BILL ANALYSIS Ó 1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
SB 1207 - Fuller Hearing Date:
April 24, 2012 S
As Amended: April 16, 2012 FISCAL B
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DESCRIPTION
Current law requires the California Public Utilities Commission
(CPUC) to establish the California Alternate Rates for Energy
(CARE) program which provides a discount for electric and gas
service for customers whose incomes are below 200% of the federal
poverty guideline levels and limits the rate structure for CARE
customers to no more than three tiers. The commission is
required to set penetration rates for the IOUs and examine
methods to improve enrollment and participation.
Current law limits rate increases for CARE customers, until
January 1, 2019, to no more than the annual percentage increase
in the CalWORKS program, not to exceed 3% annually, and
thereafter requires that CARE customers receive at least a 20%
rate discount for service.
This bill authorizes electrical or gas corporations (investor
owned utilities or IOUs) to conduct random audits of eligibility
for CARE customers.
This bill authorizes IOUs, for CARE customers whose usage exceeds
400% of baseline in any monthly billing cycle, to require:
Proof of eligibility regardless of whether the customer
was automatically enrolled based on eligibility for another
assistance program or was self-enrolled;
A residential energy audit and condition continued
enrollment on participation in the audit; and
If the customer rents, to notify the utility of the
landlord's identity.
This bill authorizes IOUs, for CARE customers whose usage exceeds
600% of baseline for 120 days, to remove CARE customers from the
program..
This bill requires CARE customers whose usage exceeds 600% of
baseline for an unspecified time frame, to participate in a
residential energy audit, conditions further participation in the
program on the audit, and requires the customer to lower usage
within 120 days of an audit or be terminated from the program.
This bill authorizes an IOU to require back payment from a CARE
customer who is later determined to be ineligible for the program
for the difference between the cost of service with the CARE
discount and service for non-CARE customers.
This bill requires IOUs to immediately terminate a CARE customer
from the program for two years if they are found to have
defrauded the utility in any program or tampered with the utility
meter.
BACKGROUND
California Alternate Rates for Energy (CARE) - The CARE program
was designed to provide a 20 percent discount on monthly gas and
electric bills to income-qualified customers at their primary
residence and is funded through a rate surcharge paid by all
other utility customers. The income cap on CARE eligibility is up
to 200% above Federal Poverty Guidelines, which are updated
annually in June. Income guidelines are determined by the total
number of persons in the household and total combined annual
income as follows:
--------------------------------
|Household |Care Income |
|Size |Limit |
|--------------+-----------------|
|1 to 2 |$31,800 |
|--------------+-----------------|
|3 |$37,400 |
|--------------+-----------------|
|4 |$45,100 |
|--------------+-----------------|
|5 |$52,800 |
|--------------+-----------------|
|6 |$60,500 |
|--------------+-----------------|
|Each |$7,700 |
|additional | |
--------------------------------
Customers can enroll by self-certifying eligibility through an
IOU website, mail, or over the phone. Automatic enrollment
occurs if the customer is already enrolled in one of several
means-tested state or federal assistance programs such as TANF,
MediCal or Medicaid. Community based organizations are also paid
capitation fees of up to $15 per enrollment. The IOUs conduct a
post enrollment verification process (PEV) for 1-5% of the
enrolled CARE customers. Selection of those PEV'd are either
random for some IOUs, or based on a computer stratified selection
model that targets certain customers. If a customer fails to
provide all the available income documentation when selected for
PEV, they are removed from the CARE program, no back charges or
penalties are assessed.
The CPUC directed the IOUs to achieve a 90% penetration rate for
participation of eligible customers in the CARE program, which is
approximately 4.9 million households. According to the CPUC CARE
penetration rates are:
-------------------------------------------------------------------------------------------------------
|IOU | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | *2011 |
|------------+------------+------------+------------+------------+------------+------------+------------|
|PGE | 68%| 74%| 69%| 74%| 86%| 93%| 90%|
|------------+------------+------------+------------+------------+------------+------------+------------|
|SCE | 73%| 78%| 75%| 83%| 89%| 97%| 99%|
|------------+------------+------------+------------+------------+------------+------------+------------|
|SDGE | 61%| 65%| 69%| 74%| 80%| 83%| 85%|
|------------+------------+------------+------------+------------+------------+------------+------------|
|SoCalGas | 67%| 73%| 75%| 84%| 88%| 93%|93% |
| | | | | | | | |
-------------------------------------------------------------------------------------------------------
* 2011 figures are based on IOU December 2011 monthly
reports and have yet to be finalized.
COMMENTS
1. Author's Purpose . According to the author, because of
rate caps on CARE customers, increasing utility costs have
been disproportionately shifted to non-CARE customers with
usage in the upper tiers. Today, the gap between CARE and
non-CARE rates in the higher tiers is as much as 63%. In
addition, because of these rate caps, CARE customers have
little incentive to conserve, which only further drives up
costs for non-CARE customers. This bill seeks to reduce the
amount of costs that are shifted to non-CARE customers by
reducing the potential for fraud in the program and also
providing incentives to conserve. It maintains the essence
of the CARE program for those low-income individuals who are
legitimately qualified for the program and provides
utilities with a tool to recognize and identify high energy
users who may need efficiency assistance.
2. Prejudges Outcome of CPUC Decision . Approximately every
three years the IOUs file applications with the CPUC for
approval of program budgets for CARE and other low-income
programs. The applications are usually consolidated into
one proceeding in which the commission considers not only
the expenditures for the subsequent three-year cycle but
program goals and requirements. Applications for the
2012-14 cycle were filed last summer by the utilities and
are under consideration by the commission. The applications
are and subject to public review and comment in an open
proceeding with a decision expected in the next few months.
Several proposals in this bill mirror requests made by PG&E
in its application for the next program cycle. This
includes adoption of a requirement that customers over 600%
of baseline reduce usage to below the 600% level within 180
days and that a customer who fails to reduce usage to below
600% of baseline would have to be removed from the CARE
program until usage drops below such level.
This hard mandate of program termination without cause or
review doesn't consider whether the person or family lives
in a rented dwelling for which they have little or no
control over the quality of the HVAC systems, high heat
storms, or have multiple families living in one unit which
can dramatically increase load. TURN reports that this
issue is being thoroughly debated at the commission and that
they:
?along with several other consumer groups,
proposed modifications to PG&E's proposal, which
PG&E has accepted, that would provide these CARE
customers with reasonable and appropriate
protections prior to their removal from the CARE
program. These protections include a longer time
period during which to lower usage following the
energy audit, as well as an opportunity to appeal
the utility's determination that the customer
should be removed from CARE because of her or his
usage level. We are awaiting the Commission's
adoption of the new policy and procedures, and a
final decision is expected this spring.
Consequently, the committee may wish to consider amending
this bill to ensure that the CPUC can complete its
deliberative process and give the commission the flexibility
to consider program termination and adopt procedures for
termination under appropriate circumstances.
3. Ramifications of Fraud and Ineligibility . The utilities
do post-enrollment verification (PEV) of eligibility for
1-5% of CARE customers. As many as half of the customers
fail to respond to the PEV on a timely basis. As a result
they are terminated from the program until they do comply.
There are instances where customers take advantage of the
CARE program and are improperly enrolled and are terminated
because their income exceeds program eligibility. The
utilities do not seek reimbursement for ineligible
participation. This bill would require them to do so.
This bill also requires the utilities to immediately
terminate a customer from the CARE program for other fraud
and misrepresentation in other assistance programs or for
meter tampering.
Blanket repercussion for fraud and ineligibility does not
leave latitude for appeal by the customer, does not consider
instances where the customer fails to respond, and the many
other circumstances that the utilities encounter in dealing
with their millions of customers. TURN also notes that
these hard dictates for the treatment of customers leave
little discretion to the commission to determine "how best
to deter fraud in the CARE program and address it when it
does occur." Consequently the committee may wish to
consider striking these provisions at page 7, lines 28
through 38 and on page 8 at lines 3-9.
4. Rate Freeze Hangover . One of the many lingering effects
of the 2001-02 energy crisis is the impact on tier 1 and 2
electric rates. Those rates were completely frozen by the
Legislature during the energy crisis and not until January
1, 2010 were they allowed to increase. At that time
legislation was passed authorizing up to 5% annual rate
increases for tier 1 and 2 non-CARE customers until 2019.
Increases for CARE customers are tied to increases in
CalWORKs and cannot exceed 3% per year. Because there have
been no CalWORKs increases, there have consequently been no
electric rate increases for these customers and the
practical affect is that CARE customer rates remain frozen.
As a consequence the CARE discount which was intended to be
20% is generally higher. PG&E estimates that CARE
households in the next program cycle will receive discounts
on their electric charges that range from approximately 30%
for Tier 1 usage to 55% for Tiers 3-5 usage.
The additional result of the freezes and limits on rate
increases is that non-CARE customers in tiers 3, 4, and 5
have borne the brunt of all electric rate increases, public
purpose charges, and transmission and distribution cost
increases.
The disproportionate effect of the rate freezes has resulted
in many different approaches to limit the expense and reach
of the CARE program. This bill appears to fall into that
category.
POSITIONS
Sponsor:
Author
Support:
Division of Ratepayer Advocates, if amended
League of California Cities
San Diego Gas & Electric Company
Sempra Energy utilities
Southern California Gas Company
The Utility Reform Network, if amended
Oppose:
None on file
Kellie Smith
SB 1207 Analysis
Hearing Date: April 24, 2012