BILL ANALYSIS AB 1002 Page 1 ASSEMBLY THIRD READING AB 1002 (Wright) As Amended April 26, 1999 2/3 vote UTILITIES AND COMMERCE 11-0 APPROPRIATIONS 19-1 ----------------------------------------------------------------- |Ayes:|Wright, Pescetti, |Ayes:|Migden, Ashburn, Corbett, | | |Campbell, Cardenas, | |Davis, Granlund, | | |Frusetta, Maddox, | |Hertzberg, Kuehl, | | |Mazzoni, Papan, Reyes, | |Ackerman, Papan, Aroner, | | |Vincent, Wesson | |Runner, Shelley, | | | | |Steinberg, Thomson, | | | | |Wesson, Wiggins, Wright, | | | | |Zettel, Longville | | | | | | |-----+--------------------------+-----+--------------------------| | | |Nays:|Brewer | | | | | | ----------------------------------------------------------------- SUMMARY : Imposes a surcharge on all natural gas consumed in California to fund specified low-income, energy efficiency, conservation and public interest research programs. Specifically, this bill : 1)Requires the California Public Utilities Commission (CPUC) to impose a surcharge on all natural gas consumed in the state. 2)Exempts specified natural gas usage from the consumption surcharge, including natural gas utilized to generate power for sale, for resale to end users, for enhanced oil recovery, in cogeneration technology projects to produce electricity, pursuant to contracts previously approved by CPUC which do not currently impose the surcharge, and gas sold within the service territory of a municipality that provides similar programs. 3)Requires CPUC to establish the surcharge rate for each class of customer and notify the State Board of Equalization (BOE) of the surcharge and requires each end user on an interstate pipeline to notify BOE of their consumption. 4)Requires that revenues collected from the surcharge be paid to BOE and deposited into the Gas Consumption Surcharge Fund to AB 1002 Page 2 be created in the State Treasury to fund the public purpose programs. 5)Appropriates funds to pay CPUC and BOE for their costs associated with the administration of these programs. 6)Establishes an advisory board to administer programs and conduct financial and compliance audits. 7)Institutes a tariff rate to apply to customers who bypass public utility gas corporation and subsequently seek to utilize the public utility gas corporation for transportation services. EXISTING LAW : 1)Establishes certain public purpose programs, including energy efficiency, public interest research and development, low-income assistance and weatherization. 2)Authorizes the collection of funds through a surcharge on ratepayers of public utility gas corporations. FISCAL EFFECT : BOE estimates annual costs of $70,000 to administer the surcharge and CPUC would incur minor absorbable costs. COMMENTS : The sponsor of this bill, Sempra Energy, had this bill introduced to establish a surcharge on all natural gas customers to ensure the financial stability of California's public purpose programs. Program costs are spread over core (i.e., residential and small commercial) and non-core (i.e., large, industrial users) customers. The four public purpose programs provide rate assistance and weatherization services to low-income customers, promote cost-effective energy conservation and efficiency measures, and to support technology research that would reduce energy production and end-use costs. In recent years, federal deregulation of the gas industry has enabled interstate pipelines regulated by the Federal Energy Regulatory Commission (FERC) to compete with CPUC-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 AB 1002 Page 3 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. Based on the 1998 budgeted costs for the public purpose programs, core customers are currently paid approximately 85% of the overall program costs and non-core funded the remaining 15%. This bill proposes that there be no cost shifting between core and non-core customers. This bill also proposes a change in the manner in which the public purpose programs are administered. At present, the utility companies administer the program and receive varying benefits under the programs. The differences impact program costs, participation levels and overall program funding. This bill proposes that program administration be transferred to an advisory board and that the advisory board be required to establish a uniform statewide program and also be authorized to conduct financial and program audits of the public purpose programs. The surcharge collection mechanism is proposed to be with BOE. Customers of the interstate pipelines must register with BOE so that they may receive remittances on a quarterly basis for payment. A corollary problem has been revealed to the author while addressing the public purpose surcharge, the residual load service (RLS) tariff. The RLS tariff, which was approved by CPUC in 1995, imposes a higher rate on any customer which partially bypasses the public utility gas corporation and continues to use the gas corporation for its high cost peak load volumes. This bill modifies the RLS tariff and replaces it with one that shares the customer's and the system's peak utilization. The replacement tariff will apply until such time that a workably competitive market exists. CPUC will be required to make a finding as to whether a workably competitive market exists. Analysis Prepared by : Carolyn Veal-Hunter / U. & C. / (916) 319-2083 FN: AB 1002 Page 4 0000922