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