BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 521|
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UNFINISHED BUSINESS
Bill No: SB 521
Author: Bowen (D)
Amended: 6/23/03
Vote: 21
SENATE ENERGY, U.&C. COMMITTEE : 8-0, 4/8/03
AYES: Bowen, Alarcon, Battin, Dunn, McClintock, Murray,
Sher, Vasconcellos
NO VOTE RECORDED: Morrow
SENATE APPROPRIATIONS COMMITTEE : 10-0, 5/5/03
AYES: Alpert, Battin, Bowen, Burton, Escutia, Karnette,
Machado, Murray, Poochigian, Speier
NO VOTE RECORDED: Aanested, Ashburn, Johnson
SENATE FLOOR : 39-0, 5/12/03
AYES: Aanestad, Ackerman, Alarcon, Alpert, Ashburn,
Battin, Bowen, Brulte, Burton, Cedillo, Chesbro, Denham,
Ducheny, Escutia, Figueroa, Florez, Hollingsworth,
Johnson, Karnette, Knight, Kuehl, Machado, Margett,
McClintock, McPherson, Morrow, Murray, Oller, Ortiz,
Perata, Poochigian, Romero, Scott, Sher, Soto, Speier,
Torlakson, Vasconcellos, Vincent
NO VOTE RECORDED: Dunn
ASSEMBLY FLOOR : 78-0 (Passed on Consent), 7/29/03 - See
last page for vote
SUBJECT : Public Utilities Commission: customers
SOURCE : Author
CONTINUED
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DIGEST : This bill (1) requires the Office of Ratepayer
Advocate, within the State Public Utilities Commission, to
primarily consider the interests of residential and small
commercial customers when dealing with rate design and
revenue allocation matters, and (2) expands eligibility for
"intervenor compensation", as specified.
Assembly Amendments (1) provide additional definitions for
terms used in the bill, (2) authorize the State Public
Utilities Commission to make certain changes to the
definition of "small commercial customer," as specified,
and (3) add legislative findings and declarations.
ANALYSIS : Current law provides a mechanism where
non-governmental participants in cases before the State
Public Utilities Commission (PUC) may be paid for their
reasonable costs of participation if the PUC 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 for
the reasonable costs of participating in proceedings at the
PUC.
This bill defines small business customers as those with
maximum peak demand less than 50 kilowatts, but allows the
PUC to modify this definition in order to increase
participation by organizations representing small
businesses.
This bill precludes anyone representing small business
customers from receiving intervenor compensation if they
have a conflict arising from prior representation before
the PUC and states this conflict cannot be waived by the
group hiring the representative.
Current law establishes the Office of Ratepayer Advocates
(ORA) within the PUC and requires ORA to represent utility
customer interests.
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This bill requires the ORA to primarily consider the
interests of residential and small commercial customers in
proceedings involving issues of revenue allocation or rate
design.
Background
The PUC deals with many complex cases that have a
significant impact on utility customers. The PUC 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 PUC will handle around 1,000 cases, not including
individual customer complaints.
The PUC 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 PUC in
two ways:
1.Customers represent themselves on occasion before the
PUC. Larger consumers sometimes band together and
collectively represent themselves, while residential
customers have more active representation through
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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 PUC proceedings involving
electricity, natural gas, telecommunications, and water.
Intervenor Compensation
Current law provides some encouragement for public
participation in PUC cases. Because of the time and expense
involved in participating in PUC 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 PUC, 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 PUC. Its director is separately
appointed by the Governor and confirmed by the Senate. The
ORA has 160 employees, including attorneys, which
represents 18 percent of the personnel at the PUC.
The ORA is required to participate in every substantial PUC
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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 PUC 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 PUC. 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
PUC. 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 percent and 31
percent higher than the average residential and industrial
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rate, respectively. It is not clear that the cost of
serving small business customers justifies that level of
cost differences.
Comments
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 PUC 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 PUC'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 PUC.
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 PUC. 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.
Requiring ORA To Pick A Side . Most of ORA's work is on
issues where all ratepayers have similar interests, but
about 15 percent of the time, ORA works on rate design
issues where the interests of the various ratepayer classes
diverge.
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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.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
ASSEMBLY FLOOR :
AYES: Aghazarian, Bates, Benoit, Berg, Bermudez, Bogh,
Calderon, Campbell, Canciamilla, Chan, Chavez, Chu,
Cogdill, Cohn, Corbett, Correa, Cox, Daucher, Diaz,
Dutra, Dutton, Dymally, Frommer, Garcia, Goldberg,
Hancock, Harman, Haynes, Jerome Horton, Shirley Horton,
Houston, Jackson, Keene, Kehoe, Koretz, La Malfa, La
Suer, Laird, Leno, Leslie, 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, Yee, Wesson
NC:cm 8/18/03 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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