BILL ANALYSIS
AB 3 X1
Page A
ASSEMBLY THIRD READING
AB 3 X1 (Wright)
As Amended March 5, 2001
2/3 vote. Urgency
ENERGY 17-0 APPROPRIATIONS 19-0
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|Ayes:|Wright, Pescetti, Briggs, |Ayes:|Migden, Aroner, Ashburn, |
| |John Campbell, | |Cedillo, Corbett, Correa, |
| |Canciamilla, Diaz, | |Daucher, Goldberg, |
| |Dickerson, Dutra, | |Maldonado, Robert |
| |Jackson, Leonard, Migden, | |Pacheco, Papan, Runner, |
| |Oropeza, Reyes, | |Shelley, Simitian, |
| |Steinberg, Vargas, | |Thomson, Wesson, Wiggins, |
| |Wesson, Zettel | |Wright, Zettel |
| | | | |
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SUMMARY : Takes numerous measures to increase the penetration
level of the California Alternate Rate for Energy (CARE) program
to help minimize the impacts of energy rate increases on
low-income and senior households. Specifically, this bill
1)Requires the California Public Utilities Commission (CPUC) 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 bill.
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 CPUC to administer a program of targeted outreach
about the CARE program to low-income and senior communities.
5)Provides for extended informal payment arrangements on a
AB 3 X1
Page B
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.
EXISTING LAW authorizes the CARE program to provide discounted
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%. CARE customers were exempted from
the November 2000 rate increase order of CPUC, so CARE rates are
effectively 22-23% lower than other residential rates for these
services. The current CARE 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 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 the 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 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
AB 3 X1
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45-55% 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 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.
This bill directly addresses both the low enrollment rates for
the program and the current affordability problems associated
with steep energy rate increases. This bill orders direct
outreach through customer bills and targeted outreach to
low-income and senior households under the auspices of CPUC.
This bill 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 enrollment for the CARE
program and should help minimize the effects of gas and electric
rate increases on low-income and senior customers, the two
hardest hit groups.
This bill 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 gas 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 15% or
more, can not be disconnected if they have paid at least 50% of
total energy bills. This bill also requires energy providers to
tell customers 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.
This bill should result in increased penetration for the CARE
program at a time when customers are being especially hard hit
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<1> Subscriber data provided by Sempra, Southern California
Edison, PG&E, Verizon and Pacific Bell.
AB 3 X1
Page D
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, this bill ensures that more
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, this bill protects vulnerable
customer groups from disconnection of vital energy services.
This bill 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 four
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 this bill.
Analysis Prepared by : Kelly Boyd / E. C. & A. / (916) 319-2083
FN: 0000145