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        
           
           ----------------------------------------------------------------- 
          |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            |
          |     |                          |     |                          |
           ----------------------------------------------------------------- 

           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
                                                                  Page C
          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  


          ---------------------------
          <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 



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