BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
DEBRA BOWEN, CHAIRWOMAN
SB 41XX - Speier Hearing Date:
May 24, 2001 S
As Proposed to be Amended FISCAL/URGENCY
B
X
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4
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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 allotment - an
allotment 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 allotment. 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, as proposed to be amended , requires the CPUC to adopt
an additional baseline allotment for customers who have
dependents under age 18 in their home.
This bill, as proposed to be amended , permits people to
self-certify that they meet the criteria established by this
bill and subsequently by the CPUC.
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-tiered 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 allotments and corresponding
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 1,299 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 allotments 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
allotments 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.Creating A Separate Baseline Allotment For Customers With
Children . When calculating the baseline allotment, 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, as proposed to be amended, requires the CPUC to
establish an additional baseline allotment for customers who
have dependents under age 18 living in their home. The amount
of that additional allotment is to be determined by the CPUC.
This bill, as proposed to be amended, allows those people to
self-certify their participation in the program, much as
participants in the CARE program (which provides discounts to
low-income energy users) and participants in the Universal
Lifeline Telephone Service Program are allowed to self-certify
their participation in those programs.
The author envisions this additional baseline allowance will
be modeled after the existing medical baseline allowance,
wherein a customer obtains an additional increment of baseline
usage on top of the standard baseline amount for that
customer's particular circumstance. The additional allotment
wouldn't vary by climate zone or time of year.
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.
There was some discussion at the May 22 hearing about "netting
out" the cost shift that would be associated with this bill.
Absent direction from the Legislature, the CPUC has the
flexibility to spread those costs in any way that is
consistent with the public interest, including:
q It could increase the rates charged under and/or over
the new baseline allotment created by this bill and confine
any cost shifts to the "family" designation created by this
bill. In this instance, "family" ratepayers who use more
than their baseline allotment would see their rates go up
more than they otherwise would absent this bill, but
depending on where the CPUC sets the baseline allotment,
they may never use up their allotment.
q It could lower the baseline allotment to other
non-family residential customers, which could have the
effect (depending on their use) of pushing those customers
over their baseline allotment sooner, thus increasing their
monthly bills.
q It could increase the rates charged to all residential
customers or just the non-family residential customers.
q It could increase the rates charged to all customers
across the residential and business sectors.
1.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, create a separate
baseline for people who have dependents under age 18 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:
Southern California Edison
Randy Chinn
SB 41XX Analysis
Hearing Date: May 24, 2001