BILL ANALYSIS Ó
AB 327
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 327 (Perea)
As Amended September 6, 2013
Majority vote
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|ASSEMBLY: |66-4 |(May 23, 2013) |SENATE: |33-5 |(September 9, |
| | | | | |2013) |
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Original Committee Reference: U. & C.
SUMMARY : Modifies statutory requirements specific to
residential rate design applicable to the customers of Investor
Owned Utilities (IOUs). Specifically, this bill :
1)Requires the California Public Utilities Commission (PUC),
when it approves changes to electric service rates charged to
residential customers, to determine that the changes are
reasonable, including that the changes are necessary in order
to ensure that the rates paid by residential customers are
fair, equitable, and reflect the costs to serve those
customers.
2)Requires PUC to consider specified principles in approving any
changes to electric service rates.
3)Requires PUC to report to the Legislature its findings and
recommendations relating to tiered residential electric
service rates in a specified rulemaking by January 31, 2014.
4)Recasts and revises limitations on electric and natural gas
service rates of residential customers, including the rate
increase limitations applicable to electric service provided
to California Alternate Rates for Energy (CARE) customers.
The Senate amendments , substantively revise this bill by adding
new provisions related to the following:
1)Require the IOUs to provide annual distribution plans and for
the PUC to approve those plans, if it finds them reasonable,
in each IOU General Rate Case.
2)Revise the current Net Energy Metering (NEM) statute to
specify the maximum program capacity for customers in IOU
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service areas, require the PUC to develop a new NEM program by
July 2015 and establish a transition to the new NEM program by
2017. The new NEM program is to be based on electrical system
costs and benefits to nonparticipating ratepayers and remove
both the total system capacity cap and the one megawatt
project size limit. Existing NEM customers will be
transitions no later than December 2020 to the new NEM.
3)Provide the PUC with authority to require IOUs to procure
renewable energy generation above that which is required in
the 33% Renewable Portfolio Standard.
4)Authorize the PUC to approved fixed monthly charges no greater
than $10 for residential customers and $5 for low-income
customers beginning in 2016.
5)Specify discounts for low-income customers are not to exceed
30% to 35% of the average non-low-income customer.
6)Establish that by 2018 the default rate schedule for
residential customers shall be based on Time of Use and
establishes provisions to protect senior or other vulnerable
customers, in hot climate zones, from unreasonable hardship.
7)Add technical amendments to the provisions related to
residential electricity rate reform.
FISCAL EFFECT : According to the Senate Appropriations
Committee:
1)Annual costs of approximately $116,000 from the Public
Utilities Reimbursement Account (special) for the workload
involved in conducting a triennial assessment of the needs of
low-income electricity and gas customers.
2)Cost pressures in the millions to tens of millions of dollars
to the General Fund and various special funds to the state as
a ratepayer should the PUC exercise the authority in this bill
to raise renewable energy procurement requirements.
3)One-time costs of at least $120,000 from the Public Utilities
Reimbursement Account for the development of a new NEM
standard contact and tariff, a transition period for existing
NEM customers, and the eligible period for a fuel-cell
standard tariff.
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4)One-time costs of at least $120,000 and ongoing costs of up to
$120,000 from the Public Utilities Reimbursement Account to
review distribution resource plans and to establish criteria
on evaluating the success of investments made pursuant to such
a plan.
5)Cost pressures in the hundreds of thousands of dollars to the
General Fund and various special funds to the state as a
ratepayer to the extent that the distribution resources plan
proposals lead to necessary infrastructure spending that will
be paid by the ratepayers.
COMMENTS :
1)Author's Statement . "The energy crisis is long over, but laws
meant to protect residential rate users are now preventing
CPUC from governing the rate structure and making necessary
changes for the thousands of middle to low income families
struggling to pay high energy costs. For example, the gap
between Tier 2 and Tier 5 increased from 5 cents per kWh to 15
cents per kWh today. Absent rate reform, the gap between Tier
2 and Tier 5 will double to nearly 29 cents per kWh by 2022
causing tens of thousands of customers to pay rates
significantly higher than the actual cost of electricity.
Without legislative changes, the CPUC has only very limited
ability to fix this unfair residential electric rate
structure."
2)Energy Crisis of 2000-01 . During the energy crisis, AB 1 X1
(Keeley), Chapter 4, Statutes of 2001, protected ratepayers
from rampant price fluctuations due to a dysfunctional
wholesale electricity market. AB 1 X1 authorized the
Department of Water Resources (DWR) to issue revenue bonds to
purchase power on behalf of the cash-strapped IOUs who could
not keep up with the volatile wholesale prices. Among other
stabilizing efforts, AB1 X1 prohibited PUC from increasing
rates for usage under 130% of baseline until DWR bond charges
are paid off. These restrictions did not apply to customers
of publicly owned utilities, about 25% of electricity
customers in California. Subsequent legislation (SB 695
(Kehoe), Chapter 227, Statutes of 2009) removed the freeze on
Tiers 1 and 2 and allowed very limited rate increases.
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3)PUC Residential Rate Design Proceeding Underway . On June 28,
2012, PUC initiated a proceeding to examine current
residential electric rate design, including the tier structure
in effect for residential customers, the state of time variant
and dynamic pricing, potential pathways from tiers to time
variant and dynamic pricing, and preferable residential rate
design. This PUC proceeding is open to the public and allows
interested parties opportunities to participate by making
comments on PUC rulings, making rate design proposals,
commenting on proposals made by others, commenting on
proposals made by staff, and commenting on any decision made
by PUC. According to the public schedule, final rounds of
comments are due mid-summer 2013. This would be followed by a
draft decision, which is also open to comments.
4)Residential Electricity Rate Design may not change the bill .
It is important to make a distinction between rate design and
the customer's bill. Redesigning rates does not necessarily
result in a change in the customer's bill. This bill includes
language to maintain protections for low income ratepayers to
ensure affordable energy bills.
5)Rate Reform Impacts on Low Income households . Currently, CARE
customers are to receive a 20% discount off of their electric
and gas bills. However, because of the cap on Tiers 1 and 2,
the effective discount can be much higher if CARE customer is
using more than 130% of the baseline allocation. In some
instances, Pacific Gas and Electric (PG&E) has reported
providing discounts in the range of 60% off of the otherwise
applicable bill.
6)No Action is Action . For residential customers, rate
increases must be disproportionately placed on the price paid
for electricity by residential customers whose usage exceeds
their Tier 2 allocation. Until the statute restricting rate
design is modified, this will continue.
As more customers elect to reduce electricity consumption
through energy efficiency measures or on-site self-generation,
fewer customers will remain to recover service costs. This
will result in even higher rates for those customers in the
higher tier usage.
In addition to CARE, the Legislature has authorized several
ratepayer funded programs to assist low income households,
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procure energy efficiency, and develop new technologies and
business models. These include the Self Generation Incentive
Program (SGIP), the California Solar Initiative (CSI), Energy
Efficiency Incentive Programs (EEIP), the Energy Savings
Assistance Program (ESAP, free weatherization and appliances
for qualified low-income homes), and Net Energy Metering.
Analysis Prepared by : Susan Kateley / U. & C. / (916)
319-2083
FN: 0002659