BILL ANALYSIS Ó AB 2874 Page 1 Date of Hearing: April 12, 2016 ASSEMBLY COMMITTEE ON WATER, PARKS, AND WILDLIFE Marc Levine, Chair AB 2874 (Beth Gaines) - As Amended March 15, 2016 SUBJECT: Groundwater sustainability agencies: fees SUMMARY: Requires a groundwater sustainability agency (GSA), before imposing or increasing a fee relating to a groundwater basin that includes a water corporation regulated by the Public Utilities Commission (CPUC) to notify the CPUC. EXISTING LAW: 1)The Sustainable Groundwater Management Act (SGMA), requires all groundwater basins designated as high or medium priority basins subject to critical overdraft to be managed under a groundwater sustainability plan by January 31, 2020, and all other high or medium priority groundwater basins to be managed under such a plan by January 31, 2022. 2)Authorizes any local agency or combination of agencies overlying a groundwater basin to become a GSA for that region. A combination of local agencies may form a GSA by using a joint powers agreement, or a memorandum of agreement or other legal agreement. Authorizes a water corporation regulated by the CPUC or a mutual water company to participate in a GSA AB 2874 Page 2 through a memorandum of agreement or other legal agreement. Provides that this authority does not confer any additional powers to a nongovernmental entity. 3)Authorizes a GSA to impose fees, including but not limited to, permit fees and fees on groundwater extraction, to fund the costs of a groundwater sustainability program. 4)Authorizes the CPUC to regulate privately owned electric, natural gas, telephone, water, and sewer utilities, and to process utility rate change requests. FISCAL EFFECT: Unknown COMMENTS: This bill requires GSAs under SGMA to notify the CPUC before imposing a fee, as authorized under SGMA. 1)Author's Statement: The author has introduced this bill to protect customers of water utilities regulated by the CPUC from the effects of a potential lack of coordination between GSAs and the CPUC. This will ensure a process is in place to notify the CPUC of any GSA decisions that could affect customers' water rates. Without coordination between GSAs and the PUC, customers of regulated water utilities could be harmed through changes in fees and ground water rights. 2)Background: There are over 108 investor-owned water utilities under the CPUC's jurisdiction providing water service to about 6 million Californians, or 16 percent of California residents. The CPUC investigates water and sewer system service quality issues, and analyzes and processes utility rate change requests. Regulated private water utilities are not allowed to change rates or the terms of service to their customers AB 2874 Page 3 without the CPUC's approval. While SGMA allows an investor-owned utility to be a member of a GSA, not all communities are including investor-owned utilities in the GSAs that they are forming. The sponsors of this bill are concerned that in those instances in which an investor owned utility is not a member of the GSA, and the GSA imposes a fee, the utility may not be authorized by the CPUC to impose a surcharge on its customers in order to collect the fee. The notice requirement would alert the CPUC regarding the proposed fee. The California Water Service Company cites an example of a 2014 case where they filed an application with the CPUC seeking authority to apply surcharges on customers, phased in over 8 years, to mitigate groundwater overdraft in the Upper Kings River Basin. The purpose of the surcharges was to fund groundwater recharge projects under a cooperative agreement between the City of Selma and the Consolidated Irrigation District (District) which supplies irrigation water to farmers in the area. A dispute between the District and the City over urban development led to a cooperative agreement through which both groundwater extraction and new urban development would be allowed to continue, and water customers in the City would be assessed surcharges to pay for groundwater recharge projects. The Office of Ratepayer Advocates intervened in the case and a settlement agreement was ultimately reached. 3)Prior and Related Legislation: SB 1168 (Pavley), Chapter 346, and AB 1739 (Dickinson), Chapter 437, Statutes of 2014, together enacted SGMA, which requires that each high- and medium-priority groundwater basin be managed pursuant to a groundwater sustainability plan by January 31, 2020, if in critical overdraft, or by January 31, 2022, with the goal of achieving sustainability within 20 years. AB 2874 Page 4 SB 13 (Pavley), Chapter 255, Statutes of 2015, among other things, authorized a mutual water company to participate in a GSA and provided that a water corporation or a mutual water company may participate in a GSA through a memorandum of agreement or other legal agreement. 4)Support Arguments: None received. 5)Opposition Arguments: None received. REGISTERED SUPPORT / OPPOSITION: Support California Water Association Opposition None on file. Analysis Prepared by:Diane Colborn / W., P., & W. / (916) 319-2096 AB 2874 Page 5