BILL ANALYSIS Ó
SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS
Senator Ben Hueso, Chair
2015 - 2016 Regular
Bill No: AB 401 Hearing Date: 6/30/2015
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|Author: |Dodd |
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|Version: |4/8/2015 Amended |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Nidia Bautista |
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SUBJECT: Low-Income Water Rate Assistance Program
DIGEST: This bill requires the Department of Community
Services and Development, in collaboration with the State Board
of Equalization and stakeholders, to develop a plan for the
funding and implementation of a new program to provide water
rate relief for low-income ratepayers by January 1, 2017.
ANALYSIS:
Existing law:
1)Establishes the California Public Utilities Commission (CPUC)
to regulate privately owned public utilities in California.
(Article XII of the California Constitution)
2)Requires the CPUC to establish the California Alternate Rates
for Energy (CARE) program of assistance to low-income electric
and gas customers with an annual household income not greater
than 200 percent of the federal poverty guideline levels.
(Public Utilities Code §739.1)
3)Provides that access to an adequate supply of healthful water
is a basic necessity of human life, and shall be made
available to all residents of California at an affordable
cost. (Public Utilities Code §739.8)
4)Requires the CPUC to consider programs to provide rate relief
for low-income ratepayers of water corporations. (Public
Utilities Code §739.8)
AB 401 (Dodd) Page 2 of ?
5)Establishes the Department of Community Services and
Development (Department) and charges it with improving the
quality of life for low-income Californians. (Government Code
§12085)
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
XIII D)
This bill:
1)Requires the Department, in collaboration with the State Board
of Equalization and stakeholders, to develop a plan to fund
and implement of a new program to provide water rate relief
for low-income ratepayers by January 1, 2017.
2)Requires the Department to report its findings to the
Legislature by January 1, 2017, including the feasibility,
financial stability, and desired structure of the program, and
any recommendations for legislative action.
Background
CPUC's regulation of water utilities. The CPUC has jurisdiction
over 113 privately owned water utilities: nine Class A water
utilities (10,000 or more connection points); five Class B water
utilities (2,000 or more connection points); 25 Class C water
utilities (500 or more connection points); and 74 Class D water
utilities (less than 500 connection points). Combined, these
utilities deliver water service to roughly 16% of the state's
population (about 6 million residents). The CPUC regulates all
aspects of the privately owned utilities' service provision,
including assessing their rates to ensure they are reasonable,
while providing a reasonable rate of return to continue to
provide customers service and satisfy shareholders.
Publicly owned water utilities. The majority of California's
water customers are served by cities, water districts, and
mutual water companies, which are governed by local boards who
are not regulated by the CPUC. As established by Proposition
218 (1996), the majority of these utilities are subject to state
constitutional and statutory requirements that ensure water
AB 401 (Dodd) Page 3 of ?
rates are restricted to cost of service. As a result, these
entities have limitations, not imposed on the IOUs, that hinder
their ability to increase rates to fund low-income programs for
their customers.
CPUC low-income assistance for water ratepayers. Of the
privately-owned utilities, the CPUC has authorized the largest
nine water utilities to offer low-income rate assistance
programs similar in concept to those provided to electricity
customers through CARE. However, each program is varied in
terms of the amount of the assistance provided to low-income
customers and the collection of the surcharge from
non-participating ratepayers to cover the cost of the program.
Combined, the nine largest utilities serve approximately 1.175
million customers.
In CPUC Decision D.11-05-020, the CPUC ordered large water and
energy utilities to exchange information about their low-income
customers to cross-promote the goal of increasing participation
in both programs. Reports from the CPUC indicate the effort has
yielded a substantial increase in participation.
The case of Lucerne. The challenge to adopt a low-income
assistance program is daunting for smaller agencies who have
limited base of ratepayers to share the increased costs for the
program.
In July 2012, the privately-owned water company Cal Water filed
a request with the CPUC for a water rate increase of 77% over
three years to ratepayers in Lucerne located in Lake County and
one of several Cal Water service territories. With a median
annual household income of approximately $25,000, Lucerne's
household income is well below the state's average of roughly
$61,000. Cal Water's proposed rate increases would have doubled
the average resident's water bill, from about $63 to $124 per
month. Ultimately, the CPUC, Cal Water, Lake County and other
parties entered into a settlement that would not drastically
increase water rates in Lucerne. The settlement also provided
adjustments to the Cal Water Low-Income Ratepayer Assistance
Program. Additionally, Cal Water has recently received some
assistance from the state, including a $136,000 grant for a pump
extension to reach declining water levels. However, the
community has continued concerns about the prospects for future
rate increases because of its limited ratepayer base. Just this
week the Lake County Board of Supervisors adopted a resolution
AB 401 (Dodd) Page 4 of ?
to explore further solutions to increased water rates.
State Auditor Report Finds Opportunities for Cost-Savings at
Water Districts. On April 30th of this year, the State Auditor
released a report regarding the differences in water rates for
four Apple Valley Area water districts, two privately owned and
two publicly owned. The Auditor's main findings included the
challenges between investor ownership and public ownership,
where investor-owned utilities have greater ability to increase
rates (as noted above). The Auditor also raised concerns that in
some instances the water utilities had not done a good job of
demonstrating or instituting cost-saving measures. While the
report was based on only the four water utilities, the need to
demonstrate cost-saving measures to customers is one that can be
applied to other utilities.
The author and committee may wish to amend the bill to:
Move the deadline required to report to the
Legislature by February 1, 2017.
Require participating water agencies to demonstrate
how they are working to keep rates low, including
implementing and quantifying any cost-saving efforts.
Require a set of best practices towards achieving
cost-savings.
Clarifying the role of CPUC and the agencies in
determining and verifying customer eligibility.
Ensure the report includes recommendations regarding
the structure of the program, particularly whether it will
be state-run or locally run.
Prior/Related Legislation
AB 1434 (Yamada, 2014) A bill with the same provisions as this
bill. Died in the Senate Committee on Appropriations.
FISCAL EFFECT: Appropriation: No Fiscal
Com.: Yes Local: No
SUPPORT:
California Catholic Conference, Inc.
California Equity Leaders Network
California League of Conservation Voters
California Rural Legal Assistance Foundation
AB 401 (Dodd) Page 5 of ?
California Water Association
Clean Water Action
Community Water Center
Environmental Justice Coalition for Water
Environmental Working Group
Food and Water Watch
Friends of the River
Leadership Counsel for Justice and Accountability
Lutheran Office of Public Policy - California
Northern California Water Association
Office of Ratepayer Advocates
Planning and Conservation League
PolicyLink
San Diego County Water Authority
Sonoma County Water Agency
Utility Workers Union of America
Wholly H2O
OPPOSITION:
None received
ARGUMENTS IN SUPPORT: The author states that "water district
investments to maintain and upgrade water treatment and delivery
systems in areas that have a small and/or declining ratepayer
base leads those water districts to often substantially increase
the rates they charge to customers. In some cases water rates
have jumped as much as 300% since 2006. As the state's
population of elderly citizens living on fixed incomes
increases, and as these elderly citizens retire to smaller
communities served by less capitalized water systems, water rate
affordability will become an ever growing problem."
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