BILL ANALYSIS                                                                                                                                                                                                    Ó






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          |SENATE RULES COMMITTEE            |                        AB 401|
          |Office of Senate Floor Analyses   |                              |
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                                   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)  








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            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  







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            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  







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          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
          







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          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)








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          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


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