BILL ANALYSIS Ó
AB 401
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Date of Hearing: March 23, 2015
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Rendon, Chair
AB
401 (Dodd) - As Introduced February 19, 2015
SUBJECT: Low-Income Water Rate Assistance Program
SUMMARY: AB 401 would require the Department of Community
Services and Development (CSD), in collaboration with the Board
of Equalization (BOE), by January 1, 2017, to develop a plan for
the funding and implementation of a program to provide funding
assistance for water service to households with less than 200
percent of the federal poverty guideline level.
EXISTING LAW:
1)Establishes the Department of Community Services and
Development and charges it with improving the quality of life
for low-income Californians. (Government Code 12085)
2)Establishes the California Alternate Rates for Energy (CARE)
Program to assist low-income electric and gas customers with
annual household incomes that are no greater than 200 percent
of the federal poverty guideline levels. (Public Utilities
Code 739.1)
3)Allows the California Public Utilities Commission (PUC) to
consider and implement programs to provide water rate relief
for low-income ratepayers. (Public Utilities Code 739.8)
4)Allows any public agency providing public utility service to
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impose a fee, including a rate, charge, or surcharge, for any
product, commodity, or service provided to a public agency,
and that such a fee for public utility service, other than
electricity or gas, shall not exceed the reasonable cost of
providing the public utility service. (Government Code
54999.7)
5)Provides that special taxes shall not include any fee which
does not exceed the reasonable cost of providing the service
or regulatory activity for which the fee is charged.
(Government Code 50076)
6)Provides that a fee encompasses any levy other than an ad
valorem tax, a special tax, or an assessment, imposed by an
agency upon a parcel or upon a person as an incident of
property ownership, including a user fee or charge for a
property related service. (California Constitution, Article
XIIIC)
FISCAL EFFECT: Unknown
COMMENTS:
1)Author's Comment. "Water affordability is a central element to
water access. When water costs make water unaffordable, it can
pose a health and safety issue and a myriad of administrative
and political problems. Households paying an amount for water
that exceeds an affordability threshold are considered to be
paying a cost that is unaffordable and a "high burden."
A commitment to water affordability is rooted in both human
rights and public welfare. While recognition of the Human
Right to Water goes back to the 1970s, the legal basis of this
right was strengthened in 2012 when the California Legislature
passed AB 685, which established a human right to water in
California and directed "all relevant state agencies,
including the department of water resources, the state water
resources control board, and the State Department of Public
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Health, to consider this state policy when revising, adopting,
or establishing policies, regulations, and grant criteria."
2)Proposition 218. California voters approved Proposition 218 in
November 1996, adding Articles XIIIC and D to the California
Constitution. This resulted in the state of California
considering water and wastewater services as property-related
fees and as such, subject to state constitutional and
statutory requirements. As such, publicly-owned water
utilities (POUs) must restrict water rates to the cost of
service which is a barrier to a using ratepayer funds to
provide financial support or assistance to low income water
utility customers.
Additional complications with creating state-wide low-income
water rate program arise related to Propositions 13 and 26.
Proposition 13, as established by voters in 1979, provides
that "special taxes shall not include any fee which does not
exceed the reasonable cost of providing the service or
regulatory activity for which the fee is charged." In 2010,
voters approved Proposition 26, which establishes that the
"?local government bears the burden of proving by a
preponderance of the evidence that a levy, charge, or other
exaction is not a tax, that the amount is no more than
necessary to cover the reasonable costs of the governmental
activity, and that the manner in which those costs are
allocated to a payor bear a fair or reasonable relationship to
the payor's burdens on, or benefits received from, the
governmental activity."
The cost of service mandates related to Propositions 13, 26,
and 218 would make it difficult for POUs to provide a program
to support low-income customers.
3)Investor-owned versus publicly-owned water utilities. The PUC
is charged with ensuring California's 115 investor-owned water
utilities (IOU) and 14 investor-owned wastewater utilities
provide safe and reliable water to customers at reasonable
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rates. Water utilities regulated by the PUC deliver water
service to about 16% (~6 million) of the state's population.
In recent years, IOUs have requested rate increases ranging
from 7-45% over three year spans. The PUC has granted
increases of 10%-24%. Average water bills range from $42-$82,
and with the increases, bills are rising or have risen to
$46-$95 (a $4-$13 increase). These increases, especially if
continued in the foreseeable future, may be unaffordable to
low-income ratepayers without discounts or subsidies.
Of the IOUs, only the largest 9 large water utilities are
authorized by the PUC to offer Low-Income Rate Assistance
(LIRA) programs. The 9 large IOU water utilities together
serve approximately 1.175 million customers. If a ratepayer
meets low-income eligibility criteria, a discount is provided.
These discounts are funded by non-participating ratepayers.
Current enrollment in LIRA programs is 255,982 or about 21.7
of residential customers. Discounts available to qualifying
low-income customers vary widely, ranging from
percentage-based to flat dollar discounts on the ratepayer's
bill. These varying discounts are provided and allowed for by
the PUC due to unique circumstances in each area. Surcharges
levied upon non-participating customers (i.e., those not
eligible for rate relief programs) are not standardized.
4)Water rates: affordability versus income. The US Environmental
Protection Agency (EPA) and the California Department of
Public Health use a "water affordability threshold" to factor
in variable costs of living across California. For example, at
a threshold of 1.5%, a household at the California median
income of $61,000 would not be expected to pay over $915 per
year for water ($76.25/month). Households with water bills
exceeding this threshold are considered to be paying a cost
that is unaffordable and a "high burden".
In Lucerne, one of Lake County's most disadvantaged
communities, the average resident's water bill, according to
local news accounts, would have doubled from $62.85 to $124.22
per month - this occurring in an area with a median household
income of ~$25,000 (versus California's median income of
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~$61,000). In the case of Lucerne, it is estimated that an
affordable monthly bill would be $32.50 or less. In reality,
the average bill is $85 - about 2.5 times the affordable
amount.
5)Related Legislation.
AB 1434 (Yamada, 2014) - held in Senate Appropriations
REGISTERED SUPPORT / OPPOSITION:
Support
Clean Water Action of California
Community Water Center, El Centro Comunitario por el Agua
Utility Workers Union of America
Opposition
None on file.
Analysis Prepared
by: Sue Kateley / U. & C. / (916) 319-2083
AB 401
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