BILL ANALYSIS Appropriations Committee Fiscal Summary 1157 (Canciamilla) Hearing Date: 8/04/04 Amended: 6/30/04 Consultant: Lisa Matocq Policy Vote: E. U. & C. 5-1 ____________________________________________________________ ___ BILL SUMMARY: AB 1157 eliminates the Public Utilities Commission's (PUC) authority, regarding an application for a general rate increase by a water utility with more than 10,000 service connections, to (1) issue a lesser increase in interim rates if the commission finds the rates to be in the public interest, and (2) require a different effective date for the interim rates in cases where the commission's decision is delayed due to actions by the water utility. The bill also makes related changes. ____________________________________________________________ __ Fiscal Impact (in thousands) Major Provisions 2004-05 2005-06 2006-07 Fund ORA Unknown costs, if any. See comments Special* below. Any increased costs should be offset by increased fee revenues. PUC Unknown costs or savings Special* *Public Utilities' Reimbursement Account (PURA) ____________________________________________________________ ___ STAFF COMMENTS: AB 2838 (Canciamilla, Ch. 1147, St. of 2002) required the PUC to (1) establish a schedule to review the rates of water utilities, with greater than 10,000 service connections, every three years, and (2) issue a decision on a water utility's application for a general rate increase within a certain time period. It also provided that if the PUC fails to issue a timely decision, the applicant may be granted interim rates. Interim rates are based on the current rate, plus inflation, and adjusted upward or downward, consistent with the final rate, back to the effective date of the interim rates. This bill also extends (2) above to all pending general rate case applications, including those that were filed prior to passage of AB 2838, and states that this is declaratory of the legislative intent of AB 2838. There may be a few pending applications that could be impacted by this provision. The Office of Ratepayer Advocate (ORA), within the PUC, has expressed concern that removing existing incentives for water utilities to act, and respond to the PUC, expeditiously (for example, eliminating the PUC's authority to change the effective date of interim rates under certain circumstances) could adversely impact ORA staffing, work flow, and the timely processing of applications, and result in increased staff costs of $160,000 to $240,000 annually. Staff notes, however, that this estimate assumes that water utilities will cause delays in the future. Any additional costs or savings to the PUC are unknown. However, PURA revenues are derived from an annual fee imposed on public utilities. Therefore, any increased costs to the PUC, including the ORA, should be offset by increased fee revenues.