BILL ANALYSIS Ó SB 1090 Page 1 Date of Hearing: August 6, 2014 ASSEMBLY COMMITTEE ON APPROPRIATIONS Mike Gatto, Chair SB 1090 (Fuller) - As Amended: July 1, 2014 Policy Committee: Utilities and Commerce Vote: 14-0 Urgency: No State Mandated Local Program: No Reimbursable: SUMMARY This bill requires the California Public Utilities Commission (PUC) to explicitly consider whether hardship will be caused to customers living in hot, inland areas before authorizing electrical corporations to impose default time-of-use (TOU) residential rates. FISCAL EFFECT Absorbable costs to the PUC. COMMENTS 1)Rationale. The PUC is currently prohibited from authorizing electrical corporations to impose mandatory or default time-variant pricing for residential customers until January 1, 2018. Rather than a single flat rate for energy usage, TOU pricing refers to a rate structure with higher rates when electricity demand is higher. Many business and agricultural investor-owned utility (IOU) customers have already transitioned to TOU rates. The IOUs currently offer TOU rates as a voluntary option for residential customers. If default TOU rates are implemented, residential customers would be automatically switched to these rates unless they take action to affirmatively notify the utility company to opt-out. The Utility Reform Network (TURN) notes that under one currently pending proposal for the establishment of default TOU rates, approximately 97% of PG&E residential customers in SB 1090 Page 2 the Bakersfield area would experience higher summer bills with almost 60% paying at least $30 more per month during the summer compared to 2013 rates. According to the author, the purpose of this bill is to ensure the PUC thoroughly examines the potential hardship for residential customers in very hot climates when considering the imposition of default TOU rates. 2)Background. The PUC is responsible for setting reasonable rates for utilities. In efforts to mitigate the impact of the energy crisis in 2000 and 2001 on customer bills, the Legislature adopted a number of restrictions on the PUC's rate making abilities and rate design. Last year, AB 327 (Perea) Chapter 611, Statutes of 2013, removed many of these statutory restrictions. AB 327 also explicitly allowed the PUC, beginning in January 1, 2018, to require or authorize electrical corporations to employ default TOU pricing for residential customers if specific conditions are met. One of the conditions mandates the TOU rate schedule will not cause unreasonable hardship for senior citizens or economically vulnerable customers in hot climate zones. In response to the passage of AB 327, the PUC opened a proceeding on rate design (R. 12-06-013). The scoping memo for this proceeding was released April 15, 2014. The proceeding will address a number of issues regarding TOU pricing, including pilot TOU programs for the summer of 2015 and the possibility of default TOU pricing beginning in 2018. This proceeding is anticipated to be completed early in 2015. Analysis Prepared by : Jennifer Galehouse / APPR. / (916) 319-2081