BILL ANALYSIS 1
1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
DEBRA BOWEN, CHAIRWOMAN
AB 5XX - Kelley Hearing
Date: August 29, 2001 A
As Amended: July 16, 2001 FISCAL/URGENCY
B
X
2
5
DESCRIPTION
Existing law requires the California Public Utilities Commission
(CPUC) to designate a baseline quantity of gas and electricity
necessary to supply a significant portion of the reasonable energy
needs of the average residential customer, taking into account
differences in climate zone and season. Baseline quantities must
be based on 50 to 60 percent of average residential consumption,
except that, for all-electric customers, the baseline quantities
are established at 60 to 70 percent of average residential
consumption during the winter heating season. The CPUC is
required to review and revise baseline quantities as average
consumption patterns change in order to maintain these ratios.
Existing law prohibits the CPUC from increasing electricity
charges for residential customers for existing baseline quantities
and usage by those customers of an additional 30 percent of
existing baseline quantities, until the Department of Water
Resources (DWR) has recovered the costs of power it has procured
for retail end use customers.
This bill requires the CPUC to adjust the summer baseline
quantities for electricity based on 70 percent of average summer
usage.
This bill prohibits the CPUC from reducing any baseline quantity
prior to July 1, 2003.
BACKGROUND
Baseline is a quantity of electricity "necessary to supply a
significant portion of the reasonable energy needs of the average
residential customer" (Public Utilities Code Section 739). The
rate for electricity consumed within the baseline allotment is
less than the system average cost.
The baseline quantities of each investor owned utility (PG&E, SCE
and SDG&E) are determined by the CPUC, in consideration of
climatic and seasonal variations in energy needs. Baseline
quantities for regions with more extreme climates are higher.
Baseline quantities also take into account differentials in energy
needs between customers whose energy needs are currently supplied
by electricity alone or by both electricity and gas. Baseline
quantities for all-electric residential customers are higher.
Section 739 requires baseline quantities to be established at 50
to 60 percent of average residential consumption, except that, for
all-electric customers, the baseline quantities are established at
60 to 70 percent of average residential consumption during the
winter heating season. The PUC is required to review and revise
baseline quantities as average consumption patterns change in
order to maintain these ratios.
Current baseline quantities vary widely by region and season,
ranging from 195 kwh/month (summer in Alpine County) to 1299
kwh/month (summer in Palm Springs).
In consideration of their additional energy needs, the following
customers are entitled to an additional 500 kwh/month baseline
allowance:
1.Customers dependent on life-support equipment, including, but
not limited to, emphysema and pulmonary patients.
2.Paraplegic and quadriplegic persons.
3.Multiple sclerosis patients.
4.Scleroderma patients.
5.Persons who are being treated for a life-threatening illness or
have a compromised immune system.
Baseline quantities have no relationship to individual customer
consumption, household size or income. Rather, they are average
quantities, intended to supply the reasonable needs of the average
customer, based on an average of consumption factors. There is a
separate program, known as California Alternate Rates for Energy
or CARE, which provides a 15% discount for customers at or below
150% of poverty level. Customers in the CARE program were not
subject to the recent CPUC-approved rate increases and maintain
the 15% discount.
AB1X (Keeley), Chapter 4, Statutes of 2001, prohibits the CPUC
from increasing electricity charges for residential customers for
existing baseline quantities and usage by those customers of an
additional 30 percent of existing baseline quantities, until the
Department of Water Resources (DWR) has recovered the costs of
power it has procured for retail end use customers.
The CPUC is currently reviewing baseline quantities to determine
if adjustments are necessary to maintain the consumption ratios
outlined in current law. The CPUC is scheduled to issue a
decision on this matter in November.
COMMENTS
1.Baseline giveth and baseline taketh away. To the extent this
bill provides for additional sales at discounted baseline rates,
the amount of money collected by the investor-owned utilities
and DWR will decrease and will have to be made up by increasing
rates on other electricity consumption.
For its service area, PG&E estimates that setting baseline
quantities at 70 percent year around would create a total
revenue loss of $330 million ($58 million for PG&E and $272
million for DWR). This bill makes no provision for the
allocation of these costs. They could be recovered from the
above-baseline consumption of the residential customers
benefiting from this bill, from other residential customers,
from non-residential customers, or some combination thereof.
This raises equity questions, as other ratepayers may object to
subsidizing more baseline consumption. To avoid creating
inequities between different classes of customers, the author
and the committee may wish to consider requiring the CPUC to
recover any lost revenues resulting from this bill from
residential customers receiving a higher baseline quantity.
That is, customers who are given a higher baseline pursuant to
this bill, but still exceed it, would absorb the rate impact of
the bill through a corresponding increase on their above
baseline usage.
2.Discounting summer electricity consumption may undermine efforts
to solve the energy crisis. Although the urgency clause in this
bill states that the bill in needed to alleviate the current
energy crisis, the effect of the bill may be just the opposite.
In addition to the rate impacts noted above, increasing summer
baseline quantities reduces customers' incentives to limit
overall energy consumption and works against the goals of energy
conservation programs enacted to help minimize price and
reliability problems associated with the energy crisis, such as
the 20/20 program.
3.Prohibiting any decrease in baseline quantities further intrudes
into regulatory proceeding. It is unclear why the CPUC should
be temporarily prohibited from decreasing any baseline quantity,
especially in light of the fact that this bill effectively
mandates an increase in summer baseline quantities for certain
customers without providing a cost-recovery mechanism. As noted
above, the CPUC is currently reviewing baseline quantities and
is likely to adjust them later this year. Although it is
unlikely that any existing baseline quantities will be
substantially reduced, it is possible that the evidence in the
CPUC investigation may support such action. In fact, it may be
necessary to decrease baseline quantities in some zone or season
to support increasing baseline in another. It is also possible
that adjusting summer baseline quantities to 70 percent of
recent summer usage could lead to a baseline decrease in some
zone, creating a conflict between the two provisions of the
bill. The author and the committee may wish to consider
removing this provision.
4.Double standard. Because existing rates for existing baseline
quantities are frozen pursuant to AB 1X, adjusting baseline
quantities is likely to create a second set of baseline
allowances with a higher baseline rate. While existing
baseline consumption is protected from rate increases, any
increased baseline allotment would be subject to higher rates.
This could lead to a complicated and confusing assortment of
rates.
5.Related legislation. SB 41XX (Speier) requires the CPUC to
establish a standard adjustment to baseline quantities for
households with dependent children under 18. SB 41XX is pending
in the Assembly Energy Costs and Availability Committee.
ASSEMBLY VOTES
Assembly Floor (78-0)
Assembly Appropriations Committee (21-0)
Assembly Energy Costs and Availability Committee
(18-1)
POSITIONS
Sponsor:
Author
Support:
None on file
Oppose:
None on file
Lawrence Lingbloom
AB 5XX Analysis
Hearing Date: August 29, 2001