BILL ANALYSIS
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THIRD READING
Bill No: AB 1157
Author: Canciamilla (D)
Amended: 6/30/04 in Senate
Vote: 21
SENATE ENERGY, UTIL. & COMM. COMMITTEE : 5-1, 6/22/04
AYES: Bowen, Morrow, Dunn, Murray, Vasconcellos
NOES: McClintock
NO VOTE RECORDED: Alarcon, Battin, Sher
SENATE APPROPRIATIONS COMMITTEE : 7-1, 8/4/04
AYES: Alpert, Battin, Aanestad, Escutia, Murray,
Poochigian, Speier
NOES: Ashburn
NO VOTE RECORDED: Bowen, Burton, Johnson, Karnette,
Machado
ASSEMBLY FLOOR : 73-0, 5/8/03 (Passed on Consent) - See
last page for vote
SUBJECT : Public utilities: water and gas rates
SOURCE : California Water Association
DIGEST : This bill authorizes water corporations to
increase interim rates at the rate of inflation on all
pending general rate case applications.
ANALYSIS : Current law, AB 2838 (Canciamilla), Chapter
1147, Statutes of 2002, requires the State Public Utilities
Commission (PUC) to issue final decisions for large water
CONTINUED
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corporation rate cases on a timely basis. If the PUC fails
to produce a timely decision, the water corporation may
apply for interim rates which are subject to refund. An
interim rate will be calculated by adjusting an existing
rate by the inflation rate, though the PUC may order a
lower increase if it is in the public interest. The PUC
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 extends the requirement for timely decisions to
all pending general rate case applications by a water
corporation with greater than 10,000 service connections,
including those that were filed prior to passage of AB
2838, and states that this is declaratory of the
legislative intent of AB 2838.
The bill eliminates the PUC's 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. This authorizes water corporations
to increase interim rates at the rate of inflation on all
pending general rate case applications. The bill also
makes related changes.
Background
AB 2838 (Canciamilla), Chapter 1147, Statutes of 2002, was
enacted to improve the way the PUC 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 PUC so the new rates could be effective during
the beginning of the timeframe being considered by the
PUC (e.g. the start of the test year). If that PUC
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 PUC-approved rate,
adjusted by inflation. Water corporations are unique in
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that only they have the statutory authority to receive
interim rate increases without the PUC first finding
those rates would be just and reasonable. No other
regulated energy or telecommunications company has such
authority.
2. The PUC was required to establish a schedule to ensure
that each large water corporation will have its rates
reviewed every three years.
3. The PUC 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 PUC 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
Investor-owned water utilities have suffered from a lack of
attention at the PUC 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 PUC to review its application
for a rate adjustment. AB 2838 tried to require the PUC 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 PUC did not have the
ability to decide a rate case in a timely fashion.
Although AB 2838 has only been in effect for 17 months, it
does not 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 PUC and have a
difficult time getting the PUC to look at requests for
interim rate relief. However, according to information
provided to the Committee by the PUC, it appears the PUC
has approved 22 of 28 requests for interim rate relief.
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FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee, 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
(Public Utilities' Reimbursement Account) 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.
SUPPORT : (Verified 8/5/04)
California Water Association (source)
Southwest Gas Corporation
ASSEMBLY FLOOR :
AYES: Aghazarian, Bates, Benoit, Berg, Bermudez, Bogh,
Calderon, Chan, Chavez, Chu, Cogdill, Cohn, Corbett,
Correa, Cox, Daucher, Diaz, Dutra, Dutton, Dymally,
Firebaugh, Frommer, Garcia, Goldberg, Hancock, Harman,
Jerome Horton, Shirley Horton, Jackson, Keene, Kehoe,
Koretz, La Malfa, La Suer, Laird, Leno, Levine, Lieber,
Liu, Longville, Lowenthal, Maldonado, Matthews, Maze,
McCarthy, Montanez, Mountjoy, Mullin, Nakanishi, Nakano,
Nation, Negrete McLeod, Nunez, Oropeza, Pacheco, Parra,
Pavley, Plescia, Reyes, Richman, Ridley-Thomas, Runner,
Salinas, Samuelian, Simitian, Spitzer, Steinberg,
Strickland, Vargas, Wiggins, Wolk, Wyland, Wesson
NO VOTE RECORDED: Campbell, Canciamilla, Haynes, Houston,
Leslie, Maddox, Yee
NC:mel 8/9/04 Senate Floor Analyses
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SUPPORT/OPPOSITION: SEE ABOVE
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