BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 1002|
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THIRD READING
Bill No: AB 1002
Author: Wright (D)
Amended: 8/10/00 in Senate
Vote: 27
SENATE ENERGY, U.&C. COMMITTEE : 5-2, 7/13/99
AYES: Alarcon, Baca, Hughes, Kelley, Peace
NOES: Brown, Brulte
SENATE ENERGY, U.&C. COMMITTEE : 7-2, 6/27/00
AYES: Bowen, Alarcon, Hughes, Murray, Peace, Solis,
Vasconcellos
NOES: Kelley, Mountjoy
SENATE APPROPRIATIONS COMMITTEE : 7-1, 8/7/00
AYES: Alpert, Bowen, Escutia, Karnette, Kelley, Perata,
Vasconcellos
NOES: Johnson
ASSEMBLY FLOOR : 73-3, 6/1/99 - See last page for vote
SUBJECT : Natural gas: consumption surcharge
SOURCE : Southern California Gas Company
DIGEST : This bill imposes a surcharge on all natural gas
consumed in the State to fund specified public policy
programs.
ANALYSIS : Current law establishes several natural gas
public purpose programs, including a low-income rate
CONTINUED
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assistance program, a research and development program, and
two energy efficiency programs. These programs are funded
through the rates for natural gas paid by customers of
pipelines regulated by the California Public Utilities
Commission (CPUC). Those who use gas transported by an
interstate pipeline, which are regulated by the Federal
Energy Regulatory Commission (FERC), are exempt from having
to pay these costs because FERC doesn't build them into its
rate structure.
This bill, on or after January 1, 2001, establishes a
non-bypassable natural gas surcharge on customers of both
CPUC-regulated and FERC-regulated pipelines to pay for
these existing programs and codifies specified exemptions
to the surcharge.
The programs to be funded are:
1.California Alternate Rates for Energy Program that
provides rate assistance to low-income gas customers.
2.Low-Income Direct Assistance Program which finances
weatherization of low-income housing.
3.Research, Demonstration and Development.
4.Energy Efficiency Program which reduces energy demand
through the promotion of cost-effective energy
conservation and efficiency measures.
This bill allows the surcharge to be established by class
of customer and may be specific to the service territory of
each gas public utility. Therefore, a customer of an
interstate pipeline will pay the same surcharge as if he or
she were a customer of a CPUC-regulated pipeline.
This bill authorizes the CPUC to establish the surcharge
and the State Board of Equalization (BOE) to collect the
surcharge. Funds will deposited in the Gas Consumption
Surcharge Fund in the State Treasury, which in turn will be
used to pay for the gas public purpose program costs.
Background
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Competition, Technology, and the Bypassable Surcharge .
This bill stems in part from the increase in competition
between natural gas service providers and the differences
between state and federal regulation of the entities
providing that service.
CPUC-regulated intrastate pipelines compete with
FERC-regulated interstate pipelines to transport natural
gas, but while the CPUC-established rates include the cost
of operating the State's public purpose programs,
FERC-established rates don't include such a cost.
Therefore, customers of those pipelines don't have to pay
the public purpose program charges, which can run up to 20
percent of the transportation charge that intrastate
pipeline customers pay. (Note that the transportation
charge is only a fraction of the price paid for delivered
natural gas because it does not include the cost of the gas
itself.) This discrepancy creates a clear incentive for
customers to leave the intrastate pipeline for an
interstate pipeline. This incentive distorts the
competitive market because it allows a FERC-regulated
natural gas pipeline company to charge its customers up to
20 percent less than a CPUC-regulated company -- and still
be just as profitable.
When customers move to an interstate pipeline, they don't
pay the cost of funding the public purpose programs (which
are embedded only in the rates of CPUC-regulated
pipelines), so the cost of the public purpose programs is
borne by the remaining customers, whose bills go up to fund
them at specified levels. That increase in turn increases
the incentive for other customers to move to an interstate
pipeline as well, thereby increasing the public purpose
program charges to those left on the intrastate system even
further.
This bill attempts to eliminate the financial incentive for
a customer to leave an intrastate pipeline in favor of an
interstate pipeline by taking the public purpose program
charges out of the rate base of the CPUC-regulated
pipelines, then subjecting customers of both CPUC- and
FERC-regulated pipelines to an identical surcharge to fund
the programs, thereby creating -- dare we say -- a level
playing field.
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Public Purpose Programs . The surcharge established by this
bill will help to fund four separate programs. The program
and 1999 statewide budget amounts are shown below:
Low Income Rate Assistance $48 million
Low Income Energy Efficiency $30 million
Natural Gas Energy Efficiency $45 million
Natural Gas R&D $0.5 million
These programs are currently paid for by the rates charged
for natural gas transported through CPUC-regulated
pipelines. This bill pulls that charge out of the rate
base, then establishes a separately identified surcharge on
the gas bill of both CPUC- and FERC-regulated pipelines.
Exemptions . Current regulation exempts the following
natural gas uses from the public purpose program
surcharges: gas used to generate power for sale, gas
purchased for the purpose of being resold, sale or use of
gas for enhanced oil recovery, and gas used in cogeneration
projects to produce electricity. This bill codifies those
exemptions.
Comments
1. Level The Playing Field . This bill implements the simple
premise that public goods programs which support the
public good should be paid for by all gas pipeline users,
not just those who buy their natural gas from intrastate
pipelines. This is similar to the premise embodied in AB
995 (Wright) to extend the existing non-bypassable
surcharge to fund electric public purpose programs. The
public purpose programs supported by this bill are of a
similar character, though they fund distinctly different
programs.
Are Fees Going Up, Down, Or Nowhere? Under current law,
the public purpose programs are funded at specified levels
and the charge built into each CPUC-regulated pipeline
customer rate is adjusted up or down -- depending on the
number of customers -- in order to achieve the specified
funding level.
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This bill doesn't raise the total amount of funds collected
for natural gas public purpose programs. Rather, it
effectively lowers the rate paid by customers of intrastate
gas pipelines because it pulls funding for the programs out
of the rate base (which only applies to CPUC-regulated
pipelines today), then creates a non-bypassable surcharge
that applies to customers of intrastate and interstate
pipelines. Since only the intrastate customers are paying
to fund these programs now, by creating a surcharge and
applying it across a larger rate base, this bill will
likely lower the costs paid by customers of intrastate
pipelines.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: Yes
Fiscal Impact (in thousands)
Major Provisions 2000-01 2001-02
2002-03 Fund
Surcharge $139,000 annually (revenues)Special*
Administration $70 annually (BOE) Special*
Absorbable (PUC)
*Gas Consumption Surcharge Fund
SUPPORT : (Verified 8/10/00)
Southern California Gas Company (source)
Asian Pacific AIDS Intervention Team, Los Angeles
Antelope Valley Board of Trade
Azusa Chamber of Commerce
California Independent Petroleum Association
Coalition of California Utility Employees
Coachella Valley Economic Partnership
Creative Ark
Curtailing Abuses Related to the Elderly
El Centro Del Pueblo, Los Angeles
Fountain Valley Chamber of Commerce
Gateway Cities Partnership, Inc.
Greater Riverside Hispanic Chamber of Commerce
Industry Manufacturers Council
Kern County Board of Supervisors
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Kern River Gas Transmission Company
K.MOMS
Korean American Coalition
Korean American Family Service Center, Los Angeles
Korean Health, Education Information & Research Center, Los
Angeles
La Verne Chamber of Commerce
LA Works
Menzies & Miller Company
Modern Insurance, Incorporated
Natural Resources Defense Council
Office of Ratepayer Advocates
Pacific Gas & Electric
Ports O' Call Restaurant
Questar Southern Trails
San Gabriel Valley Economic Council
Santa Barbara County Taxpayers Association
Sempra Energy
South Orange County Regional Chambers of Commerce
State Board of Equalization
Supervisor John Tavaglione, Second District, Riverside
County
The Utility Reform Network
United Chambers of Commerce of the San Fernando Valley
United Latino Fund, Los Angeles
Valley Industry and Commerce Association
Ventura County Taxpayers Association
City of West Hollywood
Numerous Individuals
OPPOSITION : (Verified 8/10/00)
California League of Food Processors
ASSEMBLY FLOOR
AYES: Aanestad, Ackerman, Alquist, Aroner, Ashburn, Bates,
Battin, Baugh, Bock, Briggs, Calderon, Campbell,
Cardenas, Cardoza, Cedillo, Corbett, Correa, Cox,
Cunneen, Davis, Dickerson, Ducheny, Dutra, Firebaugh,
Florez, Floyd, Frusetta, Gallegos, Granlund, Havice,
Hertzberg, Honda, House, Jackson, Keeley, Knox, Kuehl,
Leach, Lempert, Longville, Lowenthal, Machado, Maddox,
Maldonado, Margett, Mazzoni, Migden, Nakano, Olberg,
Oller, Robert Pacheco, Rod Pacheco, Papan, Pescetti,
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Reyes, Romero, Runner, Scott, Shelley, Soto, Steinberg,
Strickland, Strom-Martin, Thompson, Torlakson, Vincent,
Washington, Wesson, Wiggins, Wildman, Wright, Zettel,
Villaraigosa
NOES: Kaloogian, Leonard, McClintock
NC:kb 8/14/00 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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