BILL ANALYSIS
------------------------------------------------------------
|SENATE RULES COMMITTEE | SB 85XX|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 445-6614 Fax: (916) | |
|327-4478 | |
------------------------------------------------------------
UNFINISHED BUSINESS
Bill No: SB 85XX
Author: Burton (D)
Amended: 8/28/01
Vote: 21
SENATE ENERGY, U.&C. COMMITTEE : 10-0, 7/19/01
AYES: Bowen, Morrow, Alarcon, Battin, Dunn, Murray, Sher,
Speier, Vasconcellos, Vincent
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SENATE FLOOR : 37-0, 7/19/01
AYES: Ackerman, Alarcon, Alpert, Battin, Bowen, Brulte,
Burton, Chesbro, Dunn, Escutia, Figueroa, Haynes,
Johannessen, Johnson, Karnette, Kuehl, Machado, Margett,
McClintock, McPherson, Monteith, Morrow, Murray,
O'Connell, Oller, Ortiz, Peace, Perata, Poochigian,
Romero, Scott, Sher, Soto, Speier, Torlakson,
Vasconcellos, Vincent
ASSEMBLY FLOOR : 77-0, 9/13/01
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.
CONTINUED
SB 85XX
Page
2
Assembly amendments recast and clarify the bill's
provisions without changing the intent.
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
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 prohibits 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 as a result of the termination of the 10% reduction.
The bill provides that its provisions do not affect the
authority of the commission to raise rates for other
reasons. The bill provides that its provisions do not
further extend the authority to impose fixed transition
amounts on customers or further authorize or extend rate
reduction bonds.
Comments
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:
SB 85XX
Page
3
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.
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
Absorbable costs to the PUC.
DLW:jk 9/13/01 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
SB 85XX
Page
4
**** END ****