BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  SB 1207
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          SENATE THIRD READING
          SB 1207 (Fuller)
          As Amended  August 20, 2012
          Majority vote 

           SENATE VOTE  :39-0  
          
           UTILITIES & COMMERCE              12-0              
          APPROPRIATIONS      17-0        
           
           ----------------------------------------------------------------- 
          |Ayes:|Bradford, Fletcher,       |Ayes:|Gatto, Harkey,            |
          |     |Buchanan, Fong, Gorell,   |     |Blumenfield, Bradford,    |
          |     |Roger Hernández, Knight,  |     |Charles Calderon, Campos, |
          |     |Ma, Nestande, Skinner,    |     |Davis, Donnelly, Fuentes, |
          |     |Swanson, Valadao          |     |Hall, Hill, Cedillo,      |
          |     |                          |     |Mitchell, Nielsen, Norby, |
          |     |                          |     |Solorio, Wagner           |
           ----------------------------------------------------------------- 
           
          SUMMARY  :  Authorizes investor owned utilities (IOUs) to take 
          certain actions on participants of the California Alternate 
          Rates for Energy (CARE) program.   Specifically,  this bill  :   

          1)Authorizes IOUs to require proof of income eligibility for 
            CARE customers whose usage exceeds 400% of baseline.

          2)Authorizes IOUs to require CARE customers whose usage exceeds 
            400% of baseline to participate in an energy savings 
            assistance program (ESAP) that includes a residential energy 
            assessment.

          3)Authorizes IOUs to condition continued participation in an 
            ESAP if CARE customer usage exceeds 400% of baseline.

          4)Authorizes IOUs to require CARE customers to notify the 
            utility of whether the residence is rented, and identify the 
            landlord.  The IOU may share any evaluation and recommendation 
            relative to the residential structure that is made as part of 
            an energy assessment, with the landlord of the CARE customer.

          5)Authorizes IOUs to require CARE customers whose usage exceeds 
            600% of baseline to participate in an ESAP that includes a 
            residential energy assessment.








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          6)Makes participation in the ESAP mandatory if a CARE customer's 
            usage exceeds 600% of baseline.

          7)Authorizes IOUs to remove a CARE customer from the program, 
            after the completion of a residential energy assessment, if 
            the customer's monthly usage exceeds 600% of baseline. CARE 
            customer may appeal to the IOU to demonstrate usage levels are 
            legitimate.

          8)Exempts CARE gas customers from the provisions of this bill.

           FISCAL EFFECT  :  According to the Assembly Appropriations 
          Committee, any costs to the PUC will be minor and absorbable.

           COMMENTS  :  The author states that "SB 1207 seeks to reduce the 
          amount of costs that are shifted to non-CARE customers by 
          reducing the fraud within the program and providing incentives 
          to CARE customers to conserve.  It maintains the essence of CARE 
          program for those low-income individuals who are legitimately 
          qualified for the program and provides the utilities with a tool 
          to recognize and identify high energy users who may need energy 
          efficiency assistance."

           Background  :  CARE program offers income-qualified customers a 
          discount of 20% or
          more off their monthly gas and electric bill at their primary 
          residence.  The program is fully funded through a surcharge paid 
          by non-CARE customers.  Qualifications for the discount are 
          based on the number of persons living in your home and your 
          total annual household income.   
          Current income guidelines are effective June 1, 2012 through May 
          31, 2013 as follows:

                    --------------------------------------------------- 
                   |                     |    CARE & Energy Savings    |
                   |   Household Size    |Assistance Programs (200% of |
                   |                     | Federal Poverty Guidelines) |
                   |---------------------+-----------------------------|
                   |          1          |           $22,340           |
                   |---------------------+-----------------------------|
                   |          2          |           $30,260           |
                   |---------------------+-----------------------------|
                   |          3          |           $38,180           |








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                   |---------------------+-----------------------------|
                   |          4          |           $46,100           |
                   |---------------------+-----------------------------|
                   |          5          |           $54,020           |
                   |---------------------+-----------------------------|
                   |          6          |           $57,700           |
                   |---------------------+-----------------------------|
                   |          7          |           $62,940           |
                   |---------------------+-----------------------------|
                   |          8          |           $77,780           |
                   |---------------------+-----------------------------|
                   |  Each add'l person  |$                            |
                   |                     |7,920                        |
                   |                     |                             |
                    --------------------------------------------------- 

          Utility customers can enroll by self-certifying through the 
          utility's internet-website, mail, or over the telephone.  
          Customers may be automatically enrolled if they are enrolled in 
          a public assistance programs such as Medicaid, Medi-Cal, or 
          Temporary Assistance for Needy Families (TANF).  Community based 
          organizations are also paid capitation fees, under the 
          Capitation Fee Project, up to $15 per enrollment.  

          Due to the large number of CARE customers, IOUs conduct 
          post-enrollment verification (PEV) annually for 1-5% of the 
          enrolled CARE customers.  These customers are selected either 
          randomly or based on a computer stratified selection model that 
          targets certain customers.  As part of the PEV process, CARE 
          customers are asked to provide all the pertinent income 
          documentation.  If the customer fails to provide the required 
          documentation, they are removed from CARE program without having 
          to pay any back-charges or penalties.

          In 2008, PUC directed IOUs in D.08.11.031 to achieve a 90% 
          penetration rate for participation of eligible customers in the 
          CARE program, which are approximately 4.9 million households.  
          According to a May 4, 2012 PUC Proposed Decision (PD) - on IOUs 
          2012-2014 Energy Assistance Savings Program and CARE, IOUs 
          submitted reports showing extraordinarily high CARE Program 
          penetration rates as follows:











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                CARE Enrollments and Penetration Rate (December 2011)
                 ------------------------------------------------- 
                |   IOU    |Participants |  Eligible  |Penetration|
                |          |  Enrolled   |Participants|    Rate   |
                |          |             |            |           |
                |----------+-------------+------------+-----------|
                |PG&E      |  1,532,692  | 1,699,660  |   90.2%   |
                |----------+-------------+------------+-----------|
                |SCE       |  1,437,537  | 1,451,325  |    99%    |
                |----------+-------------+------------+-----------|
                |SoCalGas  |  1,716,495  | 1,847,296  |   92.9%   |
                |----------+-------------+------------+-----------|
                |SDG&E     |   308,596   |  362,551   |85.1%      |
                |          |             |            |           |
                 ------------------------------------------------- 

           Problems with CARE  :  IOUs conduct a PEV of eligibility for 1-5% 
          of CARE customers.
          In some cases, nearly half of the customers fail to respond to 
          the PEV on a timely basis which ultimately results in their 
          termination from the program.  PG&E conducted a PEV on 161,000 
          customers in 2011 which represented about 11% of customers.  
          According to PG&E data, about 42% of customers who go through 
          their PEV process are removed from CARE.  Reasons for 
          termination range from documentation showing they are 
          ineligible, requests to be removed instead of providing 
          qualifying documentation, and failure to respond.   

          Moreover there are approximately 12,700 CARE customers in PG&E 
          territory with usage greater than 600% of baseline amounting to 
          $69 million in discounts which equates to about 10% of all CARE 
          program discounts.  There are 10,600 PG&E CARE customers in the 
          400-600% range and $36 million in discounts and 27,600 customers 
          in the 300-400% range for $65 million in discounts.  

          IOUs and other stakeholders presented evidence in the 2012-2014 
          CARE Budget Applications proceeding A.11-05-017 which 
          demonstrated that a small percentage of customers may be 
          consuming large amounts of energy under CARE rate for 
          illegitimate reasons. 

           Off-ramps  :  Recent amendments to SB 1207 allow CARE customers 
          with usage over 600% to appeal to the IOU to demonstrate that 








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          their usage is legitimate. The bill also prohibits a CARE 
          customer from being removed from the program if their landlord 
          is non-responsive to contact by the IOU or does not provide for 
          ESAP participation.

           CARE impacts on Non-CARE customers  :  The 2001-02 energy crisis 
          had an impact on Tier
          1 and 2 electricity rates.  The Legislature froze these rates 
          during the energy crisis and it wasn't until January 1, 2010, 
          they were allowed to increase.  During that time, legislation 
          was passed authorizing up to 5% annual rate increases for Tier 1 
          and 2 non-CARE customers until 2019.  CARE increases are linked 
          to increases in CalWORKs and cannot exceed 3% per year.  
          CALWORKs has not increased, which means CARE customer rates 
          remain frozen.  As a result, the CARE discount is slightly 
          higher than 20%.  According to PG&E estimates, CARE households 
          in the next program cycle will receive discounts on their 
          electric usage charges that range from approximately 30% for 
          Tier 1 usage to 55% for Tiers 3-5 usage.  

          The chilling effect of the rate freezes and limits on rate 
          increases is that non-CARE customers in tiers 3, 4 and 5 bear 
          the burden of all of the electric rate increases, public purpose 
          charges, and transmission and distribution cost increases.


           Analysis Prepared by  :    DaVina Flemings / U. & C. / (916) 
          319-2083 
                                                                FN: 0005124