BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                       AB 401


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          ASSEMBLY THIRD READING


          AB  
          401 (Dodd)


          As Amended  April 8, 2015


          Majority vote


           ------------------------------------------------------------------- 
          |Committee       |Votes |Ayes                |Noes                  |
          |                |      |                    |                      |
          |                |      |                    |                      |
          |----------------+------+--------------------+----------------------|
          |Utilities       |9-3   |Rendon, Achadjian,  |Patterson, Hadley,    |
          |                |      |Burke, Cristina     |Obernolte             |
          |                |      |Garcia, Eggman,     |                      |
          |                |      |Quirk, Santiago,    |                      |
          |                |      |Ting, Williams      |                      |
          |                |      |                    |                      |
          |----------------+------+--------------------+----------------------|
          |Appropriations  |12-5  |Gomez, Bonta,       |Bigelow, Chang,       |
          |                |      |Calderon, Daly,     |Gallagher, Jones,     |
          |                |      |Eggman,             |Wagner                |
          |                |      |                    |                      |
          |                |      |                    |                      |
          |                |      |Eduardo Garcia,     |                      |
          |                |      |Gordon, Holden,     |                      |
          |                |      |Quirk, Rendon,      |                      |
          |                |      |Weber, Wood         |                      |
          |                |      |                    |                      |
          |                |      |                    |                      |
           ------------------------------------------------------------------- 










                                                                       AB 401


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          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 by  
          January 1, 2017, for households with less than 200% of the federal  
          poverty guideline level.
          FISCAL EFFECT:  According to the Assembly Appropriations  
          Committee:


          1)Potential general fund (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 (CPUC) for a water rate increase of 77% over three  








                                                                       AB 401


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            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 $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 CPUC 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 CPUC  
            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 United States Environmental Protection Agency 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 per  
            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, which is about 2.5 times the affordable  
            amount. 


          3)Water Services Providers.  The CPUC 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 CPUC deliver water service to about 16% of the  
            state's population.   
            The remaining water customers in California are served by  
            publicly-owned utilities (POUs) (cities, water districts, and  








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            mutual water companies), which are self-regulated and not under  
            CPUC 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 the Assembly Utilities and Commerce  
            Committee but was held in the Senate Appropriations Committee.




          Analysis Prepared by:                                               
                          Sue Kateley / U. & C. / (916) 319-2083  FN:  
          0000673