BILL ANALYSIS
SB 659
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Date of Hearing: June 16, 2003
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Sarah Reyes, Chair
SB 659 (Soto) - As Amended: June 9, 2003
SENATE VOTE : 28-5
SUBJECT : Electrical Corporations: rates.
SUMMARY : Extends for five years a sunset provision in an
existing provision which requires all residential electricity
charges to be based on volume of usage and prohibits the
investor owned utilities (IOUs) form imposing fixed charges.
Specifically, this bill :
1)Requires that, with the exception of a reasonable minimum
monthly bill, all charges for residential electric customers
shall be based on volume of usage and prohibits fixed charges.
2)Sunsets the above provision on January 1, 2009.
EXISTING LAW instructs the California Public Utilities
Commission (PUC), through December 31, 2003, to require that all
charges for residential electric customers be volumetric.
FISCAL EFFECT : Unknown.
COMMENTS : AB X1 29 (Kehoe), Chapter 8, Statutes of 2001-02
First Extraordinary Session, among other things, prohibited any
new fixed electricity charges from being imposed on residential
IOU customers, with a sunset provision of December 31, 2003.
The primary purpose of AB X1 29 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.
The concerns leading to the provision in AB X1 29 appear to
come, at least in part, from a Southern California Edison
proposal to establish a fixed customer charge of approximately
$17, which some believe would shift some electricity charges
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from high-volume users to low-volume users. The proposal was
never approved by PUC.
Opponents argue that some of the costs of providing electricity
are fixed and will be incurred by the utility no matter how much
electricity the consumer uses. For example the cost of
installing and maintain power lines remains the same even if the
customer used no electricity. Allowing the utilities to charge
fixed charges in some circumstances assures that all ratepayers
pay equally for the cost of services while volumetric charges
can result in shifting of some costs to higher volume users.
The sponsors contend that recent amendments to this bill to
allow the rates to include a minimum monthly bill will enable
the utility to recover their fixed costs.
Supporters of volumetric charges argue that such charges
encourage conservation since reducing consumption will result in
low power bills, while a fixed charge would create no incentive
to save. Additionally, fixed charges can have a disparate
impact on low income rate payers due to the fact that these
charges will encompass a larger percentage of their actual
income and no amount of conservation will reduce the bills.
Alternatively, with purely volumetric charges, IOUs may have an
incentive to increase the amount of electricity they produce and
deliver since their income will be based solely on volume sold.
Fixed charges can neutralize IOUs' incentive to deliver more
electricity.
Leave Flexibility to PUC?
As the arguments of both the supporters and opponents of this
bill show, fixed rates may have repercussions beyond energy
conservation and will effect different customer classes
differently. The outright prohibition on fixed rates will
reduce the discretion that PUC has in designing rates and will
remove a potential rate mechanism to assure that cost shifting
between customer classes does not occur and to assure that
Legislatively set policy goals such as energy conservation are
meet in the most effective manner.
The committee may want to consider amendments to eliminate the
prohibition against fixed rates and instead instruct PUC to
assure that any fixed rate does not act as a disincentive to
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conservation.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file.
Opposition
California Public Utilities Commission
Sempra Energy
Pacific Gas and Electric
Analysis Prepared by : Edward Randolph / U. & C. / (916)
319-2083