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


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|SB 1153 - Brulte              |Hearing Date:April 13,    | S|
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|As Introduced:  February 26,  |                          | B|
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                         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