BILL ANALYSIS AB 3 X1 Page A Date of Hearing: February 20, 2001 ASSEMBLY COMMITTEE ON ENERGY COSTS AND AVAILABILITY Roderick D. Wright, Chair AB 3 X1 (Wright) - As Amended: February 16, 2001 SUBJECT : California Alternate Rates for Energy or CARE program. SUMMARY : Takes numerous measures to increase the penetration level of the CARE program to help minimize the impacts of energy rate increases to low-income and senior households. Specifically, this bill 1)Requires the commission to immediately adopt regulations to deem a customer enrolled in the CARE program before August 1, 2001 to be enrolled retroactive to the effective date of the measure, notwithstanding Section 453 et al of the Public Utilities Code. 2)Requires energy utilities to send out information about the CARE program, in a distinctive fashion, on customer bills for three consecutive bill cycles beginning after the effective date of the measure. 3)Requires that they include CARE subscription forms in the bill envelope and refer to them in the bill information notice so those customers can mail in the subscription with their bill payments. 4)Requires the California Public Utilities Commission (CPUC) to administer and program of targeted outreach about the CARE program to low-income and senior communities. 5)Provides for extended payment arrangements on a one-time basis for CARE and residential customers, to prevent disconnection of gas and electric services. The extended payment applies for customers that have experienced significant rate increases and provides for revenue protection for utilities to offset cash flow problems such extended arrangements might cause during the current crisis. 6)Contains an urgency clause. EXISTING LAW authorizes the CARE program to provide discounted AB 3 X1 Page B electric and gas service to qualified low-income households and is funded by a rate surcharge on energy bills. The current level of surcharge is 15%. But CARE customers wee exempted from the November 2000 rate increase order of the commission, so CARE rates are effectively 22-23% lower than other residential rates for these services. The current program provides for a dollar amount administrative cost recovery for all utilities participating in the program, but provides for no unified, specific outreach. FISCAL EFFECT : None. COMMENTS : The current energy crisis and the steep increases in natural gas rates, combined with recent increases in electric service rates, have hit low-income and senior households very hard. Senior and low income households pay a disproportionate amount of their income out for energy costs and do not have the flexibility to absorb significant energy cost increases over prolonged periods of time. Doubling and trebling of utility bills pressures these customers beyond any ability to cut back on usage to normalize rate increases. The CARE program can be very helpful in minimizing effects of recent rate increases, as it provides direct rate discounts on gas and electric service to qualified low income households. The current CARE discount, coupled with exemption from the November 2000 electric rate increase ordered by the CPUC, provides some affordability. Unfortunately, the CARE program accounts for only about 6% of residential electric and gas service subscribers currently. Census data indicates that 19-22% of all households in California (depending on location and definition of "household") have incomes at 150% of the poverty level, or at a level which would qualify for CARE program rates. Compared to Universal Lifeline Telephone Service (ULTS), which provides reduced rate basic telephone service to about 22% of all residential telephone lines in California, the CARE program lags behind in getting all qualified households subscribed. It is estimated that 95% of eligible households have ULTS service, but as few as 55% of households are receiving CARE program rates for electric and gas services<1>. Increasing the number of subscribers on the CARE program gets rate relief to qualified user groups, and because rate discounts are reimbursed to providers, there is no revenue shortfall to utilities from increased program --------------------------- <1> Subscriber data provided by Sempra, Southern California Edison, PG&E, Verizon and Pacific Bell. AB 3 X1 Page C penetration. Making electric and gas service more affordable by getting qualified customers subscribed to the program may actually reduce uncollectibles to electric and gas service providers. AB3X directly addresses both the problem with low penetration for the program and with current affordability problems associates with steep energy rate increases. AB3X orders direct outreach through customer bills and targeted outreach to low-income and senior households under the auspices of the CPUC. AB3X also orders energy companies to provide information on all customer service lines, on all disconnect calls, payment arrangement calls, and other types of calls about electric and gas service rates and bills. This type of broad outreach should result in significantly increased penetration for the CARE program and should help minimize the effects of gas and electric rate increases to low income and senior customers, the two hardest hit groups. AB3X also addresses a short term solution to keeping customers in these groups from being disconnected by prohibiting disconnection of CARE customers who have paid at least 40% of their total gar or electric bill, including any outstanding balance, for a period of up to six months. Other residential customers who may not qualify for CARE, but who are experiencing difficulty paying energy bills due to rate increases of 25% (amendment to be taken by author) or more, can not be disconnected if they have paid at least 50% of total energy bills. AB3X also requires energy providers to tell customers who are on payment arrangements or upon completion of payment under the terms of AB3X, about rate levelizing as an additional prevention against disconnection. Rate levelizing, especially if begun in the summer months, can save customers on monthly bills by minimizing differences in peak rates and usage. Rate levelizing allows customers to pay averages over twelve months of the total year's energy costs, and over the course of the year it makes utilities whole with regard to revenues. The bill should result in increased penetration for the CARE program at a time when customers are being especially hard hit by large rate increases that conservation alone cannot mitigate. While a 22 or 23% reduction below current rate levels may not be enough, combined energy conservation with the rate reductions should help low income and senior households weather the current energy crisis. For the long term, AB3X ensures that more AB 3 X1 Page D qualified customers have access to reduced rates for energy services. While utilities may be cash strapped in the short term on their side of the energy crisis, AB 3X protects vulnerable customer groups from disconnection of vital energy services. AB 3X makes utilities whole for any cash flow problems that extension of payment arrangements might create by allowing reimbursement for reasonable costs of the proposed one time 4 or six month payment extensions to customers. Funding from the CARE program, inclusive of any additional appropriations for that program, covers both short term cash requirements of utilities for actual costs of payment plans, and for administrative costs for prescribed outreach under AB3X. REGISTERED SUPPORT / OPPOSITION : Support Congress of California Seniors Greenlining Institute The Older Women's League Opposition None on file. Analysis Prepared by : Kelly Boyd / E. C. & A. / (916) 319-2083