BILL ANALYSIS                                                                                                                                                                                                    



                                                          AB 1002
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Date of Hearing:   May 19, 1999

              ASSEMBLY COMMITTEE ON APPROPRIATIONS 
                    Carole Migden, Chairwoman

         AB 1002 (Wright) - As Amended: April 22, 1999 

Policy Committee:                              Utilities and  
Commerce     Vote:                             11-0

Urgency:     No                   State Mandated Local  
Program:NoReimbursable:            

  SUMMARY  :

This bill:

1)Requires the Public Utilities Commission (PUC) to establish  
  and impose a surcharge on all natural gas consumed in the  
  state, with specified exceptions, to fund low-income energy  
  assistance programs, energy efficiency activities, and  
  research and development.  

2)Requires the Board of Equalization (BOE) to collect and  
  administer the surcharge to fund the specified programs and  
  the administrative costs of the PUC and BOE.  

3)Requires the PUC to create an advisory board to make  
  recommendations as to how the PUC should fund the specified  
  programs.  

4)Requires the PUC to repeal an existing "residual load service"  
  tariff on natural gas and replace it with a new tariff using a  
  specified calculation.

  FISCAL EFFECT  :

The BOE estimates annual costs of $70,000 to administer the  
surcharge and the PUC would incur minor absorbable costs.

  COMMENTS  :

  1)Background and Purpose  .  In recent years, federal deregulation  
  of the gas industry has enabled interstate pipelines regulated  
  by the Federal Energy Regulatory Commission (FERC) to compete  








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  with PUC-regulated intrastate pipelines.  This competition has  
  caused a significant exodus of large, non-core customers from  
  intrastate pipelines, and resulted in the reduction of the  
  funding base for California's public purpose programs.  When  
  non-core customers abandon the public utility gas  
  corporation's pipeline, their contributions to the public  
  purpose programs are shifted and reallocated amongst core  
  customers remaining on the system.  This bill is intended to  
  level the playing field and require all customers to share in  
  funding California's public purpose programs which benefit  
  core utility customers. 

  The bill also proposes a change in the manner in which the  
  public purpose programs are administered.  Utility companies  
  currently administer the programs and, as a result, customers  
  are offered varying benefits under the programs. This bill  
  proposes that program administration be transferred to the PUC  
  or to an entity to be designated by the PUC.

  2)Residual Load Service (RLS) Tariff . The residual load service  
  tariff imposes a higher rate on any customer that partially  
  bypasses the public utility gas corporation but continues to  
  use the gas corporation for its peak load demands.  The PUC  
  authorized the tariff because providing occasional peaking  
  service is more costly for a pipeline operator. Opponents of  
  the RLS tariff believe the tariff should be eliminated and  
  replaced with a standby rate based on the actual cost of  
  providing peaking service to non-core customers.  

  The author agrees that that the RLS tariff in its current form  
  discourages customers from taking a portion of their gas from  
  another pipeline.  While that was PUC's intention, the author  
  believes that the RLS should be modified and has been working  
  with the gas corporations and interstate pipelines to  
  establish a different model that would a) continue to meet PUC  
  goal of discouraging uneconomic bypass, b) compensate the  
  public utility gas corporation for providing standby service  
  and c)provide reasonable standby rates for the fully and  
  partially bypassing customer.  

  Customers proposing to utilize competitor pipelines have  
  suggested that failure to reform the RLS tariff prevents  
  competing pipelines from entering the market.

  Analysis Prepared by  :    Chuck Nicol / APPR. / (916)319-2081 








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