BILL ANALYSIS
SB 85 X2
Page 1
Date of Hearing: September 4, 2001
ASSEMBLY COMMITTEE ON ENERGY COSTS AND AVAILABILITY
Roderick D. Wright, Chair
SB 85 X2 (Burton) - As Amended: August 28, 2001
SENATE VOTE : 37-0
SUBJECT : Electrical restructuring: rates.
SUMMARY : This bill prohibits California Public Utilities
Commission (CPUC) from raising electrical rates up to or above
levels in effect prior to the imposition of 10% rate reduction
which extends until March 1, 2002 for residential and small
commercial customers solely for purposes of restoring rates to
their previous level.
EXISTING LAW : Imposes a 10% rate reduction for residential and
small commercial customers of electrical corporations until
March 1, 2002, unless an electrical corporation recovers its
uneconomic costs prior to that time.
Provides CPUC with broad ratemaking authority over electrical
corporations in California.
FISCAL EFFECT : Unknown.
COMMENTS :
In 1998, when electrical restructuring provided for opening up
of market to direct access, a rate reduction was put into place
for residential and small commercial customers of electrical
corporations in California. The reductions were to remain in
effect until March 1, 2002. Subsequently, for reasons unrelated
to recovery of uneconomic costs associated with competition,
CPUC has ordered various rate increases for all classes of
customers to allow electrical corporations to recover costs of
operation.
This measure provides that when the 10% rate reduction ends on
March 1, 2002, that CPUC cannot order rates to go back up to or
to exceed the levels they were at prior to issuance of the
reduction in 1998 solely for the purpose of restoring rates to
their previous levels. Nothing in this bill precludes CPUC from
raising residential and small commercial customer rates for
SB 85 X2
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other reasons related to cost recovery and revenue requirement
needs.
The immediate result of elimination of the rate reduction is
that rates can be increased for these classes of customers up to
9.9% without cause. If CPUC authorizes any increase in rates
for these customer classes of 10% or above, there must be a
cause beyond resumption of previous rate levels for such an
order to be within the law as prescribed by this measure. The
rationale expounded by the author for the prohibition against
rate reductions up to their prior levels without cause is that
these customer classes never advocated for de-regulation and
thus should not have to bear additional costs of re-regulation
not contemplated at the time. In reality, at the time
deregulation legislation was passed, the Legislature opined that
20% rate reductions would occur for these customer classes.
Those increases never occurred, and over time utility
procurement costs have driven up the retail price of electricity
for all classes of customer of electrical corporations.
Two electrical corporations, Pacific Gas and Electric (PG&E) and
Southern California Edison (SCE) remain ostensibly under a rate
freeze, notwithstanding rate increases ordered by CPUC in
November 2000 and May 2001. Those customers would seem to be
the ones impacted by this legislation. Either electrical
corporation can apply to CPUC for rate increases for other
purposes beyond simple restoration of revenue levels to pre-rate
reduction levels. CPUC can order increases for other purposes,
but the plain impact of this bill is that intended increase of
revenue levels alone will not be sufficient grounds upon which
to order a rate increase to pre-1998 levels for residential and
small commercial customers.
Staff recommends:
While letters of opposition have been received by the California
Farm Bureau and the Chamber of Commerce, it appears that this
legislation will not directly result in increases to other
customer classes. This bill passed out of Senate Committee and
off the Senate Floor unanimously, despite this modest
opposition.
Moderate rate increases to small commercial and residential
customer classes may be ordered by CPUC, and these customer
classes have already received large rate increases in recent
SB 85 X2
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months. This bill appears to provide that, for customers of
PG&E and SCE, there must be a cost basis for implementation of
any substantial rate increases for these customer classes.
These are the customer classes least likely to have access to
other providers, to discounted rates, or to other benefits
previously presumed to be consistent with deregulation. They
are also, as the author points out, not the customer classes
that voiced strong encouragement for deregulation legislation.
REGISTERED SUPPORT / OPPOSITION :
Support
American Federation of State and County Municipal Employees
(AFSCME)
Opposition
California Farm Bureau Federation
California Chamber of Commerce
Analysis Prepared by : Kelly Boyd / E. C. & A. / (916)
319-2083