BILL ANALYSIS                                                                                                                                                                                                    




                    Appropriations Committee Fiscal Summary
                                              AB 994 (Wright)
          Hearing Date: 6/26/00                       Amended:  
          6/19/00
                                          
          Consultant:  Bob Franzoia      Policy Vote: E, U&C  8-0
          ____________________________________________________________ 
          ___
          BILL SUMMARY: AB 994, relating to telephone rates and rural  
          telephone cooperatives, would do the following:
          1) Extend from 1/1/01 to 1/1/05, provisions which require  
          the Public Utilities Commission (PUC) to maintain a program  
          to establish a local rate structure designed to reduce  
          disparities in rates charged by small, independent  
          telephone corporations.  The program includes a surcharge  
          on telephone customers in urban and suburban areas in order  
          to provide a subsidy to the 167 smallest telephone  
          companies in the state.
          2) Require the PUC to open a proceeding to adopt consumer  
          protection rules.
          3) Require the PUC to submit a report by 1/1/02 on the  
          feasibility of establishing rural telephone cooperatives or  
          other alternative service configurations to promote rural  
          telephone service.
                              Fiscal Impact (in thousands)

           Major Provisions                     2000-01       2001-02   2002-03         
               Fund  
          
          Report             $100 one time                  Special*

          Proceeding         Absorbed under existing workload     
          Specialschedule                                              
          * Public Utilities Commission Utilities Reimbursement Account
          STAFF COMMENTS: The State Auditor estimates that three  
          percent of the rural population lives in areas where  
          traditional telephone service is not offered.  It is  
          possible that cooperatives, customer-owned businesses in  
          which members purchase shares in the business to provide  
          capital for facilities, are a viable way to service this  
          population.  No cooperatives exist in the state, though the  
          National Telephone Cooperative Association estimates that  
          two million residents in other states obtain service in  
          this manner.

          Current law limits the charges that can be placed on a  










          telephone bill.  The PUC has a proceeding underway to  
          establish consumer protections if and when that prohibition  
          expires.  This proceeding is similar to the one required by  
          the bill.

          The telephone subsidy is funded by all telephone ratepayers  
          via a surcharge on telephone bills.  Those monies are  
          deposited in the California High Cost Fund - A.  For the  
          past four years, the surcharge has been zero because the  
          program expenses have been paid from the fund balance  
          collected in prior years.  In 2000, it is estimated that  
          seven telephone companies will receive $6.9 million from  
          the CHCF - A.  In 1999, the total cost of the program was  
          $4.9 million.