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.
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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
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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