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 FN: 0000145