BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 401| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 401 Author: Dodd (D), et al. Amended: 9/1/15 in Senate Vote: 21 SENATE ENERGY, U. & C. COMMITTEE: 8-1, 6/30/15 AYES: Hueso, Cannella, Hertzberg, Hill, Lara, Leyva, McGuire, Pavley NOES: Morrell NO VOTE RECORDED: Fuller, Wolk SENATE APPROPRIATIONS COMMITTEE: 6-1, 8/27/15 AYES: Lara, Beall, Hill, Leyva, Mendoza, Nielsen NOES: Bates ASSEMBLY FLOOR: 55-22, 6/2/15 - See last page for vote SUBJECT: Low-Income Water Rate Assistance Program SOURCE: Author DIGEST: This bill requires the State Water Resources Control Board (SWRCB), 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) AB 401 Page 2 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) 5)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) 6)Requires the SWRCB to administer provisions relating to the regulation of drinking water to protect public health, including, but not limited to, conducting research, studies, and demonstration programs relating to the provision of a dependable, safe supply of drinking water, enforcing the Federal Safe Drinking Water Act, adoption of enforcement regulations, and conducting studies and investigations to assess the quality of water in domestic water supplies. (Water Code §174 et seq) This bill: 1)Requires the SWRCB, 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 SWRCB to report its findings to the Legislature by January 1, 2017, including the feasibility, financial AB 401 Page 3 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 percent 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 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 AB 401 Page 4 yielded a substantial increase in participation in these programs. 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 percent 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 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. Prior/Related Legislation AB 401 Page 5 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.:YesLocal: No According to the Senate Appropriations Committee: One-time costs of approximately $331,000 to the General Fund over two years for the development of feasibility plan. Cost pressures, possibly in the millions of dollars, to the General Fund or unknown special fund for the implementation of the feasibility plan. SUPPORT: (Verified9/1/15) California Catholic Conference of Bishop, Inc. California Environmental Justice Alliance California Equity Leaders Network California League of Conservation Voters California Rural Legal Assistance Foundation 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 League of Women Voters of California Lutheran Office of Public Policy - California Northern California Water Association Office of Ratepayer Advocates Planning and Conservation League Policy Link San Diego County Water Authority Sonoma County Water Agency Utility Workers Union of America Wholly H2O OPPOSITION: (Verified9/1/15) AB 401 Page 6 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 percent 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." ASSEMBLY FLOOR: 55-22, 6/2/15 AYES: Achadjian, Alejo, Bloom, Bonilla, Bonta, Brown, Burke, Calderon, Campos, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Daly, Dodd, Eggman, Frazier, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Roger Hernández, Holden, Irwin, Jones-Sawyer, Lackey, Levine, Lopez, Low, McCarty, Medina, Mullin, Nazarian, O'Donnell, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Mark Stone, Thurmond, Ting, Weber, Wilk, Williams, Wood, Atkins NOES: Travis Allen, Baker, Bigelow, Chang, Beth Gaines, Gallagher, Grove, Hadley, Harper, Jones, Kim, Linder, Maienschein, Mathis, Mayes, Melendez, Obernolte, Olsen, Patterson, Steinorth, Wagner, Waldron NO VOTE RECORDED: Brough, Chávez, Dahle Prepared by:Nidia Bautista / E., U., & C. / (916) 651-4107 9/1/15 20:33:49 **** END ****