BILL ANALYSIS 1
1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
DEBRA BOWEN, CHAIRWOMAN
AB 1157 - Canciamilla Hearing Date:
June 22, 2004 A
As Amended: June 15, 2004 FISCAL B
1
1
5
7
DESCRIPTION
Current law requires the California Public Utilities Commission
(CPUC) to issue final decisions for large water corporation rate
cases on a timely basis. If the CPUC fails to produce a timely
decision, the water corporation may apply for interim rates
which are subject to refund. An interim rate would be
calculated by adjusting an existing rate by the inflation rate,
though the CPUC may order a lower increase if it's in the public
interest. The CPUC may also delay the effective date of the
interim rate if it determines a delay in processing the case is
due to the actions of the water corporation.
This bill eliminates the CPUC's ability to order a lower interim
rate increase and eliminates its ability to delay the effective
date of the interim rate.
This bill extends to gas corporations serving less than 250,000
connections the same authority to apply for interim rates.
BACKGROUND
AB 2838 (Canciamilla), Chapter 1147, Statutes of 2002, was
enacted to improve the way the CPUC processes water rate cases.
AB 2838 made four significant changes to the law:
(1) Rate cases for large water companies had to be decided by
the CPUC so the new rates could be effective during the
beginning of the timeframe being considered by the CPUC (e.g.
the start of the test year). If that CPUC decision is delayed,
the water company was permitted to ask for, and receive, interim
rates which would be trued up once the final rates were decided.
The permissible interim rate was equal to the last
CPUC-approved rate, adjusted by inflation. Water corporations
are unique in that only they have the statutory authority to
receive interim rate increases without the CPUC first finding
those rates would be just and reasonable. No other regulated
energy or telecommunications company has such authority.
(2) The CPUC was required to establish a schedule to ensure
that each large water corporation will have its rates reviewed
every three years.
(3) The CPUC received an appropriation of $445,000 to ensure it
had sufficient staff to perform these functions. That
appropriation was reduced to $222,500 by then-Governor Davis and
was later eliminated entirely.
(4) The CPUC was told to revise its procedures for considering
large water company rate cases so those cases would be decided
by the start of the test year.
That bill also specifically said its provisions were not to be
precedential for any other utility.
COMMENTS
1.Hello, We're Over Here . Investor-owned water utilities have
suffered from a lack of attention at the CPUC and that lack of
attention has led to delays of weeks, months, and years in
terms of a water utility's ability to get the CPUC to review
its application for a rate adjustment. AB 2838 tried to
require the CPUC to pay more attention to the investor-owned
water utilities by appropriating money for staff, requiring
rate reviews every three years, and allowing for interim rates
to be approved - subject to refund - in the event the CPUC
didn't have the ability to decide a rate case in a timely
fashion.
Although AB 2838 has only been in effect for 17 months, it
doesn't appear to have had its desired effect, at least so
far. According to the investor-owned water utilities, they
still suffer from inattention at the CPUC and have a difficult
time getting the Commission to look at requests for interim
rate relief. However, according to information provided to
the Committee by the CPUC, it appears the Commission has
approved 22 of 28 requests for interim rate relief.
2.Who Is In Charge Of Water? In the early 1990's, the CPUC
experimented with making a single commissioner the lead on
water issues, rather than spreading the responsibility among
all five commissioners. This seemed to have worked on water
and a variety of other issues, though the practice has been
abandoned for water issues for some time. The author and
committee may wish to consider requiring the commissioners to
select from among themselves a single commissioner to be the
point person on water industry issues.
3.How Are We Going To Pay for This? AB 2838 required rate
reviews every three years and appropriated $445,000 to the
CPUC to make sure those reviews happened. That total was
blue-penciled down to $222,500 by then-Governor Davis, and
then was eliminated entirely in a round of mid-year budget
cuts. The author and committee may wish to consider restoring
the $222,500 appropriation so the water utilities can obtain
the service they were promised in the original bill. To
ensure the water utilities aren't disproportionately paying
for their service the author and committee may wish to
consider requiring an annual report from the CPUC to account
for the money received from the water utilities and how that
money is spent in performing CPUC duties related to water
corporations.
4.Awarding Interim Rate Increases To Natural Gas Companies .
This bill takes the concept created for water companies in AB
2838 and applies it to natural gas corporations with less than
250,000 service connections. This provision was advocated by
Southwest Gas, in frustration that the CPUC wasn't processing
its application on a timely basis. The Southwest Gas case has
since been decided, so this provision appears to be
unnecessary and as such, the author and committee may wish to
delete it.
PRIOR VOTES
Assembly Floor (73-0)
Assembly Utilities and Commerce Committee
(13-0)
POSITIONS
Sponsor:
California Water Association
Support:
Southwest Gas Corporation
Oppose:
None on file
Randy Chinn
AB 1157 Analysis
Hearing Date: June 22, 2004