BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 1041|
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THIRD READING
Bill No: SB 1041
Author: Hueso (D)
Amended: 4/7/16
Vote: 21
SENATE ENERGY, U. & C. COMMITTEE: 10-0, 4/19/16
AYES: Hueso, Cannella, Gaines, Hertzberg, Hill, Lara, Leyva,
McGuire, Pavley, Wolk
NO VOTE RECORDED: Morrell
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
SUBJECT: Energy: electric and gas rates: public elementary
and secondary schools
SOURCE: Author
DIGEST: This bill requires each electrical and gas corporation
(IOU) in the state to develop and submit to the California
Public Utilities Commission (CPUC) for its approval a rate for
service applicable to public elementary and secondary schools
that reflects the cost of providing service to those schools,
and makes a parallel requirement of each local publicly owned
electric utility (POU).
ANALYSIS:
Existing law:
1)Authorizes the CPUC to fix rates, establish rules, examine
records, issue subpoenas, administer oaths, take testimony,
punish for contempt, and prescribe a uniform system of
accounts for all public utilities, including electrical and
gas corporations, subject to its jurisdiction. (Article 12 of
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Page 2
the California Constitution)
2)Requires that all charges demanded or received by any public
utility for any product, commodity or service be just and
reasonable, and that every unjust or unreasonable charge is
unlawful. (Public Utilities Code §451)
This bill:
1)Directs each IOU to develop and submit to the CPUC for its
approval a rate for service applicable to public elementary
and secondary schools that is just and reasonable and reflects
the cost of providing service to those schools.
2)Makes a number of findings and declarations, including that it
is the intent of the Legislature that the CPUC, in reviewing
and approving the IOU rates applicable to public elementary
and secondary schools, act according to the cost-causation
principle.
3)Requires each POU to develop and submit to its governing board
for its approval a rate for service applicable to public
elementary and secondary schools that is just and reasonable
and reflects the cost of providing service to those schools.
Background
Cost-causation guides the CPUC's ratemaking. Statute charges
the CPUC with setting the rates charged by the state's
utilities, including its IOUs. Statute requires that the rates
set by the CPUC be just and reasonable. In fulfilling these
responsibilities, the CPUC is guided by the cost-causation
principle. In simple terms, this principle states that
customers pay a fair rate that is based on the cost to serve
them. The CPUC has confirmed its commitment to the
cost-causation principle, explicitly and implicitly, on numerous
occasions. (See, for example, CPUC decisions D.93-06-087,
D.92-12-058, D.08-07-045, D.14-12-080 and D.14-06-029) Most
recently, this principle, among others, has been driving the
CPUC's ongoing efforts to reform the residential rate structure
so that the price residential customers pay for electricity
better reflects the cost of providing the electricity to those
customers.
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Page 3
Electric customers charged for service based on rate class, some
established in statute. IOUs divide their customers into
several distinct rate classes. This division reflects the
recognition that different general categories of customers place
different costs upon the electrical system and, therefore, it is
appropriate to charge them differently. Very broadly, the IOUs
divide their customers, for rate purpose, into residential and
nonresidential classes. (This is a very generalized discussion
of IOU rate classes. The IOUs further distinguish their rate
classes by many criteria. See, for example, PG&E's description
of its customer rate classes:
http://www.pge.com/tariffs/rateinfo.shtml.) In addition,
pursuant to legislative requirements, the IOUs have established
special rate classes, such as rate classes for agricultural
customers.
Generally, the IOUs place public elementary and secondary school
customers in one of the nonresidential or commercial class
rates. However, public elementary and secondary schools have
electricity use patterns that differ from the use patterns of
most of the other electricity users in their rate class. For
example, schools typically experience a significant reduction in
demand for electricity in the mid-afternoon that is sustained
until early the next morning; many schools also dramatically
reduce their electricity use during hot summer months.
Bill seeks relief for schools, consistent with cost-causation
principle. The author reports of a number of schools in the San
Diego region that have recently experienced sharp increases in
their electricity bills. According to representatives of those
schools, the increases have come about, in large part, because
of rate increases, in the form of "demand charges," placed upon
most or all commercial class customers that are meant to reflect
the costs to serve these commercial class customers. However,
proponents contend that, in the case of schools, these demand
charges are unreflective of the costs to provide service.
This bill proposes creation of a rate class special to public
schools. The author contends this is appropriate given schools'
unusual, possibly unique electricity use patterns, as well as
the state's financial and policy interest in ensuring public
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Page 4
schools have the resources they need to educate our children and
young people.
Prior/Related Legislation
AB 2218 (Bradford, Chapter 581, Statutes of 2014) required
electrical and gas IOUs to develop and implement a program of
rate assistance to eligible food banks, subject to discretion
and supervision by the CPUC, and encourages the POUs to do the
same.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: Yes
SUPPORT: (Verified5/17/16)
Association of California School Administrators
San Diego County Office of Education
San Diego Schools Coalition for Electricity Cost Reduction
School Energy Coalition
School for Integrated Academics and Technologies
OPPOSITION: (Verified5/17/16)
California Municipal Utilities Association
Sacramento Municipal Utility District
ARGUMENTS IN SUPPORT: According to the author, the state has
a unique interest in ensuring that public elementary and
secondary schools are able to dedicate their limited resources
to fulfillment of their core mission - the education of our
children and young people. The electric rates paid by our
public schools should reflect the cost to provide service to
those schools, not the costs to serve commercial or industrial
class customers. This bill directs the CPUC to follow its own
principle of cost causation to ensure our public schools
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experience rates for electric service that are fair, just and
reasonable.
ARGUMENTS IN OPPOSITION: Opponents, representing POUs,
contend that the rates set by POUs are, today, just and
reasonable and express concern of a blossoming of legislatively
mandated, customer-specific rate classes.
Prepared by:Jay Dickenson / E., U., & C. / (916) 651-4107
5/18/16 16:27:54
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