BILL ANALYSIS
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THIRD READING
Bill No: SB 659
Author: Soto (D)
Amended: 4/21/03
Vote: 21
SENATE ENERGY, U.&C. COMMITTEE : 6-0, 4/22/03
AYES: Bowen, Alarcon, Dunn, McClintock, Murray, Sher
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SUBJECT : Electrical corporations: rates
SOURCE : The Utility Reform Network
DIGEST : This bill makes permanent the law which requires
all investor-owned utility residential electricity charges
to be based on volume and prohibits these utilities from
imposing any new fixed charges. The bill also allows an
exception from this law for a reasonable minimum monthly
bill.
ANALYSIS : 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
CONTINUED
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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 (PUC) "(a)t least until December 31,
2003," were approved by the Senate Energy, Utilities and
Communications 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.
Senate Energy, Utilities and Communications Committee
Comments :
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
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neutralize the IOUs' incentive to deliver more electricity,
but they can also disadvantage people who use very little
electricity.
This bill permits a reasonable (as determined by the PUC)
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.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
SUPPORT : (Verified 5/6/03)
The Utility Reform Network (source)
California Coalition of Utility Employees
OPPOSITION : (Verified 5/6/03)
Sempra Energy
ARGUMENTS IN SUPPORT : The author states this bill
continues one of the better, fairer policies put in place
during the energy crisis: customers should be charged on
the basis of the electricity they use.
The proponents indicate, absent this bill's enactment, the
PUC 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.
The $17 per month burden proposed at one time by Edison,
but not acted upon at the commission, means a lot to the
low- and moderate-income customer who bears that charge.
ARGUMENTS IN OPPOSITION : Sempra Energy believes that a
fixed service charge ensures that all customers pay equally
for maintenance expenses of a utility. They believe the
bill infringes upon PUC regulating procedures stating, "the
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commission should not be prohibited from considering this
type of fixed rate charge, particularly when a utility
would be able to demonstrate how this type of charge would
be in the best interests of ratepayers. The commission
should be free to act upon its authority to set rates that
balance the needs of ratepayers and shareholders without
statutory interference."
NC:sl 5/7/03 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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