BILL ANALYSIS Ó
AB 401
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Date of Hearing: April 15, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
AB
401 (Dodd) - As Amended April 8, 2015
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Urgency: No State Mandated Local Program: NoReimbursable:
SUMMARY:
This bill requires the Department of Community Services and
Development (CSD), in collaboration with the Board of
Equalization (BOE) and relevant stakeholders, to develop a plan
to fund and implement a Low-Income Water Rate Assistance Program
AB 401
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by January 1, 2017, for households with less than 200 percent of
the federal poverty guideline level.
FISCAL EFFECT:
1)Potential GF or special fund cost pressures, possibly in the
millions of dollars, for the implementation of the plan.
2)Increased GF costs to CSD in the $350,000 range over a
two-year period to conduct the feasibility study and develop
the rate assistance program.
3)Minor, absorbable costs for the BOE to participate in the
development of the plan.
COMMENTS:
1)Purpose. According to the Author, 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.
2)Background. This bill, in part, is a result of the struggle
between the community of Lucerne (Lake County) and the
investor-owned water utility (IOU) Cal Water. In July 2012,
Cal Water filed a request with the California Public Utilities
Commission (PUC) for a water rate increase of 77% over three
years to ratepayers 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
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$62.85 to $124.22 per month. Lucerne is an area with a median
annual household income of approximately $25,000 as opposed to
the statewide median annual income of approximately $61,000.
A recent pending settlement between PUC and Cal Water would
not drastically increase water rates in Lucerne. However, over
recent years, Lucerne has been subject to large rate
increases. In 2005, Cal Water sought a 247% rate increase,
receiving PUC approval for a 120% rate increase. In 2009, Cal
Water requested an increase of 54.9%, and received approval
for an increase of 41.8%.
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 the case of Lucerne, it
is estimated an affordable monthly bill would be $32.50 or
less. In reality, the average bill is $85 - about 2.5 times
the affordable amount.
3)Water Services Providers. The PUC is charged with ensuring
California's 115 investor-owned water utilities and 14
investor-owned wastewater utilities provide safe and reliable
water to customers at reasonable rates. Water utilities
regulated by the PUC deliver water service to about 16% of the
state's population.
The remaining water customers in California are served by
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publicly-owned utilities (POU) (cities, water districts, and
mutual water companies), which are self-regulated and not
under PUC jurisdiction. POUs must restrict water rates to
the cost of service. It is unclear how POUs will be able to
offer rate assistance without violating special tax and fee
laws.
4)The Department of Community Services and Development. CSD
partners with a network of private, non-profit and local
government community service providers dedicated to helping
low-income families achieve and maintain self-sufficiency,
meet their home energy needs and reside in housing free from
the dangers of lead hazards. As such, CSD is the appropriate
state agency to perform this study.
5)Previous Legislation. Last year, a very similar measure AB
1434 (Yamada), passed this Committee but was held in Senate
Appropriations.
Analysis Prepared by:Jennifer Galehouse / APPR. / (916)
319-2081