BILL ANALYSIS                                                                                                                                                                                                    1
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   SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
                  DEBRA BOWEN, CHAIRWOMAN


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|SB 282 - Kelley               |Hearing Date:April 13,    | S|
|                              |1999                      |  |
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|As Amended:April 6, 1999      |FISCAL                    | B|
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|                              |                          | 8|
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                         DESCRIPTION
  
  This bill  requires the California Public Utilities  
Commission (CPUC) to report on various activities related  
to reducing energy costs and improving competitive  
opportunities for California agriculture and other rural  
energy customers.

  The bill  makes related findings and declarations about the  
unfairly high relative energy costs borne by agricultural  
customers.

                        KEY QUESTIONS
  
 1) Is the proposition that rural energy costs are  
   disproportionately high well enough established that the  
   Legislature should require the CPUC to study how to  
   reduce them?

 2) Should reducing energy costs for a specific customer  
   class, and not others, be incorporated into various CPUC  











   mandates?

                          BACKGROUND
  
Energy is a significant portion of the costs of production  
in all sectors of the agricultural economy.  According to  
the sponsor of this bill, the California Electric Users  
Cooperative, these costs are exacerbated by  
disproportionately and unfairly high electric rates,  
particularly in Pacific Gas and Electric Company's (PG&E)  
service area.

Customers in PG&E's service area are billed according to  
agricultural rates if 70% or more of their energy use is  
for agricultural uses, including growing crops, raising  
livestock, pumping water for irrigation and other uses  
involving production of agricultural products for sale.   
Rates for agricultural customers are higher than rates for  
commercial customers with comparable energy consumption.

This bill would require the CPUC to study, and report to  
the Legislature, the causes of high electric rates for  
agricultural and other rural customers and to identify  
options for reducing rates.  The bill further requires the  
CPUC to include a statement of activities it proposes to  
reduce energy costs and improve competitive opportunities  
for California agriculture and other rural energy customers  
in its annual work plan and its annual report to the  
Governor.

                           COMMENTS
  
  1) Can I get the state to study how to lower my bill, too?    
   This bill singles out agricultural customers as  
   deserving of CPUC attention to reduce their energy costs  
   and makes findings and declarations to justify such  
   treatment.  The Committee may wish to consider whether  
   the proposition that rural energy costs are  
   disproportionately and unfairly high is well enough  
   established that the Legislature should require the CPUC  
   to study how to reduce them and/or whether there are  
   other customer classes that are deserving of similar  
   attention.











  2) Aren't we moving toward competition here?   To the extent  
   that this bill requires the CPUC to identify ways to  
   reduce electric rates for agricultural customers, it may  
   be inconsistent with the move toward increased electric  
   competition.  If the problem is unfairly high energy  
   charges, customers have increasing options to shop for a  
   cheaper energy provider.  If the problem is unfairly  
   high rates for distribution, which remains a monopoly  
   function of the utilities, perhaps this bill should  
   focus on increasing competition for that component of  
   electric service.

                          POSITIONS
  
  Support:
  Agricultural Council of California
Allied Grape Growers
Blue Anchor, Inc.
Calavo Growers of California
California Canning Peach Association
California Electric Users Cooperative (sponsor)
California Farm Bureau Federation
California Fruit Exchange
California Grain & Feed Association
California League of Food Processors
California Seed Association
California State Floral Association
California Wool Growers Association
Cal/West Seeds
Central California Almond
Fruit Growers Supply Company (Sunkist Growers, Inc.)
Pacific Egg & Poultry Association
Plumas-Sierra Rural Electric Cooperative
San Joaquin Valley Dairymen
San Luis Obispo County Farm Supply
Sunkist Growers
Valley Fig Growers
Western Growers Association

  Oppose:
  None reported to Committee.


Lawrence Lingbloom                  










SB 282 Analysis
Hearing Date:  April 13, 1999