BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
DEBRA BOWEN, CHAIRWOMAN
SB 659 - Soto Hearing Date: April 8, 2003
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As Introduced: February 21, 2003 FISCAL B
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DESCRIPTION
Existing law requires all investor-owned utility (IOU)
residential electricity charges to be based on volume (i.e. no
fixed charges) and prohibits IOUs from imposing any new fixed
charges. These provisions sunset on December 31, 2003.
This bill makes these provisions permanent.
BACKGROUND
AB 29X (Kehoe), Chapter 8, Statutes of 2001-02 First
Extraordinary Session, added Public Utilities Code Section
739(c)(3) to prevent any new fixed electricity charges from
being imposed on residential IOU customers. These provisions,
which were binding on the California Public Utilities Commission
(CPUC) "(a)t least until December 31, 2003," were approved by
this committee on March 29, 2001.
The primary purpose of AB 29X was to fund a variety of energy
efficiency and conservation programs. The provision prohibiting
any new fixed charges was intended to maintain customers'
incentives to conserve by ensuring people with very modest
consumption would pay for energy, transmission and distribution
costs only according to the electricity they use, and not via
any fixed charges. Prior to AB 29X's enactment, Southern
California Edison proposed to establish a fixed customer charge
of approximately $17, which some believe would shift some
electricity charges from high-volume users to low-volume users.
Absent this bill's enactment, the CPUC could permit new fixed
charges beginning next year. According to the sponsor, this
bill encourages rate-setting on a basis that's
environmentally-sound and doesn't disadvantage low- and
moderate-income consumers.
COMMENTS
1.Do purely volumetric charges put utilities and customers at
odds over conservation? Basing electricity charges purely on
consumption gives customers an incentive to use less, but it
may give IOUs an incentive to deliver more, since IOUs'
revenues then depend on the amount of electricity they
deliver. Thus, the IOUs' incentive to maximize revenues
competes with their customers' incentives to cut costs.
The effect on overall electricity use of the IOUs' incentive
is mitigated by ratepayer-funded energy efficiency programs,
but as long as IOUs are primarily responsible for managing
these programs, they face conflicting incentives.
Rewarding IOUs for delivering more electricity is
counterproductive to the extent it perpetuates disincentives
for improved energy efficiency and conservation. Depending on
their design, fixed charges can neutralize the IOUs' incentive
to deliver more electricity, but they can also disadvantage
people who use very little electricity.
2.Commodity costs vs. delivery costs. This bill requires all
charges for residential electric customer be volumetric, and
not fixed. This applies to charges for the electric energy
itself, but it also includes the charges for delivering the
energy (i.e., transmission and distribution). Many
transmission and distribution costs are fixed, and are not
related to individual customer demand (i.e. the same pole,
wire, and meter are required to deliver one kilowatt or 1000
kilowatts). The author and the committee may wish to consider
whether it's appropriate to prohibit recovery of transmission
and distribution costs through fixed charges, or whether the
prohibition on fixed charges should be limited to the electric
energy commodity.
POSITIONS
Sponsor:
The Utility Reform Network (TURN)
Support:
None on file
Oppose:
Southern California Edison
Lawrence Lingbloom
SB 659 Analysis
Hearing Date: April 8, 2003
Whether one believes that requiring purely volumetric
electricity charges will achieve greater energy conservation
depends on whether one believes it's the customers, or the
IOUs, that have a greater capacity to effect conservation.