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  








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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