BILL ANALYSIS                                                                                                                                                                                                    �



                                                                  SB 743
                                                                  Page  1

          Date of Hearing:   August 14, 2014

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                  Mike Gatto, Chair

               SB 743 (Steinberg) - As Introduced:   February 22, 2013

          Policy Committee:                             Utilities and  
          Commerce     Vote:                            15-0

          Urgency:     No                   State Mandated Local Program:  
          No     Reimbursable:              

           SUMMARY  

          This bill revises the Public Utilities Commission's (PUC)  
          authority to increase electricity rates under the California  
          Alternative Rates for Energy (CARE) program.  Specifically, this  
          bill: 

          1)Deletes the requirement restricting increases in CARE rates to  
            no more than the annual increase in benefits from the  
            California Work Opportunity and Responsibility to Kids Act  
            (CalWorks) but no greater than 4% per year.

          2)Instead, allows increases in electricity rates for low-income  
            households participating in CARE programs administered by  
            regulated electrical corporations to increase at the same rate  
            as the Consumer Price Index (CPI) but no more than 4% per  
            year. 

           FISCAL EFFECT  

          1)Potential rate increases for CARE customers, though capped at  
            4% annually, pursuant to current law, similar to all other  
            rate payers.

          2)  Minor, absorbable costs to the PUC.

           COMMENTS  

           1)Purpose.   This bill modifies the index to which CARE customer  
            rate increases are tied.  
            The index would be the same for non-CARE customers, the CPI,  
            but capped at no more than 4%. This modification is consistent  








                                                                  SB 743
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            with the intent of the original SB 695 agreement to authorize  
            the PUC to increase rates for customers while capping rates  
            and protecting customers in the CARE program.

           1)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.


            In 2009, SB 695 (Kehoe) was enacted and permitted rate  
            increases for all tier 1 and 2 customers to an annual narrow  
            range and controlled the increase within relatively small  
            parameters.  The bill was intended to minimize spikes in  
            electricity rates and provide relative stability and  
            predictability.  SB 695 tied those rate increases to two  
            different indices - one for CARE customers (tied to increases  
            in CalWORKs benefits) and one for non-CARE customers (tied to  
            increases in the Consumer Price Index).

            CARE customer rates never increased because no cost of living  
            adjustments were provided for CalWORKs benefits.


           Analysis Prepared by :    Jennifer Galehouse / APPR. / (916)  
          319-2081