BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
DEBRA BOWEN, CHAIRWOMAN
SB 2X - Alarcon Hearing
Date: May 1, 2001 S
As Amended: April 25, 2001 FISCAL B
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DESCRIPTION
Current law establishes a low-income energy assistance
program for electric and natural gas service customers of
the investor-owned utilities (IOUs) funded by a surcharge
on energy bills. That program has two parts. The first
part, known as California Alternate Rates for Energy
(CARE), is a 15% bill discount on electric and natural gas
bills. The second part, known as Low Income Energy
Efficiency (LIEE), is a residential weatherization and
energy efficiency program. These programs are required to
be administered by the IOUs.
Current law requires municipal utilities that don't have
low-income assistance programs to conduct a needs analysis
and, if determined necessary, establish such a program.
Current law establishes a low-income assistance program for
telecommunications services funded by a surcharge on
telephone bills.
Current federal law establishes a low income energy
assistance program, known as the Low Income Home Energy
Assistance Program (LIHEAP), funded by the federal
government and administered through the Department of
Community Services and Development.
Current state regulation provides for a Low-Income Advisory
Board (LIAB) at the California Public Utilities Commission
(CPUC) to make recommendations about low-income energy
assistance programs and to be a liason to the low-income
community. The LIAB has nine members appointed to
five-year staggered terms by the CPUC.
Current law requires municipal utilities to establish a
non-bypassable surcharge to fund public purpose programs,
which may include low-income energy assistance.
This bill establishes a Low-Income Oversight Board (Board)
which shall report to the Legislature and work with the
CPUC to evaluate the implementation of programs provided to
low income electricity and gas customers. To that end, the
Board is required to:
Oversee the development of an assessment of whether
existing low-income energy assistance programs are
sufficient to ensure that seniors and low-income
families aren't overburdened by monthly energy bills;
Ensure that such assessments are conducted
periodically;
Ensure collaboration between state and utility
low-income energy programs;
Streamline the application and enrollment process
for low-income energy programs with other low-income
assistance programs;
Promote the usage of community service
organizations;
Advise the CPUC on low-income issues.
The Board is selected by the CPUC. It is comprised of 13
members as follows:
Four members, geographically diverse, who have
expertise in the low-income community;
Four members, one each representing the Governor,
the CPUC, and the California Energy Commission, and
the Department of Community Services and Development;
One member who is a provider of LIHEAP assistance;
Four members, one each from the major electrical
corporations, who have expertise in serving low-income
customers.
The Board may establish a technical advisory committee.
The Board and its committee members shall be eligible for
reasonable compensation for board meeting attendance and
compensation of reasonable costs. Such expenditures
shall be a part of the CPUC's budget.
This bill freezes electricity and gas rates for CARE
customers at January 1, 2000 levels until January 1, 2005.
This bill requires the CPUC to:
Ensure that seniors and low-income families are not
overburdened by monthly energy expenditures;
Establish goals for CARE participation;
Collect data on Universal Lifeline Telephone
Service (ULTS) customers and enroll eligible customers
into the CARE program;
Streamline the ULTS and CARE enrollment processes;
Increase participation in low-income energy
assistance programs;
Dissolve the LIAB if it finds it to be duplicative
of the Board created by this bill.
This bill requires municipal utilities to:
Ensure that low-income families have access to
affordable electricity, and that current assistance
levels reflect the rising level of need;
Provide energy efficiency programs to low-income
families at no cost;
Increase the low-income energy efficiency discount
or raise the eligibility level for any existing
assistance program to reflect customer need;
Collaborate with providers of LIHEAP and ULTS to
streamline the enrollment processes;
Establish CARE participation goals;
Do the above without increasing the surcharge for
the municipal utility customers.
BACKGROUND
The percentage of eligible customers who participate in the
CARE program varies widely throughout the state. In
Pacific Gas & Electric's (PG&E) service area, 44% of the
eligible customers participate, while in Southern
California Edison's (SCE) service area, 68% of those
eligible are participating. Roughly 1 in 5 residential
customers is eligible to participate in the CARE program,
yet statewide, only about 60% of those who are eligible to
take part actually do so.
CARE program eligibility is based on self-certification.
If the CARE customer certifies that he or she meets the
program eligibility requirements, then he or she is
eligible to receive the discounts provided by the program.
Costs for the CARE and LIEE programs are $135 million and
$60 million annually, respectively.
The LIHEAP program is budgeted at $63 million this year,
though that has been supplemented with about $40 million in
additional emergency federal funding.
The CPUC is currently considering changes to the CARE and
LIEE programs, particularly with respect to outreach and
coordination with the ULTS and LIHEAP programs. A proposed
decision has been issued and may be adopted by the CPUC as
early as May 3, 2001.
COMMENTS
1.Statutory Rate Rollback & Freeze . This bill proposes to
roll electricity and natural gas rates for CARE customers
back to January 2000 levels and to freeze those rates in
place until January 1, 2005.
The CPUC, in its December 2000 and March 2001 orders to
increase electricity rates, exempted CARE customers from
any increases, but clearly those exemptions could be
altered in the future. This bill, by statutorily
reducing and then freezing rates paid by one particular
class of customers, raises a number of questions about
fairness and the effect on conservation.
Unanswered is the question of how electric rates are
established for any customers once the rate freeze
created by AB 1890 (Brulte), Chapter 854, Statutes of
1996, ends in March 2002 (at the latest). When that
happens, will wholesale electric prices simply be passed
through to customers, implying substantial volatility and
double- or triple-digit rate increases, or will some
mechanism be established to dampen volatility and
suppress increases?
Looking at natural gas pricing policies, which have been
deregulated for more than a decade, only the gas
distribution portion of the rate is regulated while the
actual wholesale natural gas costs are passed directly
through to customers. The CARE discount is simply
applied as a percentage of the customer's total bill, so
as natural gas prices go up and down, the rates paid by
CARE customers go up and down as well, but they're
discounted by 15%.
Freezing CARE gas rates at a specific level means the
amount of the discount will vary wildly depending on gas
market volatility, the balance between supply and demand,
and the ability of gas transportation companies to
exercise market power. For example, if the rate is
frozen at 40 cents per British thermal unit (btu) but the
actual price paid by non-CARE customers is actually $1.60
per btu, that will effectively provide CARE customers
with a 300% rate discount.
This bill effectively takes rate-making authority away
from the CPUC as it pertains to those customers who are
eligible to enroll in the CARE program. The author and
committee may wish to consider the impact of such a
proposal and the impact it will have on other classes of
customers.
2.Need For A Second Board . The CPUC's Low-Income Advisory
Board (LIAB) was created to help perform many of the
tasks - including standardizing program design and
delivery processes across utilities - that are given to
the new Board this bill proposals to create. Should the
new Board be duplicating the work of the LIAB, this bill
requires the LIAB to be dissolved.
Clearly, there's no value in having two boards focused on
achieving virtually identical goals. There are benefits
to retaining the existing LIAB in that the many
activities necessary to make a board functional have
already occurred, even though the board currently has no
members. The author and committee may wish to consider
whether it would be more appropriate to simply expand the
duties of the existing LIAB and/or expand the membership
of the existing LIAB. (The LIAB is a 9-member board
appointed by the CPUC. The Board proposed by this bill
is a 13-member body appointed by the CPUC using a
specific set of criteria laid out in this bill).
Aside from the concern over duplication of existing
efforts, the structure and relationships of the Board
created by this bill are also odd in that the Board is
appointed by the CPUC, but yet it's required to report
directly to the Legislature.
Another concern is the Board is an advisory board , but
it's required by this bill to ensure that a number of
analysis and processes occur - even though it has no
authority to implement its recommendations. There's
little argument that low-income customer input is
important to ensuring the state's low-income energy
assistance efforts are productive and efficient, but it's
not clear how creating a new, duplicative board will help
accomplish that goal.
3.Outreach and Consistency Efforts . There are many
opportunities to do a better job on outreach and
coordination between low-income assistance programs. A
recent CPUC decision recognizes those opportunities and
has put forth changes, including paying community-based
organizations (CBOs) for each new enrollee to raise
participation levels and force better coordination of
utility efforts and those of the CBOs that implement the
LIHEAP programs. Given the work of the CPUC, the overlap
with this part of the bill, and the CPUC's imminent
action, the author and committee may wish to consider
deleting these sections until the final CPUC action is
assessed.
4.Municipal Utility Programs & Rates . The bill requires
municipal utilities to ensure that low-income families
have access to affordable electricity, that the current
level of assistance reflects the rising level of need,
that energy efficiency programs be made available at no
cost, and that this be accomplished without increasing
any surcharge for customers.
It's unclear how any of this can - or should - be
accomplished without increasing rates or surcharges. For
example, the entire notion of increasing energy
efficiency is that a small upfront capital investment
(weather stripping, compact fluorescent light bulbs,
etc.) will eventually pay for itself through decreased
utility bills. If these programs are worthwhile in that
they save energy or money - or both - it seems reasonable
that they should be paid for by the people who will
receive the most direct benefit. Therefore, the author
and committee may wish to consider deleting the
limitation on increasing any surcharge.
As for the provisions requiring municipal utilities to
ensure access to affordable electricity and to increase
discounts to reflect low-income customer need, it's
unclear how this provision will work in light of the fact
that those determinations are made by a municipal
utility's governing board. Presumably, those boards
believe their current programs provide affordable rates.
Unless more specific criteria defining "affordable" or
"customer need" is provided, these provisions will have
only limited usefulness.
5.Privacy Concerns vs. Rate Concerns . The bill requires
the CPUC to collect data from telephone corporations on
ULTS customers and enroll those customers in the CARE
program. This proposal raises two issues.
First, CARE and ULTS eligibility aren't identical, so
enrollment is one doesn't automatically imply eligibility
for the other. To enroll in CARE, a person's income
can't exceed 175% of the federal poverty level, but to
enroll in ULTS, a person's income can only be up to 150%
of the federal poverty level.
Second, the CPUC doesn't currently have information on
specific CARE customers because that information resides
with the serving utility that provides the 15% CARE
discount to the customer. While sharing the information
with the CPUC may ultimately allow for expedited, and
perhaps automatic, enrollment in other low-income
assistance programs, current CARE customers don't expect
their information to be shared with others. If such
sharing of information is desirable, the author and
committee may wish to consider simply giving CARE
customers the opportunity to enroll in the ULTS program
and vice-versa instead of placing the burden on the CPUC
to collect the information and act as the go-between for
the electric utility companies and the telephone
companies.
6.Related Legislation . SB 5X (Sher), Chapter 7, Statutes
of 2001, provided $100 million for increasing CARE
discounts and increasing CARE enrollment, $20 million for
additional low-income weatherization services, and $120
million to supplement and expand the existing LIHEAP
program.
AB 29X (Kehoe), Chapter 8, Statutes of 2001, provided $20
million to the California Conservation Corps to go
door-to-door to deliver energy efficiency measures to
low-income residents.
AB 3X (Wright), which is pending before this committee,
enhances CARE outreach efforts and provides for limited
retroactive application of the CARE discount for natural
gas customers.
POSITIONS
Sponsor:
Author
Support:
California HIV Advocacy Coalition/Southern California
Region
Greenlining Institute
Latino Issues Forum
Western Center on Law and Poverty
Oppose:
None on file
Randy Chinn
SB 2X Analysis
Hearing Date: May 1, 2001