BILL ANALYSIS 1 1 SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE DEBRA BOWEN, CHAIRWOMAN ------------------------------------------------------------ |SB 1153 - Brulte |Hearing Date:April 13, | S| | |1999 | | |------------------------------+--------------------------+--| |As Introduced: February 26, | | B| |1999 | | | |------------------------------+--------------------------+--| | | | | |------------------------------+--------------------------+--| | | | 1| |------------------------------+--------------------------+--| | | | 1| |------------------------------+--------------------------+--| | | | 5| |------------------------------+--------------------------+--| | | | 3| |------------------------------+--------------------------+--| | | | | ------------------------------------------------------------ DESCRIPTION Current law provides for several programs which help achieve statutorily directed social goals, including aid to low income natural gas customers, as well as assistance for natural gas research and development efforts. This bill requires the State Auditor to conduct a study to review the existing funding sources for these programs, consider the impacts of these programs on competitive natural gas markets and make recommendations for a stable funding source. BACKGROUND Over the years, a number of natural gas public purpose programs have been enacted into statute. These programs provide discounts to low income customers, assist in home weatherization efforts, encourage research and development, and aid in the deployment of cleaner generation technologies. The total expenditures for these programs by California's major natural gas utilities approaches $140 million annually, financed by ratepayers via a surcharge on gas transported by intrastate pipelines. Large customers are permitted to shop for natural gas and can buy from out-of-state producers via interstate pipeline that, because they are interstate, are not subject to the state surcharges which pay for the public purpose programs. This creates a competitive inequity which potentially biases customers against natural gas provided by the regulated utility and leads to a decrease in the money available to funds the state's natural gas public purpose programs. The study required in this bill is aimed at assessing the impact of the competitive inequity and recommending stable funding sources for these programs, as well as looking at the costs incurred in connection with these programs. This study is required to be completed by January 1, 2001. COMMENTS 1)This bill is sponsored by the California Manufacturers Association, which believes the study will help answer questions about the effect of competition on natural gas public purpose programs. 2)The Legislature will deal with a large number of natural gas bills this year, all of which deal with disputes between competitors, incumbent natural gas utilities, and customer groups over costs and charges. One of the main disputes is over the degree to which competition by interstate pipelines, which are not subject to state surcharges, is impacting the incumbent natural gas utilities. This bill is intended to investigate that issue. 3)Considering the number of potential approaches to resolving this issue pending in the Legislature, the Committee may wish to consider whether a study merely delays its ability to resolve an important issue. 4)The study required in this bill is to be conducted by the State Auditor, in consultation with the California Public Utilities Commission (CPUC), the Energy Commission, and the Office of the Ratepayer Advocate. However, a study by the State Auditor does not require legislation - in fact, it may be sufficient to contact the Joint Legislative Audit Committee and request it to direct the Auditor to undertake such a study. 5)If the Committee believes a study is warranted, it may wish to consider the State Auditor's limited expertise in energy matters and the fact that there may be other organizations, such as the CPUC or the University of California Energy Institute, both of which have expertise in this area, that may be better equipped to conduct such a study. POSITIONS Support: California Manufacturers Association (Sponsor) The Williams Companies Oppose: None reported to Committee. Randy Chinn SB 1153 Analysis Hearing Date: April 13, 1999