BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 695|
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THIRD READING
Bill No: SB 695
Author: Kehoe (D)
Amended: 5/28/09
Vote: 27 - Urgency
SENATE ENERGY, U. & C. COMMITTEE : 11-0, 4/21/09
AYES: Padilla, Benoit, Calderon, Corbett, Cox, Kehoe,
Lowenthal, Simitian, Strickland, Wiggins, Wright
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SUBJECT : Electricity rates
SOURCE : Author
DIGEST : This bill makes several changes to the state's
regulation of electricity, including allowing for increases
in some residential electricity rates, increasing the
ability of retail customers to purchase electricity
directly from generators, prohibiting mandatory
time-variant pricing, and making changes to existing energy
efficiency programs.
ANALYSIS : The investors-owned utilities (IOUs) have been
concerned about the consequences of the 130 percent of
baseline residential rate freeze on bills for large
residential electric consumers. The residential consumer
representatives have been concerned about the reopening of
direct access and the effect on electric prices and
reliability. This bill represents an agreement between the
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IOUs, the residential consumer representatives, and some of
the competitive electric providers.
Changes to current law made by SB 695 (Kehoe)
Under existing law, the Public Utilities Commission (PUC)
has regulatory authority over public utilities, including
electrical corporations, as defined. Existing law
authorizes the PUC to fix the rates and charges for every
public utility, and requires that those rates and charges
be just and reasonable.
This bill prohibits the PUC from requiring or permitting an
electrical corporation to employ mandatory or default
time-variant pricing for residential customers prior to
January 1, 2016, but authorizes the PUC to authorize an
electrical corporation to offer residential customers the
option of receiving service pursuant to time-variant
pricing and to participate in other demand response
programs. The bill requires the PUC to only approve an
electrical corporation's use of time-variant pricing for
residential customers, beginning January 1, 2016, if those
residential customers have the option to not receive
service pursuant to time-variant pricing and incur no
additional costs as a result of the exercise of that
option.
Existing law requires the PUC to establish a program of
assistance to low-income electric and gas customers,
referred to as the California Alternate Rates for Energy or
CARE program, and prohibits the cost to be borne solely by
any single class of customer.
This bill requires the PUC to establish the CARE program to
provide assistance to low-income electric and gas customers
with annual household incomes at or below 200 percent of
the federal poverty guideline levels, and requires that the
cost of the program, with respect to electrical
corporations, be recovered on an equal
cent-per-kilowatthour basis from all classes of customers
that were subject to the surcharge that funded the CARE
program on January 1, 2008. For a public utility that is
both an electrical corporation and a gas corporation, the
bill requires that the cost of the program be recovered on
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an equal cent-per-kilowatthour or per-therm basis from all
classes of customers that were subject to the surcharge
that funded the CARE program on January 1, 2008.
Existing law relative to electrical restructuring requires
that the electrical corporations and gas corporations that
participate in the CARE program administer low-income
energy efficiency and rate assistance programs described in
specified statutes, and undertake certain actions in
administering specified energy efficiency and
weatherization programs.
This bill requires that electrical corporations, in
administering the specified energy efficiency and
weatherization programs, to target energy efficiency and
solar programs to upper-tier and multifamily customers in a
manner that will result in long-term permanent reductions
in electricity usage by occupant of the dwelling units and
develop programs that specifically target rehabilitation
and weatherization of existing dwelling units and new
construction by, and new and retrofit appliances for,
nonprofit affordable housing providers. The bill requires
the PUC, by not later than December 31, 2020, to ensure
that all eligible low-income electricity and gas customers
are given the opportunity to participate in low-income
energy efficiency programs, including customers occupying
apartment houses or similar multiunit residential
structures, and requires the PUC and electrical
corporations and gas corporations to expend all reasonable
efforts to coordinate ratepayer-funded programs with other
energy conservation and efficiency programs and to obtain
additional federal funding to support actions undertaken
pursuant to this requirement.
Existing law relative to electrical restructuring requires
the PUC to authorize and facilitate direct transactions
between electricity suppliers and retail end-use customers.
Existing law requires the PUC to designate a baseline
quantity of electricity and gas necessary for a significant
portion of the reasonable energy needs of the average
residential customer, and requires that electrical and gas
corporations file rates and charges, to be approved by the
PUC, providing baseline rates and requires the PUC, in
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establishing baseline rates, to avoid excessive rate
increases for residential customers.
Existing law, enacted during the energy crisis of 2000-01,
authorized the Department of Water Resources (DWR), until
January 1, 2003, to enter into contracts for the purchase
of electricity, and to sell electricity to retail end-use
customers and, with specified exceptions, local publicly
owned electric utilities, at not more than DWR's
acquisition costs and to recover those costs through the
issuance of bonds to be repaid by ratepayers. That law
provides that DWR is entitled to recover certain expenses
resulting from its purchases and sales of electricity and
authorizes the commission to enter into an agreement with
the department relative to cost recovery. That law
prohibits the PUC from increasing the electricity charges
in effect on February 1, 2001, for residential customers
for existing baseline quantities or usage by those
customers of up to 130 percent of then existing baseline
quantities, until the department has recovered the costs of
electricity it procured for electrical corporation retail
end-use customers. That law also suspends the right of
retail end-use customers, other than community choice
aggregators and a qualifying direct transaction customer,
to acquire service through a direct transaction until DWR
no longer supplies electricity under that law.
This bill deletes the prohibition that the PUC not increase
the electricity charges in effect on February 1, 2001, for
residential customers for existing baseline quantities or
usage by those customers of up to 130 percent of then
existing baseline quantities. The bill authorizes the PUC
to increase the rates charged residential customers for
electricity usage up to 130 percent of the baseline
quantities by the annual percentage change in the Consumer
Price Index from the prior year plus one percent, but not
less than three percent, and not more than five percent per
year. This authorization will be subject to the limitation
that rates charged residential customers for electricity
usage up to the baseline quantities, including any customer
charge revenues, not exceed 90 percent of the system
average rate, as defined. The bill authorizes the PUC to
increase the rates for participants in the CARE program,
subject to certain limitations. The bill requires the PUC
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to authorize direct transactions subject to a phase-in
schedule of not less than three years and not more than
five years, and subject to total and yearly direct
transaction limits established, as specified, for each
electrical corporation. The bill continues the suspension
of direct transactions except as expressly authorized,
until the Legislature, by statute, repeals the suspension
or otherwise authorizes direct transactions.
Existing law requires the PUC to prepare and submit to the
Governor and the Legislature a written report on an annual
basis before February 1 of each year on the costs of
programs and activities conducted by an electrical
corporation or gas corporation that has more than a
specified number of customers in California.
This bill requires the report to contain the PUC's
recommendations for actions that can be undertaken during
the upcoming year to limit utility cost increases,
consistent with the state's carbon reduction, energy, and
environmental goals. The bill requires the PUC to annually
require electrical and gas corporations to study and report
to the PUC on measures that they recommend be undertaken to
limit cost increases.
Background
The 2000-01 electricity crisis, brought about by the 1996
deregulation of electric markets, elicited a number of
legislative responses designed to bring some order to
chaotic markets and to protect residential customers from
the worst of the rate increases. Responding quickly to the
crisis, the Legislature authorized the DWR to purchase
electricity on behalf of California's nearly broke
utilities, froze residential electric rates for specified
quantities of usage, and suspended direct access, the
program which permitted customers to purchase electricity
from providers other than the utility. This bill revises
all three of those legislative actions.
Recent History . Much of the content of this bill was
negotiated last year and contained in SB 1536 (Kehoe).
This bill was never heard in the Assembly.
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FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11
2011-12 Fund
PUC regulatory costs $105 $210 $210 Special *
UC energy savings About $400 in
savings per year, General
beginning sometime after 2013
CSU energy savings $1,000 to
$3,000 per year, beginning General
sometime after 2013
*PUC Utilities Reimbursement Account
Most of the regulatory costs due to changes to electricity
rates and regulations can be accommodated within existing
resources at the Public Utilities Commission. However, the
Commission estimates that it will require about $210,000
per year for additional workload in the Low Income Energy
Efficiency Program to oversee increased energy efficiency
program activities.
SUPPORT : (Verified 5/29/09)
Pacific Gas and Electric Company
Sempra Energy
Southern California Edison
The Utility Reform Network
Utility Consumer Action Network
DLW:do 5/29/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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