BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
DEBRA BOWEN, CHAIRWOMAN
AB 1457 - Utilities & Commerce Hearing
Date: June 10, 2003 A
As Amended: April 22, 2003 FISCAL/URGENCY B
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DESCRIPTION
Current law authorizes a program to ensure rates for local
telephone service offered by small rural telephone companies are
affordable.
This bill transfers $2.5 million from the California High-Cost
Fund-A Administrative Committee Fund to the California Public
Utilities Commission (CPUC) so it can then transfer the money owed
to those telephone companies that are providing services in
high-cost areas.
BACKGROUND
California has over 20 small rural telephone companies. Because
these companies lack the scale of the larger local telephone
companies, such as SBC and Verizon, and because their service
territories are in more costly-to-serve rural areas, the rates
these companies have to charge their customers are generally
higher. In keeping with California's long-held commitment to
universal service, the Legislature created a program to ensure
local telephone rates for these rural companies are affordable.
This program, known as the California High-Cost Fund-A, provides
subsidies to those companies that are financed by surcharges
imposed on all telephone bills.
Funding for this program was administered and controlled by the
CPUC until 1999 when SB 669 (Polanco), Chapter 677, Statutes of
1999, transferred the funds to the state treasury and made the
expenditure of the funds subject to the state budget.
In the 2001-02 fiscal year, the CPUC miscalculated the telephone
company claims on the fund because of a change in accounting
methods from a cash to an accrual basis, leaving the fund short by
about $2.5 million. As a result, the telephone companies that have
delivered the service haven't been paid the subsidies they're
authorized by law to receive from the High-Cost A Fund. Amounts
owed range from $873,000 for Sierra Telephone to $16,000 for
Pinnacles Telephone. This funding shortage wasn't identified early
enough to use the Section 27 budget process, and while adequate
reserves exist to pay the claims without raising the fund
surcharge, the Department of Finance has advised that a statute is
required to authorize payment.
COMMENTS
1)If It's Good For The Goose . . . Two other telecommunications
funds, the California High-Cost Fund-B Administrative Fund and
the Universal Lifeline Telephone Service Fund, face similar
shortfalls of $39 million and $6 million respectively. Since
this bill is primarily a technical measure to allow money that is
already owed and due under the law to be transferred to the
appropriate account so it can pay for services that have already
been rendered, the author and committee may wish to consider
amending the measure to include similar appropriations for the
two funds noted above.
2)State Budget . The issue of the shortfall in these various funds
has been raised in the state budget deliberations. On June 6,
the Budget Conference Committee adopted the Assembly version of
the budget to appropriate the money necessary to cover the
shortfall in all three funds. To guard against appropriating
monies for this purpose in both the budget and in this bill, the
author and committee may wish to consider including a contingent
non-enactment provision in this bill. Such a provision would
make this bill ineffective should the 2003-2004 budget
appropriate funding to cover the shortfall.
3)Related Legislation . AB 1292 (Campbell), which sought to
continuously appropriate the funds for these programs and take
them out of the state budget process, was heard and defeated in
the Assembly Utilities and Commerce Committee on April 28.
4)Technically Speaking . The purpose of this bill is to appropriate
adequate funds to allow the CPUC to make good on expenses
incurred by telephone companies in the 2001-2002 fiscal year in
fulfilling their obligations under the High Cost Fund-A program.
The author and committee may wish to consider specifying that in
Section 1 of the bill by making the following change:
Page 2, Line 6: delete "Chapter 1.5 ?" through the end of the
sentence, and replace with "Section 275 of the Public
Utilities Code for costs incurred for the 2001-02 fiscal
year."
ASSEMBLY VOTES
Assembly Floor (73-0)
Assembly Appropriations Committee (24-0)
Assembly Utilities and Commerce Committee
(14-0)
POSITIONS
Sponsor:
California Telephone Association
Kerman Telephone Company
Support:
None on file
Oppose:
None on file
Randy Chinn
AB 1457 Analysis
Hearing Date: June 10, 2003