BILL ANALYSIS                                                                                                                                                                                                    




                    Appropriations Committee Fiscal Summary
          
                                           1276 (Bowen)
          
          Hearing Date:  5/03/2004        Amended: 4/1/04        
          Consultant:  Lisa Matocq            Policy Vote: E, U & C  
          5-1                      
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          BILL SUMMARY:  SB 1276 extends, from January 1, 2005 to  
          January 1, 2009, the requirement that the Public Utilities  
          Commission (PUC) maintain a program that establishes a   
          telephone rate structure designed to reduce disparities in  
          1) rates charged by small, independent telephone  
          corporations serving rural areas, referred to as California  
          High-Cost Fund A, and 2) rates charged by larger telephone  
          companies in other high-cost areas, referred to as  
          California High-Cost Fund B.  The programs, which provide  
          subsidies to eligible telephone companies, are funded with  
          surcharges imposed on telephone bills.   
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                          Fiscal Impact (in thousands)

           Major Provisions                    2004-05             2005-06   
                      2006-07            Fund

           High-Cost Funds A/B,     Annual revenues of about $541,000  
          used to    Special*
           and program admin.      fund subsidies and administration
               
          *California High-Cost Fund A/B      
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          STAFF COMMENTS:  
          
          AB 1466 (Chapter 755, Statutes of 1987) required the PUC to  
          establish and maintain a program to ensure a fair and  
          equitable local rate structure, aided by transfer payments  
          to telephone companies serving rural and small metropolitan  
          and other high-cost areas.  

          Currently, the combined surcharge is about 2.9%. Surcharge  
          revenues are deposited into the respective High-Cost Funds  
          and allocated as subsidies to eligible telephone companies.  










          Program administration, including the costs of two advisory  
          committees, are also funded with surcharge revenues. The  
          proposed 2004-05 budget projects $59 million in the  
          High-Cost Fund A, and $482 million in the High-Cost Fund B.  
            

          Staff notes that the Office of Ratepayer Advocate recently  
          recommended that the PUC review the California High-Cost  
          Fund B program to ensure that it is fulfilling its purpose  
          in a cost-effective manner.