BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
DEBRA BOWEN, CHAIRWOMAN
SB 41XX - Speier Hearing
Date: May 22, 2001 S
As Introduced: May 17, 2001 FISCAL/URGENCY
B
X
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DESCRIPTION
Current law requires the California Public Utilities
Commission (CPUC) to establish a baseline quantity of
electricity and gas which is necessary to supply a
significant portion of the reasonable energy needs of the
"average residential customer." All residential customers
receive a baseline allowance - an allowance that isn't
based on a person's income level or individual family size.
The per-kilowatt-hour (kwh) cost of energy under the
baseline allowance is less than the per-kwh cost of energy
in excess of the baseline allowance. In determining the
baseline quantities, the CPUC is required to take into
account differentials in energy needs between all-electric
customers and customers supplied with both electricity and
natural gas. The CPUC is also required to account for
differentials in energy use by climatic zone and season.
Current law defines "baseline quantity" as the amount of
electricity or natural gas for residential customers based
on 50%-60% of average residential consumption, except that
for all-electric customers the baseline quantity shall be
from 60%-70% of average residential consumption during the
winter heating season.
Current law requires the CPUC to review and revise baseline
quantities as average consumption patterns change in order
to maintain the above-noted ratios.
Current law requires a customer dependent on life-support
equipment to be given an additional allocation of baseline
energy.
This bill requires the CPUC to consider household size in
the determination of baseline quantities, and to increase
those quantities accordingly, up to an unspecified maximum
number of inhabitants.
BACKGROUND
Each investor-owned utility (IOU) has a "baseline rate"
that varies by climate zones and by time of year. Energy
bought up to the baseline limit is priced less on a per-kwh
basis than energy bought over that level. What was a
two-tiered system has, in the wake of a recent decision by
the CPUC, effectively become a five-tier system with the
per-kwh cost of energy going up as a customer's energy use
rises through the various tiers.
Shown below are sample baseline quantities and rates for
some cities for residences with gas and electric service:
City summer baseline rate non-baseline
rate
(kwh/month)
(cents/kwh) (cents/kwh)
Palm Springs 1299 13.01
15.16 - 25.94
Compton 277 13.01
15.16 - 25.94
San Diego 249 12.82
15.28
San Francisco 231 12.59
14.32 - 25.83
Fresno 468 12.59
14.32 - 25.83
Baseline quantities vary by season (winter/summer),
climate, and whether the residence is all electric or
electric and gas. Pacific Gas & Electric (PG&E) has 10
climatic zones, Southern California Edison (SCE) has 6, and
San Diego Gas & Electric (SDG&E) has 3. The maximum and
minimum monthly baseline quantities for each utility are
shown below:
Maximum Minimum
(kwh/mo) (kwh/mo)
PG&E 505 195
SCE 1,299 277
SDG&E 347 252
For PG&E 17% of its electricity is sold at baseline rates,
while for SCE, 14% of its electricity is sold at baseline
rates.
AB 1X (Keeley) Chapter 4, Statutes of 2001, barred the CPUC
from raising rates for the first 130% of baseline
residential usage.
The CPUC is planning on opening an investigation into
baseline allowances this month to look at, among other
things, whether the baseline quantities need to be revised
and whether other criteria should be used in determining
baseline allowances.
COMMENTS
1.History . The notion of a baseline rate for electricity
and natural gas customers was first created in 1975 and
was known at the time as a "lifeline rate." The original
statute, which has been amended numerous times over the
years, required the CPUC to designate a lifeline volume
of gas and a lifeline quantity of electricity necessary
to supply the "minimum energy needs of the average
residential user for the following end uses: space and
water heating, lighting, cooking and food refrigerating .
. ."
In 1982, the "lifeline rate" was replaced with "baseline
rate" to provide for a basic quantity of service priced
at a discount from the system average rate specified in
the statute.
The current structure of defining the "baseline quantity"
as the amount of electricity or natural gas for
residential customers based on 50%-60% of average
residential consumption, except that for all-electric
customers the baseline quantity shall be from 60%-70% of
average residential consumption during the winter heating
season, was added to the codes in late 1980's or early
1990's.
2.Updating The Baseline . While current law requires the
CPUC to review and revise baseline quantities as average
consumption patterns change, it doesn't specify how
frequently the CPUC should undertake such a review. The
CPUC last updated the baseline in the early 1990's. The
author and committee may wish to consider amending the
bill to require the CPUC to review and revise (if
necessary) the baseline quantities on a regularly
scheduled basis.
3.Adding (More) People To The Calculation Of The Baseline .
When calculating the baseline quantity, the CPUC is
required to take into account the season, the climate,
and the type of energy (electricity or natural gas) used.
Because the baseline is based on the "average
residential consumption," it already factors into that
equation the "average" number of people living in a home.
This bill requires the CPUC to consider the number of
inhabitants of each residence and raise the baseline
amount accordingly, up to an undefined number of
inhabitants. While this requirement appears to more
precisely allocate baseline quantities based on usage, it
also raises a number of questions the author and
committee may wish to consider .
For example, how would a utility establish and verify the
number of inhabitants that are attached to each
customer's bill? Would it be a self-certification
process or would some verification be necessary?
(Participants in the CARE program, which provides a
discount to low income individuals, self-certify their
participation in the program, as do participants in the
Universal Lifeline Telephone Service Program). While
this bill requires the baseline to rise if a home
contains more than the average number of inhabitants, it
doesn't require the baseline to drop in homes that have
fewer than the average number of inhabitants. Is that
appropriate?
This bill contains a blank next to the maximum number of
inhabitants that the CPUC has to take into account when
providing baseline adjustments. The author and committee
may wish to consider how that number should be filled in
and whether the Legislature should move away from the
"average" concept associated with the baseline and to one
that provides specific adjustments based on one factor up
to a specified number of people.
4.Zero Sum . To the extent this bill provides for
additional sales at discounted baseline rates, the amount
of money collected by the investor-owned utilities and
the Department of Water Resources will drop and will have
to be made up by increasing rates for other electricity
users.
This raises equity questions, as other ratepayers may
object to further subsidizing baseline customers,
particularly in light of the provisions of AB 1X that
exempt 130% of baseline usage from rate increases. This
potential inequity could be dealt with by requiring any
reallocation of the baseline allowance to not increase
the total amount of electricity sold at baseline rates.
Customers with a single person would see their baseline
drop while residences with four people would get a larger
baseline allowance. This has the benefit of keeping any
cost shifts within the baseline beneficiaries, but it
does require single-person customers to subsidize the
electricity rates of households with more inhabitants.
Another way to address the issue would be to reduce the
discount for each kilowatt hour of electricity sold under
the baseline.
5.Permitting Adjustments Based On One Factor Highlights
Other Inequities . The current baseline is, essentially,
set based on a percentage of an average customer's energy
use. That "average customer" has an average number of
people living in the home with him or her, lives in a
home of average size, has a home that is of average age,
the home has an average amount of insulation, etc.
By requiring the CPUC to, as this bill does, increase the
baseline solely for customers who have a
larger-than-average number of people living with them, it
raises the question of whether adjustments should be made
based on home size, age of home, etc. Taken to the
extreme, requiring the CPUC to "customize" baseline
levels based on the number of inhabitants, etc. arguably
defeats the purpose of having a baseline in the first
place. Because it is a zero sum equation, providing
relief to a certain group of customers requires a
different group of customers to finance that relief.
POSITIONS
Sponsor:
Author
Support:
None on file
Oppose:
None on file
Randy Chinn
SB 41XX Analysis
Hearing Date: May 22, 2001