BILL ANALYSIS                                                                                                                                                                                                    



                                                                SB 5 X1
                                                                Page  1

        (  Without Reference to File  )

        SENATE THIRD READING
        SB 5 X1 (Sher)
        As Amended April 5, 2001
        2/3 vote.  Urgency 

         SENATE VOTE  :28-10  
         
         ENERGY              16-1        APPROPRIATIONS      14-0        
         
         ----------------------------------------------------------------- 
        |Ayes:|Wright, Canciamilla,      |Ayes:|Migden, Daucher, Aroner,  |
        |     |Diaz, Dutra, Goldberg,    |     |Cedillo, Keeley, Correa,  |
        |     |Jackson, Keeley, Leonard, |     |Goldberg, Maldonado,      |
        |     |Migden, Oropeza, Reyes,   |     |Papan, Shelley, Simitian  |
        |     |Richman, Steinberg,       |     |Wesson, Wiggins, Wright   |
        |     |Vargas, Shelley, Zettel   |     |                          |
        |     |                          |     |                          |
        |-----+--------------------------+-----+--------------------------|
        |Nays:|John Campbell             |     |                          |
        |     |                          |     |                          |
         ----------------------------------------------------------------- 
         SUMMARY  :  Provides a total of $710.3 million from General Fund (GF)  
        to implement energy efficiency programs and supplement existing  
        energy efficiency programs.  Specifically  this bill:   

        1)Allocates funds to the California Public Utilities Commission  
          (CPUC), California Energy Commission (CEC), Department of Consumer  
          Affairs (DCA), Department of General Services (DGS), Department of  
          Community Services and Development (DCSD), and Department of Water  
          Resources (DWR).  Among the programs and funding specified are:

           a)   $100 million in new money to supplement the existing  
             California Alternate Rates for Energy (CARE) program, a CPUC  
             administered program that provides a discount on gas and  
             electric bills for low-income customers, allowing up to 20% of  
             the funds to be used for outreach to increase enrollment;

           b)   $20 million for CPUC to fund weatherization programs for  
             low-income customers;

           c)   $60 million to DCSD for low-income assistance and $60 million  
             to expand low-income energy weatherization programs;









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           d)   Incentives to encourage the purchase of high efficiency  
             appliances to investor-owned utility (IOU) customers through  
             CPUC and to municipal utility district (MUD) customers through  
             CEC;

           e)   Incentives to encourage the purchase of whole-house and  
             indoor fans and construction of high-efficiency residences to  
             IOU customers through CPUC and to MUD customers through CEC;

           f)   Incentives to encourage the use of high-efficiency lighting  
             in commercial and residential buildings to IOU customers through  
             CPUC and to MUD customers through CEC;

           g)   $10 million to encourage the purchase of advanced telemetry  
             equipment for agricultural and water pumping customers to  
             improve load management and demand responsiveness; and,

           h)   Provides $75 million to implement programs to reduce peak  
             load electricity usage, encourage bio-gas digestion power  
             production technologies, enhance conservation and encourage use  
             of alternative fuels through rebates and grants available  
             through CEC to agricultural customers.

        2)Provides that any funds not encumbered (except for CARE program  
          funds and LIHEAP funds) by March 31, 2002 shall revert to General  
          Fund.

        3)Provides for additional interruptible electric service programs to  
          allow aggregation of multiple accounts to meet any minimum kilowatt  
          (kw) requirements, subject to geographical, load and other  
          parameters to be determined by CPUC.

        4)Requires CPUC to provide, for agricultural and water supplier  
          customers, the use of back-up generation to offset curtailed load  
          to the extent allowed under existing law, under any optional  
          binding mandatory curtailment programs exempting customers from  
          Stage 3 rotating outages.

        5)Requires public utility electrical corporations to offer its  
          customers, by May 30, 2001, the opportunity to participate in a  
          demand reduction program during morning or evening system peak  
          conditions, in addition to other programs available.  The program  
          is known as the Scheduled Load Reduction Program.

        6)Strongly urges CPUC to consider providing the option to all  








                                                                SB 5 X1
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          agricultural commodity processing customers to be included in the  
          definition of customers eligible to be served under agricultural  
          tariffs.  
         
        EXISTING LAW  :  

        1)Provides for energy efficiency programs administered by CPUC and  
          CEC.

        2)Establishes the CARE program for reduced rate electric and gas  
          service to low-income customers.

        3)Allows customers of public utility electrical corporations to  
          participate in voluntary electric service curtailment and demand  
          reduction programs.

         FISCAL EFFECT  :  Allocates $710.3 million from GF.

         COMMENTS  :  This bill provides for expansion of the existing  
        low-income programs, including the weatherization programs, and for  
        implementation of significant energy efficiency programs to reduce  
        peak demand.

        Current law establishes a low-income energy assistance program for  
        electric and natural gas service customers of the IOUs known as CARE  
        which is funded by a surcharge on energy bills.  The CARE program  
        includes both discounts on the electric and natural gas bill, as well  
        as a residential weatherization program.

        Current regulations limit CARE eligibility to those households  
        earning less than 175% of the federal poverty level.  The CARE  
        discount, which is established by CPUC, is 15% of a family's monthly  
        electric or natural gas bill.  The cost to ratepayers for the CARE  
        program is about $180 million annually, and that cost will expand as  
        the program enrollment expands.  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, 36% of  
        eligible customers participate, while in Southern California Edison's  
        (SCE) service area, 59% of those eligible are participating.  SB 5  
        X1's provisions enhance the program both with regard to funding  
        generally and through expansion of the existing weatherization  
        component. 

        SB 5 X1, appropriates $120 million to DCSD specifically to increase  
        energy conservation and reduce demand for energy within this program,  








                                                                SB 5 X1
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        assist customers in coping with high energy costs and provide for  
        weatherization services and cash assistance payments.

        Eligibility for California LIHEAP is to include households with  
        incomes not exceeding the greater of 60% of the state median income  
        or 80% of the county median income.  Under the measure's  
        specification DCSD is to provide both direct rate assistance and  
        expanded funding for low-income weatherization,  The program shall  
        establish reasonable spending limits, including up to 15% for  
        outreach and training for consumers.  Weatherization programs shall  
        account for not less than 50% of program funds and shall maximize  
        cash assistance programs by allowing funds to be used as a supplement  
        to federal LIHEAP payments.

        Investments in energy efficiency programs have proven to be very  
        cost-effective.  In May 2000, CPUC reported that in 1999, it spent  
        $242 million in energy efficiency programs to save 825 million  
        kilowatt hours of electricity and 15 million therms of gas, making  
        the programs far cheaper than buying additional energy.  AB 5 X1 has  
        a specific set aside amount to augment the existing CARE program  
        funding for energy efficiency as well as proposals to provide for  
        widespread enhanced energy efficiency in the state.

        SB 5 X1 provides for significant program accountability.  Under its  
        proposed state energy projects, these terms include contracting  
        through DGS for projects considering qualifications, experience, type  
        of technology employed, cost to the agency and selection from a pool  
        of qualified energy service providers.  All of the programs proposed  
        through each of the agencies specified seem to be tailored to  
        specific demand reduction levels and expectations and the measure  
        provides the agencies with flexibility to shift funds between  
        programs to achieve "maximum feasible energy conservation."  The  
        measure also employs tracking and auditing procedures that should  
        ensure program funds are expended prudently and provide for  
        accounting of actual energy savings accrued.

        This measure contains other miscellaneous provisions for various  
        departments to achieve more energy efficiency.  

        The measure also contains provisions to encourage demand reduction  
        through expanded participation in interruptible service programs of  
        public utility electrical corporations.  The additional measures  
        allow for aggregation of multiple accounts to meet specified load  
        reduction requirements under existing curtailment program parameters,  
        and allow for partial load reduction during rotating outages as terms  








                                                                SB 5 X1
                                                                Page  5

        of exemption from rotating outages.  The measure also strongly urges  
        the CPUC to allow agricultural product processors to be included in  
        agricultural tariffs.  


         Analysis Prepared by  :    Kelly Boyd / E. C. & A. / (916) 319-2083 



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