BILL ANALYSIS Ó
AB 327
Page 1
Date of Hearing: May 15, 2013
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 327 (Perea) - As Amended: April 23, 2013
Policy Committee: Utilities and
Commerce Vote: 15-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill deletes specified electricity and natural gas rate
restrictions and establishes principles of rate design, and
directs the Public Utilities Commission (PUC) to establish new
rates. 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 if the changes are
reasonable, including whatever changes are necessary to ensure
the rates paid by residential customers are fair, equitable,
and reflect the costs to serve those customers.
2)Requires the PUC to consider specified principles in approving
any changes to electric service rates.
3)Requires the 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.
FISCAL EFFECT
1)Unknown, potentially significant rate increase or decreases
among investor-owned utility customers.
2) Minor, absorbable costs to the PUC to establish new rates.
AB 327
Page 2
COMMENTS
1)Rationale. According to the author, the energy crisis is
over, but laws meant to protect residential rate users are now
preventing the 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 in one day recently.
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.
This bill allows PUC to adjust the residential electric rate
structure.
2)Background. During the energy crisis, AB1 x1 (Keeley, 2001)
protected ratepayers from rampant price fluctuations in the
wholesale electricity market. AB1 x1 authorized the
Department of Water Resources (DWR) to issue revenue bonds to
purchase power on behalf of the cash-strapped investor-owned
utilities who couldn't keep up with the volatile wholesale
prices. Among other stabilizing efforts, AB1 x1 prohibited the
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.
SB 695 (Kehoe, 2009) was intended to minimize spikes in
electricity rates and provide relative stability and
predictability. Among its provisions, the bill removed the
freeze on Tier 1 and Tier 2 rates and replaced it with
formulas intended to allow gradual rate increases through 2018
at which time the caps for those increases would sunset.
Different formulas were created for CARE and non-CARE
customers
3)Support. Numerous utilities, labor and business
organizations as well as local governments support this
legislation asserting current rates are punitive and
discriminatory at the top tier. Families and businesses who
live in hotter, inland areas are subsidizing the rates for
AB 327
Page 3
cooler coastal residents.
4)Opposition. This bill is opposed by senior organizations, the
Division of Ratepayer Advocates, and the Utility Reform
Network who assert the previous formula did not work and any
changes to the law require further protections for low-income
households.
Analysis Prepared by : Jennifer Galehouse / APPR. / (916)
319-2081