BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
MARTHA M. ESCUTIA, CHAIRWOMAN
SB 769 - Simitian Hearing Date:
April 19, 2005 S
As Amended: April 11, 2005 FISCAL B
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DESCRIPTION
Current law requires Pacific Gas & Electric Company (PG&E),
Southern California Edison (SCE), and San Diego Gas and Electric
Company (SDG&E) to collectively collect $228 million annually
from customers to pay for energy efficiency and conservation
activities. This amount, which is annually adjusted at the
lesser of the inflation rate or the growth in electricity sales,
is raised by a non-bypassable surcharge on electric bills known
as the Public Goods Charge (PGC).
Current law provides for a low-income energy efficiency program
funded at not less than 1996 levels. The California Public
Utilities Commission (CPUC) is required to ensure that low-
income customers are not overburdened by monthly energy
expenditures and to allocate whatever funds are necessary to
adequately fund the program.
This bill makes numerous findings and declarations, including:
Refrigerators consume more energy than any other
residential use besides lighting;
Owners of low-income rental housing have no incentive to
replace older, energy inefficient refrigerators because
renters typically pay the electric bill;
This bill creates a refrigerator replacement program run by the
California Energy Commission (CEC) for low-income residential
rental units paid for by a $10 million annual increase in the
PGC. The program goal is to replace 50,000 inefficient
refrigerators annually through a subsidy program for landlords.
Low-income customers are defined as households with incomes less
than 175% of the federal poverty guidelines; for the disabled
and senior citizens the limit is 200%.
BACKGROUND
California has long had policies to encourage energy efficiency.
AB 1890 (Brulte), Chapter 854, Statues of 1996, the 1996
electric restructuring statute, established the $228 million
annual minimum funding level for energy efficiency efforts.
This amount was reflective of the then-current energy efficiency
expenditures by the investor-owned utilities. The $228 million
has been annually adjusted by the lesser of the rate of
inflation or the growth in electric consumption.
Refrigerator replacement programs are common energy efficiency
programs because of their relative cost-effectiveness. Modern
refrigerators (i.e. post 2001) are typically better than 50%
more efficient than pre-1992 refrigerators because of
improvements in refrigerator efficiency standards.<1> All the
investor-owned utilities currently administer programs for
low-income customers that use the same income guidelines as
proposed by this bill. These programs are funded out of
electric rates, not the PGC.
2004 Program Summaries:
SCE replaced 16,000 refrigerators at a cost of $9.4
million. SCE has been authorized to pay for the entire
cost of a replacement refrigerator for renters whether they
own the refrigerator or not, but has not implemented the
program.
PG&E replaced 19,885 refrigerators at a cost of $15.5
million. PG&E has two programs. The first applies to
customers who own their own refrigerator and pay their own
electric bill; it pays for the entire installed cost of a
new refrigerator. Ninety-nine percent of PG&Es replacement
refrigerators are placed through this program. The second
program applies to landlords who own the refrigerators in
the tenants' premises and who also pay the electric bill.
This program requires the landlord to pay $200 of the total
installed cost.
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<1> West Hill Energy & Computing, Inc., Impact Evaluation of the
2002 California Low Income Energy Efficiency Program , submitted
to Southern California Edison, March 22, 2005, p. 94.
SDG&E replaced 7,000 refrigerators at a cost of $4
million. There are two programs, the biggest of which is
for low-income renters. Where the renter does not own the
refrigerator, SDG&E will pay half the cost of the new
refrigerator with the landlord paying the other half.
For a family of four, 175% of the federal poverty guideline
income is $33,900.
COMMENTS
1. Unserved . This bill is targeted at low-income renters
who do not own their own refrigerators but pay their own
electric bills. These renters have little incentive or
means to purchase their own refrigerators. Their landlords
similarly have no incentive because the electric bill is
paid by the renter. SCE's program covers this situation by
paying the entire cost of a replacement refrigerator.
SDG&E's program covers this situation by paying for half
the cost of a replacement refrigerator. PG&E has a
significant refrigerator replacement program which
apparently does not target this type of customer.
2. Cost effective ? The current utility programs are far
more generous than the program described in this bill.
Those programs have been judged by the CPUC to be cost
effective.
3. Will it Work ? The program proposed by this bill will
result in a subsidy of $200 per refrigerator ($10 million
for 50,000 refrigerators equals $200 per refrigerator).
Will this be a sufficient level of subsidy to get any
takers? PG&E has a program wherein the landlord is given a
subsidy closer to $400 but has only replaced a couple of
hundred refrigerators. This may be due to inadequate
marketing or a small number of qualified landlords, or it
may be due to an inadequate subsidy. The typical utility
refrigerator replacement program for low-income customers
pays for the entire installed cost of the refrigerator. If
the program established by this bill were to use the same
subsidy level as the utility programs the cost would be
closer to $30 million annually. Rather than specify a
specific subsidy level the author and committee may wish to
consider establishing a goal for the program (e.g.
replacing x refrigerators per year) and allowing the
administering agency to establish the subsidy level that
will meet the program goals and be cost-effective.
4. Paying for the Program . This bill proposes to raise the
$10 million annual program cost by increasing the Public
Goods Charge by $0.0006/kwh. But the bill is constructed
under the misimpression that the PGC is statutorily limited
to levels set in 2000. In fact, the amount of money raised
by the PGC increases every year pursuant to a statutory
formula. As electricity usage increases the revenue raised
by the PGC increases without raising the PGC itself.
That's why in 2005 the PGC is expected to raise $10 million
more than the $228 million baseline established in the
statute. Alternatively, this program could be included as
part of the existing low-income energy efficiency program,
which is funded out of electric rates rather than the PGC.
Either way, the PGC would not need to be increased.
Consequently, the author and committee may wish to consider
deleting the requirement to increase the PGC, with the
understanding that if sufficient funding is not available
out of the existing PGC, or in the existing low-income
energy efficiency program, that the new revenue issue will
need to be revisited.
If PGC funds are to be used to pay for this program a
conforming amendment is necessary. That amendment would
delete Section 399.4(b)(2) of the Public Utilities Code
which bars the use of energy efficiency funds to provide
incentives for new refrigerators. That law was created
because of a concern that new refrigerator programs would
be ineffective because the old refrigerators would simply
be used as second refrigerators. The program created by
this bill does not allow the inefficient refrigerators to
be reused because it requires that old refrigerators be
recycled. This amendment is also proposed in SB 1037
(Kehoe) which is being heard today. The author and
committee may wish to make this conforming amendment .
5. Program Structure . This bill creates a program for
landlords who rent to low income tenants, as defined.
Public housing agencies may well qualify. The author and
committee may wish to consider whether the program is for
landlords who rent exclusively to low income tenants.
The current refrigerator program is administered by the
utilities with the approval of the CPUC. This bill
requires the CEC to create the program. The author and
committee may wish to consider consolidating the
refrigerator programs under a single entity.
Installation and recycling costs are a significant share of
overall program costs; in PG&E's program those costs are
25% of overall costs. Those costs may be minimized if
entire complexes are dealt with rather than individual
units. The author may wish to consider ways to maximize
economies of scale to stretch the program dollars.
The Low Income Oversight Board (LIOB) is a statutorily
created liaison between the California Public Utilities
Commission and low-income customers. The author may wish
to consider collaborating with the LIOB as he fills in more
of the details of his program.
6. Technical Amendments . The bill incorrectly references
Section 385 of the Public Utilities Code, a section with
deals with municipal utilities. The correct reference is
Section 399.8 of the Public Utilities Code.
The finding on page 4, line 16 should be revised to
acknowledge that the PGC is established in statute and
annually adjusted at the lesser of the inflation rate or
the growth in electricity usage.
New sections appear to have been inadvertently omitted at
page 5, line 22, and page 6, line 14.
POSITIONS
Sponsor:
Author
Support:
Californians Against Waste
California Rural Legal Assistance Foundation
Clean Power Campaign
Environment California
Environmental Defense
Planning and Conservation League
Sierra Club California
The Utility Reform Network
Union of Concerned Scientists
Utility Consumers' Action
Western Center On Law & Poverty
Oppose:
Pacific Gas and Electric Company
Sempra Energy
Southern California Edison
Randy Chinn
SB 769 Analysis
Hearing Date: April 19, 2005