BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
DEBRA BOWEN, CHAIRWOMAN
SB 659 - Soto Hearing Date: April 22, 2003
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As Amended: April 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 this provision permanent, but allows an
exception for a reasonable minimum monthly bill.
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.Minimum bill vs. fixed charge. As it was heard in this
committee on April 8, this bill required all charges for
residential electric customers to be volumetric, and not
fixed. This applied to charges for the electric energy
itself, but it also included the charges for delivering the
energy (i.e., transmission and distribution). However, 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).
As amended, this bill now permits a reasonable (as determined
by the CPUC) minimum monthly bill . A minimum bill allows an
IOU to recover basic costs of serving a low-volume customer,
while preserving the policy that, once the minimum is reached,
all charges must be based on consumption. In contrast, a
fixed charge is a charge all customers would have to pay on
top of all of their consumption-based charges. This bill
still prohibits such fixed charges.
POSITIONS
Sponsor:
The Utility Reform Network (TURN)
Support:
California Coalition of Utility Employees
Oppose:
Sempra Energy
Southern California Edison
Lawrence Lingbloom
SB 659 Analysis
Hearing Date: April 22, 2003