BILL ANALYSIS Ó
AB 327
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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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|COMMITTEE VOTE: |14-0 |(September 11, |RECOMMENDATION: |concur |
|(U. & C.) | |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
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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 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
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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.
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
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freeze on Tiers 1 and 2 and allowed very limited rate increases.
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
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ratepayer funded programs to assist low income households,
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: 0002834