BILL ANALYSIS 1 1 SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE DEBRA BOWEN, CHAIRWOMAN ------------------------------------------------------------ |SB 1217 - Polanco |Hearing Date:April 27, | S| | |1999 | | |------------------------------+--------------------------+--| |As Amended:April 21, 1999 | | B| |------------------------------+--------------------------+--| | | | | |------------------------------+--------------------------+--| | | | 1| |------------------------------+--------------------------+--| | | | 2| |------------------------------+--------------------------+--| | | | 1| |------------------------------+--------------------------+--| | | | 7| |------------------------------+--------------------------+--| | | | | ------------------------------------------------------------ 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