BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
DEBRA BOWEN, CHAIRWOMAN
SB 521 - Bowen Hearing Date:
April 8, 2003 S
As Amended: April 1, 2003 FISCAL B
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DESCRIPTION
Current law provides a mechanism where non-governmental
participants in cases before the California Public Utilities
Commission (CPUC) may be paid for their reasonable costs of
participation if the CPUC finds the participant substantially
contributed to the commission's decision and the participant
couldn't otherwise afford to take part without undue hardship.
This is known as "intervenor compensation."
This bill specifically authorizes organizations that represent
small commercial customers who receive bundled electric service
to apply for intervenor compensation.
This bill precludes anyone representing small business customers
from receiving intervenor compensation if they have a conflict
arising from prior representation before the CPUC and states
this conflict cannot be waived by the group hiring the
representative.
Current law establishes the Office of Ratepayer Advocates (ORA)
within the CPUC and requires ORA to represent utility customer
interests.
This bill requires the ORA to primarily consider the interests
of residential and small commercial customers when dealing with
matters of rate design.
BACKGROUND
The CPUC deals with many complex cases that have a significant
impact on utility customers. The CPUC has an oversight
responsibility for investor-owned utilities (IOUs), including
gas, electric, water, and telecommunications, that collect more
than $40 billion annually from California ratepayers. In a
typical year, the CPUC will handle around 1,000 cases, not
including individual customer complaints.
The CPUC processes cases (e.g. requests by utilities to raise
rates) much like a court, relying on judges, attorneys, and
expert witnesses before making decisions. All the major cases
require public hearings to be held with written and oral
testimony, as well as opportunities for cross examination.
Opening and reply briefs are filed, draft decisions are issued,
comments are received from parties, and final decisions issued.
Participation in these cases isn't just complicated, it's also
time consuming and relatively expensive.
Utilities are able to fully participate in those cases and their
costs of taking part are generally covered in the rates they're
permitted to charge. Therefore, the utilities have the
resources to vigorously contest their side of the case that,
when combined with their depth of knowledge and control of the
information upon which regulators base their decisions, makes
them formidable opponents.
The customer side of the case is represented at the CPUC in two
ways:
1. Customers represent themselves on occasion before
the CPUC. Larger consumers sometimes band together and
collectively represent themselves, while residential
customers have more active representation through
organizations such as The Utility Reform Network (TURN)
and the Latino Issues Forum.
2. The ORA is statutorily directed to represent
customer interests in virtually all CPUC proceedings
involving electricity, natural gas, telecommunications,
and water.
Intervenor Compensation
Current law provides some encouragement for public participation
in CPUC cases. Because of the time and expense involved in
participating in CPUC proceedings, customers may be compensated
for their expenses via the intervenor compensation program.
Under this statutory program, customers who couldn't otherwise
afford to participate and who have made a substantial
contribution to the case, as determined by the CPUC, are
eligible to have their reasonable expenses covered, including
attorneys fees and expert witness fees. Because the program
only allows compensation for those who incur significant,
substantial hardship, large business customers and governmental
agencies are ineligible for intervenor compensation.
Where the utility is subject to traditional cost-of-service
ratemaking (e.g. the electric utilities), the expense of the
intervenor compensation program is recoverable from ratepayers.
Where the utility is subject to price-cap regulation, or where
prices aren't regulated (e.g. telecommunications utilities) the
utility must manage the cost of the program. In either event,
the cost of the intervenor compensation program is relatively
small. In 2001 (the most current year available), the
intervenor compensation awards totaled $1.3 million, with most
of the money going to organizations representing residential
customers.
Office of Ratepayer Advocates
The ORA is a part of the CPUC. Its director is separately
appointed by the Governor and confirmed by the Senate. The ORA
has 160 employees, including attorneys, which represents 18% of
the personnel at the CPUC.
The ORA is required to participate in every substantial CPUC
case. It is required to fully evaluate utility positions and
present a comprehensive point of view on every aspect of the
utility case. By contrast, intervenors can pick and choose
which cases they want to take part in and which issues in those
cases they want to contest.
In the majority of issues, the ORA represents a point of view
that's consistent with the interests of all ratepayers. For
example, in a proceeding where the utility is requesting to
raise rates, all ratepayers have an interest in seeing the
utility gets the minimum amount of money needed to meet its
obligations, along with a reasonable return on investment.
However, some cases have the effect of pitting certain groups of
ratepayers against one another. For example, once the amount of
money a particular utility is entitled to receive is determined,
the CPUC has to decide how to apportion that requirement between
customers. In this case, residential, small business, and
industrial customers will each want the others to bear the
burden. As a matter of practice in these types of cases, ORA
has advocated for residential customers.
Industrial customers have been reasonably successful at
communicating their concerns to the CPUC. Residential customers
are well represented by ORA and other intervening parties.
However, small business customers haven't been particularly well
heard. The ORA doesn't focus on them and small business groups
generally don't participate at the CPUC. Whether that lack of
participation is the main reason why small businesses are paying
higher rates than the other two classes of ratepayers is open to
interpretation, but one look at Pacific Gas & Electric's rates
shows small businesses are indeed paying more:
Average residential rate (non-CARE)
$0.141/kwh
Average industrial rate $0.135/kwh
Average small business rate $0.177/kwh
The average small business rate is 26% and 31% higher than the
average residential and industrial rate, respectively. It is
not clear that the cost of serving small business customers
justifies that level of cost differences.
COMMENTS
1.Making Small Businesses Eligible For Intervenor Compensation .
Current law makes "a representative of a group or organization
authorized pursuant to its articles of incorporation or bylaws
to represent the interests of residential customers" eligible
for intervenor compensation. The CPUC is the sole entity that
decides whether or not to award intervenor compensation and to
do it has to find that: 1) The intervenor substantially
contributed to the CPUC's decision; and, 2) The intervenor
couldn't otherwise afford to take part without undue hardship.
This bill makes organizations representing small business
bundled service electric customers eligible for intervenor
compensation. In order to actually receive compensation,
those organizations will have to meet the same tests as all
other intervenors. Making an entity eligible to receive
intervenor compensation isn't a guarantee it will actually
receive intervenor compensation from the CPUC.
2.Nonwaivable Conflict Of Interest . The bill denies intervenor
compensation to anyone representing small business customers
who has a conflict of interest as a result of prior
representation before the CPUC. The bill further states this
conflict can't waived by the group hiring the representative.
This provision is intended to prevent any party from skirting
the prohibition on providing intervenor compensation to
customers who are financially able to represent themselves by
also representing small business customers. Under this
provision of the bill, an intervenor would have to choose a
side.
3.Requiring ORA To Pick A Side . Most of ORA's work is on issues
where all ratepayers have similar interests, but about 15% of
the time, ORA works on rate design issues where the interests
of the various ratepayer classes diverge.
In those cases, this bill requires ORA to "primarily consider"
the interests of residential and small commercial customers
when it deals with matters of rate design. The author and
committee may wish to consider whether it's appropriate to
require the ORA to, in essence, pick a side when a conflict
between ratepayer groups arises.
POSITIONS
Sponsor:
Author
Support:
None on file
Oppose:
California Manufacturers & Technology Association (unless
amended)
Randy Chinn
SB 521 Analysis
Hearing Date: April 8, 2003