BILL ANALYSIS THIRD READING AB 2576 Baca (D) 7/4/94 in Senate 21 73-2, p. 7033, 5/31/94 SUBJECT: Public utilities: economic development SOURCE: Southern California Edison Company ____________________________________________________________________________ DIGEST: This bill permits the Public Utilities Commission (PUC) to šauthorize specified rate discount programs to companies whose facilities are located šor will locate within enterprise zones, recycling market development zones, šor economic incentive areas. ANALYSIS: The PUC is responsible for regulating the rates of investor- šowned utilities to ensure that they reflect the reasonable costs of šproviding utility services to ratepayers. Current law generally forbids "discriminatory rates" for the purpose of šattracting or benefiting specific industries. Price discrimination is šdefined as a different price per unit of service charged to customers who šare similarly situated. This bill permits the PUC to authorize discount rates to companies whose šfacilities are located or will be located within the boundaries of šenterprise zones, recycling market development zones, or economic incentive šareas. Under the bill, the rate discounts may be applied either by utilities: 1. reducing monthly rates to a qualifying customer's monthly utility bill, šor 2. assigning the discount, at the election of the customer, to a private š or public entity (e.g., a bank) that returns consideration of like value to the customer (e.g., a loan), provided the customer agrees to maintain the facility for a minimum of five years. Prior and Related Legislation AB 2054 (Polanco), Chapter 852 of 1991, authorized utilities to engage in šspecified economic development programs within enterprise zones and šeconomic incentives areas, and to recover costs from ratepayers to the šextent ratepayers benefited from the programs. AB 783 (Polanco), Chapter 53 of 1993, authorized utilities to engage in šspecified economic development programs within recycling market development šzones, and to recover costs from ratepayers to the extent ratepayers šbenefited from the programs. SB 1659 (Russell-1994), held in this Committee by the author, would have šallowed telecommunications utilities to offer regional rate discounts in šresponse to competitive factors. FISCAL EFFECT: Appropriation: No Fiscal Committee: Yes Local: No According to the Senate Appropriations Committee: Fiscal Impact (in thousands) Major Provisions 1994-95 1995-96 1996-97 Fund PUC program review $38 $75 $75 PUCURA Staff Comments Rate discounts would need to be recovered form ratepayers outside of the šEZ's or economic incentive areas. There could be a minor increase in rates špaid by state and local govenrmental entities as a result of this bill. In šadditiona, the PUC reports that it will need one additional staff position što review the various rate discount programs that will be submitted by the šutilities for th PUC's consideration. SUPPORT: (Verified 8/22/94) Southern California Edison Company (source) OPPOSITION: (Verified 8/22/94) California Manufacturers Association Agricultural Energy Consumers Association California League of Food Processors ARGUMENTS IN SUPPORT: The author is carrying AB 2576 at the request of šthe Southern California Edison Company. Both the author and the sponsor š CONTINUED AB 2576 Page 3 believe that the PUC needs to offer utility business customers rate šreductions and related third-party financing as a means to facilitate šutility economic development programs. To accomplish this result, AB 2576 šwould require utility customer "rate discounts" which may be assigned to šthird parties, such as a bank, to be used as an incentive for a loan to the šcustomer. This bill is intended to compel PUC approval of economic šdevelopment programs that will foster business retention and growth in šenterprise zones, economic incentive areas, and recycling market šdevelopment zones. ARGUMENTS IN OPPOSITION: The California Manufacturers Association š(CMA) and the Agricultural Energy Consumers Association (AECA) oppose AB š2576. While CMA and AECA support utility economic development aid to šcustomers in the form of business management services and technical šassistance, they oppose "rate discounts" which allow for discriminatory šrates and cost shifting among customers. In addition, both CMA and AECA šare opposed to transforming rate discounts into tradable commodities, such šas a revenue stream to secure third-party financing, because of the špotential for abuse and additional ratepayer costs. ASSEMBLY FLOOR VOTE: NM:lm 8/22/94 Senate Floor Analyses CONTINUED