BILL ANALYSIS
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THIRD READING
Bill No: SB 85XX
Author: Burton (D)
Amended: As introduced
Vote: 21
SENATE ENERGY, UTILITIES & COMMUNICATIONS COMM. : 10-0,
7/19/01
SENATE APPROPRIATIONS COMMITTEE : Not available
SUBJECT : Electrical restructuring: rates
SOURCE : Author
DIGEST : This bill prohibits the California Public
Utilities Commission from raising electrical rates back to
the pre-10% rate reduction levels solely because the
mandatory rate period has expired.
ANALYSIS : A fundamental feature of the 1996 electric
restructuring effort was a 10% rate reduction for
residential and small commercial customers, accompanied by
an overall rate freeze for all customers through March 2002
or whenever the utility's stranded costs were recovered.
Those rate reductions were financed through rate reduction
bonds, which are being repaid by the beneficiaries of the
rate reductions through a charge on the utility bills.
The Legislature and Governor restructured electric markets
in 1996 with the notion that electric rates would be
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reduced. The 10% statutorily required rate reduction was
simply the down payment, the first of what were hoped to be
many subsequent rate reductions. The Legislature's
electric restructuring conference committee was confident
enough that electric rates would continue to drop that it
discussed a statutory mandate of lower rates subsequent to
the end of the rate freeze, though that effort was
ultimately abandoned in favor of the statement of
legislative intent.
This bill would provide that upon the termination of the
10% rate reduction for residential and small commercial
customers, as described above, rates shall not increase to
the levels that existed prior to that reduction. The bill
would prohibit the Public Utilities Commission from raising
rates for residential and small commercial customers upon
the termination date of the 10% rate reduction for
residential and small commercial customers solely for the
purposes of restoring rates to the levels that existed
prior to the 10% rate reduction. The bill would provide
that its provisions do not affect the authority of the
commission to raise rates for purposes other than the
restoration of rates to the levels that existed prior to
the 10% rate reduction. The bill would provide that its
provisions do not further extend the authority to impose
fixed transition amounts on customers or further authorize
or extend rate reduction bonds. The bill would provide
that to the extent its provisions conflict with any other
provision of the Public Utilities Code, the provisions of
this bill shall prevail.
This bill bars the CPUC from raising rates on residential
and small commercial customers after the end of the
statutory 10% rate reduction simply because the mandate for
a 10% reduction lapses. This will have one of four
consequences:
1. Rates for non-residential and small commercial
customers must rise to make up for the lost
revenue.
2. Another revenue source will have to be found to
make up for the lost revenue.
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3. The CPUC will need to find another rationale for
raising residential and small commercial customer
rates.
4. The utilities will have to make due with less
revenue.
The author notes residential and small commercial customers
never advocated for restructuring electric markets, yet
they've been hit with historic rate increases as a
consequence of that restructuring.
The Legislature made clear its 20% rate reduction
expectations for residential and small commercial customers
in the intent language of the restructuring statutes. That
expectation, the only explicit finding on lower rates for
any customer class, won't be met. Given that change in
circumstance, the author believes it's only fair that
residential and small commercial rates not be increased
again.
Effect On San Diego Gas & Electric Customers . SDG&E
customers saw their rate freeze end two years ago. While
it isn't completely clear, this bill would seem to have no
effect on SDG&E customers.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 7/18/01)
The Utility and Reform Network
OPPOSITION : (Verified 7/18/01)
California Manufacturer and Technology Association
DLW:jk 7/19/01 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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