electrical corporation's unrecovered past 8 undercollections for electricity purchases, including any financing 9 costs, attributable to that customer, that the commission lawfully 10 determines may be recovered in rates. 11 (2) Any additional costs of the electrical corporation recoverable 12 in commission -approved rates, equal to the share of the electrical 13 corporation's estimated net unavoidable electricity purchase 14 contract costs attributable to the customer, as determined by the 15 commission, for the period commencing with the customer's 16 purchases of electricity from the community choice aggregator, 17 through the expiration of all then existing electricity purchase 18 contracts entered into by the electrical corporation. 19 (g) Estimated net unavoidable electricity costs paid by the 20 customers of a community choice aggregator shall be reduced by 21 the value of any benefits that remain with bundled service 22 customers, unless the customers of the community choice 23 aggregator are allocated a fair and equitable share of those benefits. 24 (h) (1) Any charges imposed pursuant to subdivision (e) shall 25 be the property of the Department of Water Resources. Any charges 26 imposed pursuant to subdivision (f) shall be the property of the 27 electrical corporation. The commission shall establish mechanisms, 28 including agreements with, or orders with respect to, electrical 29 corporations necessary to ensure that charges payable pursuant to 30 this section shall be promptly remitted to the party entitled to 31 payment. 32 (2) Charges imposed pursuant to subdivisions (d), (e), and (f) 33 shall be nonbypassable. 34 (i) The commission shall authorize community choice 35 aggregation only if the commission imposes a cost -recovery 36 mechanism pursuant to subdivisions (d), (e), (f), and (h). Except 37 as provided by this subdivision, this section shall not alter the 38 suspension by the commission of direct purchases of electricity 39 from alternate providers other than by community choice 40 aggregators, pursuant to Section 365.1. 97 -19— AB 1912 1 (j) (1) The commission shall not authorize community choice 2 aggregation until it implements a cost -recovery mechanism, 3 consistent with subdivisions (d), (e), and (f), that is applicable to 4 customers that elected to purchase electricity from an alternate 5 provider between February 1, 2001, and January 1, 2003. 6 (2) The commission shall not authorize community choice 7 aggregation until it has adopted rules for implementing community 8 choice aggregation. 9 (k) (1) Except for nonbypassable charges imposed by the 10 commission pursuant to subdivisions (d), (e), (f), and (h), and 11 programs authorized by the commission to provide broader 12 statewide or regional benefits to all customers, electric service 13 customers of a community choice aggregator shall not be required 14 to pay nonbypassable charges for goods, services, or programs 15 that do not benefit either, or where applicable, both, the customer 16 and the community choice aggregator serving the customer. 17 (2) The commission, Energy Commission, electrical corporation, 18 or third -party administrator shall administer any program funded 19 through a nonbypassable charge on a nondiscriminatory basis so 20 that the electric service customers of a community choice 21 aggregator may participate in the program on an equal basis with 22 the customers of an electrical corporation. 23 (3) Nothing in this subdivision is intended to modify, or prohibit 24 the use of, charges funding programs for the benefit of low-income 25 customers. 26 (I) (1) An electrical corporation shall not terminate the services 27 of a community choice aggregator unless authorized by a vote of 28 the full commission. The commission shall ensure that prior to 29 authorizing a termination of service, that the community choice 30 aggregator has been provided adequate notice and a reasonable 31 opportunity to be heard regarding any electrical corporation 32 contentions in support of termination. If the contentions made by 33 the electrical corporation in favor of termination include factual 34 claims, the community choice aggregator shall be afforded an 35 opportunity to address those claims in an evidentiary hearing. 36 (2) Notwithstanding paragraph (1), if the Independent System 37 Operator has transferred the community choice aggregator's 38 scheduling coordination responsibilities to the incumbent electrical 39 corporation, an administrative law judge or assigned commissioner, 40 after providing the aggregator with notice and an opportunity to 97 AB 1912 —20- 1 20- 1 respond, may suspend the aggregator's service to customers 2 pending a full vote of the commission. 3 (m) Any meeting of an entity authorized to be a community 4 choice aggregator, as defined in Section 331.1, for the purpose of 5 developing, implementing, or administering a program of 6 community choice aggregation shall be conducted in the manner 7 prescribed by the Ralph M. Brown Act (Chapter 9 (commencing 8 with Section 54950) of Part 1 of Division 2 of Title 5 of the 9 Government Code). 0 97