BILL ANALYSIS
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THIRD READING
Bill No: AB 2838
Author: Canciamilla (D)
Amended: 8/26/02 in Senate
Vote: 21
SENATE ENERGY, U.&C. COMMITTEE : 8-0, 6/25/02
AYES: Bowen, Morrow, Alarcon, Battin, Dunn, Murray, Sher,
Vasconcellos
SENATE APPROPRIATIONS COMMITTEE : 11-0, 8/13/02
AYES: Alpert, Battin, Bowen, Burton, Escutia, Johnson,
Karnette, McPherson, Perata, Poochigian, Speier
ASSEMBLY FLOOR : 67-0, 5/2/02 (Passed on Consent) - See
last page for vote
SUBJECT : Water rates
SOURCE : California Water Association
DIGEST : This bill requires the Public Utilities
Commission (PUC) to issue a decision on a water utility
companys application for a general rate increase, within a
certain time period, as specified. It also requires the
PUC to establish a schedule to review the rates of water
corporations every three years.
Senate Floor Amendments of 8/26/02 specifies that the
appropriation from the PUC Reimbursement Account shall be
made from moneys derived solely from regulatory fee
revenues.
CONTINUED
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ANALYSIS : Current law authorizes the California Public
Utilities Commission (CPUC) to regulate the service of
investor-owned water utilities.
This bill requires the CPUC to issue final decisions
regarding water utility rate cases so they are effective on
the first day of the period for which the rate case was
filed. If the CPUC doesn't render a decision in time, then
the water corporation may request, and shall be granted,
interim rates that may be increased by an amount equal to
the rate of inflation as compared to existing rates. These
rates would be subject to refund, pending the final
decision.
This bill requires the CPUC to establish a schedule to
review the rates of every water utility every three years.
The bill appropriates $445,000 from moneys derived solely
from regulatory fees deposited in the Public Utilities
Commission Utilities Reimbursement Account in the General
Fund to the PUC for the bill's purposes. The allocation
may not include moneys derived from the imposition of
penalties, as specified.
Background :
Investor-owned water utilities provide potable water to 20%
of Californians. They differ from their municipal water
utility cousins (e.g. East Bay Municipal Utility District,
Los Angeles Department of Water and Power) in that they are
for-profit private corporations subject to economic
regulation by the CPUC.
The CPUC categorizes the investor-owned water utilities by
size. The largest are the ten Class A water utilities,
which serve at least 10,000 customers. This bill is
intended to deal only with the Class A utilities. To get a
perspective on size, the largest Class A water utility has
about $250 million in annual revenues, compared to the
largest electric and telecommunications utility, each with
about $10 billion in annual revenues.
Water utilities are traditional utilities in that they face
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virtually no competition and deliver an essential service.
They are regulated in traditional ways with rates based on
the cost of providing the service, plus a fair return on
investment.
In 1990, the CPUC established a Rate Case Plan for the
Class A utilities which established a timeline for the
processing of water utility rate cases. These rate cases
are a detailed showing of the costs and investment
necessary to provide adequate water service, as well as a
detailed proposal for water rates necessary to recoup the
allowable revenues. The rate cases are filed for future
years, known as the Test Year.
Once the utility has filed its application to increase
water rates, the Rate Case Plan provides the CPUC with
214-259 days (depending on the size of the company) to
process the case and issue a final decision. That
timeframe is designed to encompass the filing of the case
by the utility, preparation of a competing case by the CPUC
staff, public hearings, testimony and cross examination,
preparation of a written draft opinion by the CPUC's
administrative law judge, and issuance of a final decision.
The water utilities have complained that the CPUC hasn't
acted in a timely manner when it comes to rate case
decisions. They assert the CPUC routinely takes longer
than allowed in the CPUC's Rate Case Plan, often by
hundreds of days. The CPUC responds that while recent
history bears out that the Class A water utility general
rate cases do take much longer than allowed, that delay is
often caused by actions of the water utilities themselves
and the delay generally hasn't delayed the imposition of
the new rates in time for the start of the Test Year. In
other words, while the CPUC's recent decisions may not have
been timely, the inability to stick to the pre-determined
schedule has often been due to the utility and, in any
event, has had no effect on the utility's ability to
collect money which it is due.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
There is no specific schedule for reviewing water rates
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under current law. There are 10 large water companies with
a total of 64 districts. Over the past four years, the PUC
has reviewed an average of about 10 per year, and this bill
would require them to review approximately 20 per year,
thereby doubling their workload. Increased costs to the
PUC are estimated at $445,000 in 2002-03, and $891,000 in
2003-04 and annually thereafter. PURA revenues are derived
from an annual fee imposed on public utilities. Therefore,
any increased costs should be offset by increased fee
revenues.
SUPPORT : (Verified 8/19/02)
California Water Association (source)
OPPOSITION : (Verified 8/19/02)
California Public Utilities Commission
ASSEMBLY FLOOR :
AYES: Aanestad, Alquist, Aroner, Bates, Bogh, Calderon,
Bill Campbell, John Campbell, Canciamilla, Cardenas,
Cardoza, Chan, Chavez, Chu, Cogdill, Corbett, Correa,
Cox, Daucher, Diaz, Dickerson, Dutra, Firebaugh, Frommer,
Goldberg, Harman, Havice, Hollingsworth, Horton, Jackson,
Kehoe, Kelley, Koretz, La Suer, Leach, Leonard, Leslie,
Liu, Longville, Lowenthal, Maddox, Maldonado, Matthews,
Migden, Mountjoy, Nakano, Nation, Negrete McLeod,
Oropeza, Papan, Pescetti, Richman, Salinas, Shelley,
Simitian, Steinberg, Strom-Martin, Thomson, Vargas,
Washington, Wayne, Wiggins, Wright, Wyland, Wyman,
Zettel, Wesson
NC:jk 8/27/02 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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