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