BILL ANALYSIS AB 3 X1 Page A CONCURRENCE IN SENATE AMENDMENTS AB 3 X1 (Wright) As Amended May 8, 2001 2/3 vote. Urgency ----------------------------------------------------------------- |ASSEMBLY: |75-0 |(March 12, |SENATE: |37-0 |(May 9, 2001) | | | |2001) | | | | ----------------------------------------------------------------- Original Committee Reference: E. C. & A. SUMMARY : Takes numerous measures to increase the penetration level of the California Alternative Rates for Energy (CARE) program to help minimize the impacts of energy rate increases on low-income and senior households. The Senate amendments: 1)Effect technical clarifications regarding annual cost-of-living adjustments to qualifying income levels for the CARE program. 2)Clarify that a one-time credit applies for newly enrolled CARE customers of gas corporations during a specified period of time. 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 discount is 15%. CARE customers were exempted from the November 2000 rate increase order of the California Public Utilities Commission (CPUC), 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. AS PASSED BY THE ASSEMBLY , this bill: 1)Required 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 Public Utilities Code Section 453 et al. AB 3 X1 Page B 2)Required 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 this bill. 3)Required 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)Required CPUC to administer a program of targeted outreach about the CARE program to low-income and senior communities. 5)Provided for extended informal payment arrangements for of up to 12 months 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. 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. 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. Unfortunately, the CARE program accounts for only about 6% of residential electric and gas service subscribers currently. 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 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. Making electric and gas service more affordable by getting qualified customers subscribed to the program may --------------------------- <1> Subscriber data provided by Sempra, Southern California Edison, PG&E, Verizon and Pacific Bell. AB 3 X1 Page C 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 the 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 and residential customers who have agreed to partial payment arrangements for a period not to exceed twelve months. 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 by large rate increases that conservation alone cannot mitigate. For the long term, this bill ensures that more qualified customers have access to reduced rates for energy services. Analysis Prepared by : Kelly Boyd / E. C. & A. / (916) 319-2083 FN: 0000623