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:May 11, 1999 | S|
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|As Amended:May 6, 1999        |                          | B|
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                         DESCRIPTION
  
  Part 1:

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.

  Part 2:

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  makes legislative findings that the Department of  
Community Services and Development (Department) has  
administered federal low income energy assistance and  
weatherization programs and has successfully collaborated  
with community service providers in administering these  
programs.  This bill states the intent of the Legislature  
to strengthen the current network of community service  
providers by transferring California's low income energy  
assistance programs to the Department.  This bill further  
states that it is the intent of the Legislature that any  
evaluation of the effectiveness of such programs be based  
on the degree to which the provision of the services allows  
maximum program accessibility to low-income communities by  
agencies that have effectively delivered services to those  
communities.

  This bill  transfers the low income rate assistance program  
and the low income energy efficiency program to the  
Department on June 1, 2000.

  This bill  requires the Department to utilize the  
contractors currently under contract with the utilities.   
This bill requires the policies, procedures, and  
eligibility requirements in effect on April 1, 1999 to  
remain in effect.  The Department is permitted to change  
contractors and alter those policies, procedures, and  
eligibility requirements after considering public input.   
In selecting new contractors the Department is required to  
give special consideration to local public and private  
nonprofit organizations currently doing similar work.

  This bill  requires the Department to contract out the  
outreach efforts for the low income rate assistance  
program.

  This bill  requires the Bureau of State Audits to conduct a  
performance and financial audit of the Department with  
regard to its administration of these programs no later  
than July 1, 2002 and every two years thereafter.

                        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 outreach for low income rate assistance programs  
  be contracted out?

3)  Should competitive bidding for low income energy  
efficiency programs be delayed?

                          BACKGROUND
  
  Part 1:

  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 portion of the bill 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.

  Part 2:

  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  
which costs $4 million annually.

                           COMMENTS
 
1)Part 1 of the bill is sponsored by the CPUC to create 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 of the language contained in the May 6  
  amendments to the bill.

2)While portions of this bill (Part 1) are substantially  
  similar to AB 2461 (Campbell) of 1998, this bill 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)Part 2 of the bill transfers responsibility for the CARE  
  and LIEE programs from the utilities and the CPUC 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 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 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 Southern California Edison, Sempra Energy, the Office  
  of the Ratepayer Advocate, and the Latino Issues Forum  
  oppose this part of the bill, contending it fixes  
  something that isn't broken.   The CPUC is currently  
  reviewing the administration of the LIEE program and this  
  bill prejudges the outcome of 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.  Sempra  










  opposes the transfer, arguing that current program  
  administration is efficient and transferring it raises  
  accountability issues, may decrease administrative  
  efficiency, and may let non-utility customers benefiting  
  from a program paid for by utility ratepayers.  Southern  
  California Edison, ORA, and the El Dorado County  
  Department of Community Services raise questions as to  
  the ability of the Department to efficiently administer  
  these programs.

  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 or community  
  service organizations to improve its outreach effort.

4)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.  The CPUC has required the  
  utilities to propose plans for competitively bidding the  
  LIEE programs.  Transferring the programs to the  
  Department will delay the competitive bid effort.  While  
  the bill permits the Department to change contractors,  
  there is no mandate or timeframe to do so.

5)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:
  El Dorado County Department of Community Services
Inyo Mono Advocates for Community Action, Inc.
Latino Issues Forum
Office of Ratepayer Advocates
Southern California Edison
Sempra Energy


Randy Chinn 
SB 1217 Analysis
Hearing Date:  May 11, 1999