CALIFORNIA ASSEMBLY BILL NUMBER: AB 817

Tuesday, January 01, 2008

LEGISLATIVE COUNSEL'S DIGEST

AB 817, Mutual water companies: supervisory committee.

Existing law provides that a mutual water company that delivers water at cost only to its stockholders or members, or to certain public agencies or other mutual water companies, is not a public utility subject to regulation by the Public Utilities Commission.

This bill would require that a mutual water company have a supervisory committee. The bill would exempt specified mutual water companies from this requirement. The bill would provide that the powers of the committee include, among other things;

  • The power to fill vacancies in the supervisory committee until the next annual member meeting
  • to declare vacant any office of the supervisory committee
  • to supervise the acts of the board of directors
  • to review the mutual water company's policies
  • control procedures to safeguard against fraud and self-dealing

The bill would require the supervisory committee to make or cause to be made an audit of the books and records and an examination of the business affairs of the mutual water company and authorize the committee to make supplementary inspections and audits.

The bill would require the supervisory committee to make a full report of the assets, receipts, and disbursements of the mutual water company to the board of directors and file the report with the records of the mutual water company.

The bill would require the supervisory committee to present these reports at an annual meeting.

The bill would authorize the supervisory committee to make or cause to be made any supplementary inspections of the securities, cash, and accounts of the mutual water company or audits and submit those audits to the board of directors.

This bill would require that no member of the supervisory committee serve as a member of the mutual water company board of directors or as an employee of the mutual water company.

The bill would require that members be elected by the stockholders or general membership of the mutual water company and serve for a term of 2 years for a maximum of 4 terms.

The bill would require that the terms be staggered for purposes of continuity.

Vote: majority.

Appropriation: no.

Fiscal committee: no.

State-mandated local program: no.

THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  • AMENDED IN SENATE  JUNE 4, 2007
  • AMENDED IN ASSEMBLY  MARCH 29, 2007

INTRODUCED BY Assembly Member Maze

FEBRUARY 22, 2007

An act to add Sections 2730, 2731, 2732, 2733, 2734, and 2735 to the Public Utilities Code, relating to mutual water companies.

SECTION 1.  Section 2730 is added to the Public Utilities Code, to read:

2730.  Each mutual water company shall have a supervisory committee of at least three persons, each of whom shall be a stockholder or member of the mutual water company.  This requirement shall not apply to either of the following: 

   (a) Any mutual water company that does not operate a system for the provision of piped   water for human consumption. 

   (b) Any mutual water company where 50 percent or more of the shares are held by retail water suppliers, local public agencies, or municipalities, or any combination thereof.

  SEC. 2.  Section 2731 is added to the Public Utilities Code, to read:

   2731.  The supervisory committee may:

   (a) Suspend at any time by unanimous vote, at a meeting called for that purpose, any member of the board of directors, or any officer.

   (b) By a majority vote call a meeting of the stockholders or members to consider any violation of this chapter or the bylaws, or any practices of the mutual water company which, in the opinion of the committee, are unsafe or unauthorized.

   (c) Inspect the securities, cash, and accounts of the mutual water company.

   (d) Fill vacancies in the supervisory committee until the next annual meeting of the stockholders or members.

   (e) Declare vacant any office of a member of the supervisory committee if the member is absent from three consecutive regular meetings of the supervisory committee unless excused or is completely inactive as a member of the supervisory committee for a consecutive 12-month period.

  SEC. 3.  Section 2732 is added to the Public Utilities Code, to read:

   2732.  The supervisory committee shall be responsible for reviewing the mutual water company's policies and control procedures to safeguard against fraud and self-dealing, and the supervisory committee shall exercise any efforts necessary to meet those responsibilities.

  SEC. 4.  Section 2733 is added to the Public Utilities Code, to read:

   2733.  The supervisory committee shall, within seven days after suspension of any member of the board of directors, or any other officer, cause notice of a special meeting to be given to the stockholders or members to take any action regarding the suspension as the stockholders or members deem necessary.

  SEC. 5.  Section 2734 is added to the Public Utilities Code, to read:

   2734.  (a) The supervisory committee shall at least once each year make or cause to be made an audit of the books and records and an examination of the business and affairs of the mutual water company.

The supervisory committee shall make a full report of the assets, receipts, and disbursements of the mutual water company to the board of directors. Those reports shall be presented at the annual meeting of stockholders or members and filed with the records of the mutual water company.

   (b) The supervisory committee may make or cause to be made any supplementary inspections of the securities, cash, and accounts of the mutual water company or audits as it deems necessary, and submit reports of those audits to the board of directors.

  SEC. 6.  Section 2735 is added to the Public Utilities Code, to read:

   2735.  A member of the supervisory committee shall not serve as a member of the mutual water company board of directors, or as an employee of the mutual water company. The members of the supervisory committee shall be elected by the stockholders or the general membership of the mutual water company and shall serve for a term of two years. Each member may serve a maximum of four consecutive terms. For purposes of continuity, those terms shall be staggered.