Report 98021 Summary - December 1998

California Public Utilities Commission:

It Does Not Know Its True Costs of Regulating Transportation Companies


The fees the Public Utilities Commission (commission) collects from privately owned freight railroad and passen- ger transportation companies (transportation companies) may not sufficiently cover the costs of regulating these companies. As a result, the commission's other fee-payers, such as trucking and utility companies, may subsidize freight railroad and passenger transportation regulation.

Because its former accounting system did not isolate expenditures for the commission's various funds, the commission does not know the true cost of transportation regulation during fiscal year 1997-98. Consequently, its other fee-payers may have subsidized up to $919,000 for these costs. In addition, fees received from railroad corporations did not cover all of the commission's corresponding expenses because the Public Utilities Code (code) limits the amount and types of costs for which the commission can use such moneys. Nonetheless, the com-mission spent approximately $2.9 million on allowed railroad costs-$119,000 less than the $3 million cap established by the code.

Finally, the commission installed a new accounting system in July 1998 that allows it to separate costs by fund. However, in determining which costs it should allocate to its various funds, the commission excluded $5.1 million in overhead expenses for facilities. Unless it properly allocates all relevant costs on the new accounting system, the commission will continue to be unable to determine the true costs of providing services to transportation companies and other fee-payers.


To ensure that its other fee-payers are not subsidizing railroad safety regulation, the commission should press for legislation allowing it to use railroad corporation fees to pay a fair share of its overhead costs.

To determine its true costs of regulating utility and transportation companies, the commission should equitably allocate all relevant overhead costs, including rent for its headquarters building, to its various funds.


The commission does not dispute the findings or conclusions in this report and plans to implement the recommendations.