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


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|SB 1217 - Polanco             |Hearing Date:April 27,    | S|
|                              |1999                      |  |
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|As Amended:April 21, 1999     |                          | B|
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                         DESCRIPTION
  
Current law requires the California Public Utilities  
Commission (CPUC) to administer six telecommunications  
programs, created pursuant to statute and paid for by  
consumers via their telephone bills.  The CPUC appoints  
advisory boards to each of these programs to assist in the  
administration.

  This bill  codifies the advisory boards for each of the six  
programs and creates accounts in the state treasury to hold  
the program funds.

  Current law  establishes programs to finance cost-effective  
energy efficiency and conservation activities and low  
income rate assistance which are funded by ratepayers and  
administered by utility companies.

  This bill  transfers the low income rate assistance program  
and the low income energy efficiency program to the  
Department of Community Services and Development on June 1,  











2000.

  This bill  designates San Diego Gas & Electric Company,  
Southern California Edison Company, Pacific Gas & Electric  
Company, and Southern California Gas Company as  
administrators of the remaining programs through December  
31, 2001.   This bill  requires the CPUC, by January 1, 2002,  
to study the feasibility of administering these activities  
through a nonprofit public benefit corporation.

  This bill  requires the Department to utilize the  
contractors in place as of April 1, 1999.

  This bill  requires the Department to utilize the policies,  
procedures, and eligibility requirements in effect on April  
1, 1999, and permits the Department to alter those  
policies, procedures, and eligibility requirements after  
considering public input.

                        KEY QUESTIONS
  
1)Should administration of low income energy efficiency and  
  rate assistance programs be transferred to the Department  
  of Community Services and Development?

2)Should the current contractors for these programs be  
  retained indefinitely pursuant to statute?

                          BACKGROUND
  
The CPUC has implemented six statutorily authorized  
programs, funded by utility customers, whose  aggregate  
revenues exceed $1 billion annually.  The funds are held in  
trust.  According to the CPUC, both the Attorney General  
and the Department of Finance have informally expressed  
their preference that the funding for these programs be  
kept with the state and that the advisory boards be  
codified.

The specific advisory boards and funds created by this bill  
include:

     a)     The California High-Cost Fund-A Administrative  
       Committee and Fund, designed to keep rates for rural  










       telephone companies low.

     b)     The California High Cost Fund-B Administrative  
       Committee and Fund, designed to keep rates for rural  
       customers low.

     c)     The Universal Lifeline Telephone Service Trust  
       Administrative Committee  and Fund, designed to  
       provide low cost telephone service to low income  
       households.

     d)     The Deaf and Disabled Telecommunications  
       Program Administrative Committee and Fund, designed  
       to provide discounted telephone service and  
       equipment to the deaf and disabled.

     e)     The Payphone Service Providers Committee and  
       Fund, designed to provide consumer protection to pay  
       telephone customers.

     f)     The California Teleconnect Fund Administrative  
       Committee and Fund, designed to fund advanced  
       communications services for schools, libraries, and  
       community organizations.

This bill doesn't create any new programs or raise any  
fees; it simply formalizes the current programs by  
codifying the CPUC-created advisory boards and creates  
funds in the state treasury to hold the monies from each  
program.  This part of the bill is substantially similar to  
AB 2461 (Campbell) of last year, which passed this  
committee 8-0 but was vetoed by the Governor because it  
provided for additional civil service positions.

The remaining provisions of the bill deal with the  
administration of the California Alternate Rates for Energy  
program (CARE), a discount energy rate program for low  
income customers, and the Low Income Energy Efficiency  
program (LIEE), an energy efficiency program for low income  
customers. The CARE program costs $125 million annually and  
provides eligible low income gas and electric customers  
with a 15% credit against their bill.  The LIEE program  
costs $60 million annually and provides home weatherization  
and energy efficiency devices, such as energy efficient  










lighting, to qualifying customers, whether they are  
property owners or renters. The LIEE programs are  
contracted out to numerous community-based organizations  
usually, but not exclusively, on a competitive-bid basis.   
Both the CARE and LIEE programs, which are currently  
administered by the utilities, will be transferred to the  
Department of Community Services and Development  
(Department) under this bill.  The Department currently  
administers a similar program for the federal government.

                           COMMENTS
  
1)Sponsored by the CPUC, this bill creates a continuous  
  appropriation of the program funds to ensure these  
  programs aren't interrupted by the unpredictability of  
  the state budget process and make the funding less  
  susceptible to diversion for other purposes.  The CPUC is  
  not the sponsor the language contained in the April 21  
  amendments to the bill.

2)While portions of this bill are substantially similar to  
  AB 2461 (Campbell) of 1998, it differs slightly in the  
  appointment of the advisory board members.  Both bills  
  require the CPUC to appoint the board members and to  
  attempt to achieve balanced public participation for each  
  board.  This bill additionally calls for the membership  
  of the board to reflect, to the extent possible and  
  consistent with existing law, the ethnic and gender  
  diversity of the state.  

3)Some provisions in this bill were dealt with when the  
  committee heard SB 1194 (Sher) on April 13.   The  
  committee may wish to making conforming amendments to  
  this bill by deleting the language contained on page 11,  
  lines 10-21.  

4)The bill transfers responsibility for the CARE and LIEE  
  programs from the utilities to the Department.  The goal  
  is to ensure that the current delivery mechanism for low  
  income energy assistance programs remains intact,  
  including the ability to deliver systems through  
  community-based organizations.  According to the author,  
  community-based organizations have demonstrated the  
  ability to effectively deliver energy assistance programs  










  to underserved communities.  Supporters of the bill argue  
  that such a transfer is appropriate because the  
  Department has over 14 years of experience administering  
  energy assistance and weatherization programs for low  
  income families.  They argue that the Department will be  
  able to coordinate the provision of the energy efficiency  
  programs they administer on behalf of others with the  
  energy efficiency programs transferred from the  
  utilities, thereby avoiding duplication of effort and  
  increasing program efficiency.

  The Office of the Ratepayer Advocate opposes this part of  
  the bill, contending this provision fixes something that  
  is not broken.   The CPUC is currently in the process of  
  reviewing the administration of the LIEE program and this  
  bill prejudges that process.  ORA notes that the CPUC  
  recently rejected shifting the program to a state agency  
  because of concerns that it could complicate the process  
  and procedures for fund administration and may give rise  
  to program oversight issues.

  Shifting the CARE program also raises particular concerns  
  because the current program is a credit on the utility  
  bill.  If such a program were administered by a state  
  agency the administration would be much more complicated  
  and costly. Rather than a relatively straightforward bill  
  credit where real money doesn't change hands, a  
  state-administered program would probably require money  
  to be transferred from the utility to the state agency,  
  significantly complicating the accounting.   If the  
  concern is that the CPUC and the utilities have done an  
  inadequate job of reaching out to low income households  
  then a more direct approach might be for the CPUC and  
  utilities to consult with the Department to improve its  
  outreach effort.

5)The bill also requires the Department to use the LIEE  
  program contractors which were in place as of April 1,  
  1999 to ensure that the current delivery mechanism for  
  low income energy assistance programs remains intact,  
  including the ability to deliver systems through  
  community-based organizations.  

  This provision is also opposed by the ORA, which sees no  










  reason to lock in the current set of contractors, and  
  believes such action provides no incentive to assure that  
  low-income customers are receiving the most benefit for  
  the least cost. By locking in the existing set of  
  contractors the opportunity to competitively bid this  
  work is lost, and any inefficiencies resulting from this  
  lock-in will either a) reduce the benefits available to  
  low income customers, or b) cost the general body of  
  ratepayers more.   The author and committee may wish to  
  consider amending the bill by requiring the program  
  administrators to consider the experience of the  
  contractor when evaluating the contractor bids and to  
  consider whether the contractor was a community-based  
  organization, without locking the current contractors in  
  place indefinitely.   This would provide an alternate  
  means of recognizing the value of existing contractors  
  and community based organizations while preserving the  
  benefits of competitive bidding.

6)At least two other bills deal with this same issue, SB  
  1194 (Sher) and AB 1393 (Wright), so the committee will  
  consider this subject matter again soon.

                          POSITIONS
  
  Support:
  ASCEEP
Bay Area Poverty Resource Council
California Department of Community Services and Development
Campesinos Unidos, Inc.
Community Enhancement Services
CPUC
Eddie Dillen Companies
MAAC Project
Maravilla Foundation
Pacific Asian Consortium in Employment
Pacific Bell
Riverside County Department of Community Action
San Bernardino County Community Services Department
Santa Barbara County Community Action Commission
Spectrum Community Services, Inc.
Inter-City Energy Systems, Inc.
Ventura County Commission on Human Concerns & Community  
Development










Veterans in Community Service, Inc.

  Oppose:
  Office of Ratepayer Advocates


Randy Chinn 
SB 1217 Analysis
Hearing Date:  April 27, 1999