BILL ANALYSIS Ó SB 1207 Page 1 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. SB 1207 Page 2 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 | SB 1207 Page 3 |---------------------+-----------------------------| | 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: SB 1207 Page 4 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 SB 1207 Page 5 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