BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 695|
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UNFINISHED BUSINESS
Bill No: SB 695
Author: Kehoe (D)
Amended: 8/17/09
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
SENATE FLOOR : 37-0, 6/1/09
AYES: Aanestad, Alquist, Ashburn, Benoit, Calderon,
Cedillo, Cogdill, Corbett, Correa, Cox, Denham,
DeSaulnier, Ducheny, Dutton, Hancock, Harman,
Hollingsworth, Huff, Kehoe, Leno, Liu, Lowenthal,
Maldonado, Negrete McLeod, Oropeza, Padilla, Pavley,
Romero, Runner, Simitian, Steinberg, Strickland, Wiggins,
Wolk, Wright, Wyland, Yee
NO VOTE RECORDED: Florez, Walters, Vacancy
ASSEMBLY FLOOR : 76-1, 9/1/09 - See last page for vote
SUBJECT : Electricity rates
SOURCE : Author
DIGEST : This bill makes several changes to the states
regulation of electricity, including allowing for increases
in some residential electricity rates, increasing the
CONTINUED
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ability of retail customers to purchase electricity
directly from generators, prohibiting mandatory
time-variant pricing, and making changes to existing energy
efficiency programs.
Assembly Amendments generally prohibit the California
Public Utilities Commission (CPUC) from requiring mandatory
or default time-variant pricing for electric service for
residential customers until 2014, which sunsets the
prohibitions two years earlier than the version passed by
the Senate. Beginning on 2014, the CPUC may authorize
time-variant pricing for residential customers, consistent
with the other provisions of the public Utilities Act,
provided the customer has the option not to receive
time-variant pricing and can exercise that option without
additional charge; allow the CPUC to authorize real-time
pricing for residential customers beginning in 2020;
real-time pricing was not considered in the version passed
by the Senate; and make a number of minor changes to
clarify the bill and remove opposition.
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
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 CPUC has regulatory authority over
public utilities, including electrical corporations, as
defined. Existing law authorizes the CPUC 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 CPUC from permitting a utility to
employ mandatory or default time-variant pricing for any
residential customer prior to January 1, 2014. However,
mandatory or default time-variant pricing can be authorized
as early as January 1, 2013 if the utility caps the
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customer's bill as the level it would have been had the
customer not changed his rate schedule to time-variant
pricing. Mandatory or default real-time pricing may be
permitted as early as January 1, 2020. Beginning January
1, 2014, the CPUC may approve time-variant pricing in a
manner consistent with the Public Utilities Act if the
customer has the option not to be subject to time-variant
pricing and that option can be exercised without charge.
Existing law requires the CPUC 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 CPUC to establish the CARE program
to provide assistance to low-income electric and gas
customers with annual household incomes no greater than 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
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
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develop programs that specifically target nonprofit
affordable housing providers. The bill requires the CPUC,
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 CPUC 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 CPUC to authorize and facilitate direct transactions
between electricity suppliers and retail end-use customers.
Existing law requires the CPUC 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
CPUC, providing baseline rates and requires the CPUC, in
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 CPUC 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
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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 CPUC 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 CPUC 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
CPUC to increase the rates for participants in the CARE
program, subject to certain limitations. The bill requires
the CPUC 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.
Existing law requires the CPUC 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 CPUC'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 CPUC to
annually require electrical and gas corporations to study
and report to the CPUC on measures that they recommend be
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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.
According to the author's office, the purpose of this bill
is to lift some of the emergency measures imposed during
the energy crisis-including capping residential retail
rates and suspending the ability of customers to choose a
direct-access electricity provider-that at the time helped
stabilize rates. Maintaining current policies could
actually lead to dramatic rate changes if the rate
stabilization measures imposed during the crisis were
suddenly released without the incremental changes proposed
in this bill.
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.
Related legislation
AB 413 (Fuentes), a similar bill, is pending in the Senate
Appropriations Committee.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
The CPUC can absorb the workload in this bill within
existing resources, using staff currently working on the
low-income assistance program, direct access, low-income
energy efficiency programs, and rate design.
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SUPPORT : (Verified 9/2/09)
Durant Energy
Pacific Gas and Electric Company
Sempra Energy
Shell Energy
Southern California Edison
The Utility Reform Network
Utility Consumer Action Network
OPPOSITION : (Verified 9/2/09)
California Large Energy Consumers Association
California Manufactures Technology Association
ASSEMBLY FLOOR :
AYES: Adams, Ammiano, Anderson, Arambula, Beall, Bill
Berryhill, Tom Berryhill, Blakeslee, Block, Blumenfield,
Brownley, Caballero, Charles Calderon, Carter, Chesbro,
Conway, Cook, Coto, Davis, De La Torre, De Leon, Duvall,
Emmerson, Eng, Evans, Feuer, Fletcher, Fong, Fuentes,
Fuller, Furutani, Gaines, Galgiani, Garrick, Gilmore,
Hagman, Hall, Hayashi, Hernandez, Hill, Huber, Huffman,
Jeffries, Jones, Knight, Krekorian, Lieu, Logue, Bonnie
Lowenthal, Ma, Mendoza, Miller, Monning, Nava, Nestande,
Niello, Nielsen, John A. Perez, V. Manuel Perez,
Portantino, Ruskin, Salas, Saldana, Silva, Skinner,
Smyth, Solorio, Audra Strickland, Swanson, Torlakson,
Torres, Torrico, Tran, Villines, Yamada, Bass
NOES: DeVore
NO VOTE RECORDED: Buchanan, Harkey, Vacancy
DLW:do 9/2/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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