BILL ANALYSIS Ó AB 401 Page 1 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 Page 2 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 Page 3 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 AB 401 Page 4 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