BILL ANALYSIS Ó
SB 1041
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Date of Hearing: June 29, 2016
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Mike Gatto, Chair
SB
1041 (Hueso) - As Amended April 7, 2016
SENATE VOTE: 33-4
SUBJECT: Energy: electric and gas rates: public elementary
and secondary schools
SUMMARY: 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
specific 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).
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. (California
Constitution Article XII)
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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 Section 451)
FISCAL EFFECT: Unknown.
COMMENTS:
1)Cost-Causation Principle: Current law requires the CPUC to
set the rates charged by the state's utilities, including its
IOUs. Further, current law 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. 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.<1> Most
recently, this principle 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.
According to the Association of California School
Administrators, electricity rates increased 39% in a one-year
period for school districts in San Diego County while usage
rose only 6%. Although rates have increased, neither the
author nor support groups make a clear connection explaining
why the rate increases should be considered unjust or
unreasonable. If the rate increases are unjust, schools may
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<1>
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.
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open a rate case proceeding with the CPUC under current law.
Further, it is unclear this bill would decrease rates for
schools, including schools in the author's district of San
Diego. In fact, this bill may increase energy rates for
schools, which is explained in comment section three of this
analysis.
2)Utility Rate Classes: IOUs divide their customers into
several distinct rate classes. This division recognizes that
different general categories of customers place different
costs upon the electrical system; therefore, it is appropriate
to charge them differently. IOUs divide their customers, for
rate purposes, into residential and nonresidential classes.<2>
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. According to the author, public elementary and
secondary schools have electricity use patterns that may
differ from the use patterns of most of the other electricity
users in their rate class. The author contends that schools
typically experience a significant reduction in demand for
electricity in the mid-afternoon that is sustained until early
the next morning, and that schools may also dramatically
reduce their electricity use during hot summer months.
However, this claim has not been substantiated by data
provided by the author's office or supporters of the bill. It
seems equally likely that schools may have similar or
increased energy consumption after regular school hours due to
after school programs, community use of facilities, and summer
school programs.
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<2> 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.
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3)Rates May Increase by 20 Percent: The author argues that
creating a rate class special to public schools is appropriate
given schools' possibly unique electricity use patterns. Even
if one accepts the argument that schools are unique from other
commercial customers, there is no way to guarantee this bill
would decrease rates for schools. On the contrary, rates may
increase if schools are separated into a special rate class.
Los Angeles County Unified School District (LAUSD) relays this
concern in their letter to the committee expressing a support
if amended position. According to LAUSD, "Though the intent is
admirable, the language does not guarantee elementary and
secondary schools in POU territories will, in fact, receive a
rate reduction. In fact, in discussions with the Los Angeles
Department of Water and Power, the District could see a rate
increase as much as 20 percent."
Without clear data to substantiate the author's claims, it is
impossible to conclude this bill would effectively address the
issue of rate increases for schools in San Diego and other
areas of the state. It has the potential to exacerbate the
problem it seeks to address. Further, what the author sees as
a solution to a San Diego problem may create severe negative
impacts in Los Angeles County and other areas of the state,
such as rural areas with fewer and smaller schools that may
benefit from bring grouped in a nonresidational rate class.
4)Arguments in Support: According to the San Diego County Office
of Education, "The 42 school districts in San Diego County
have seen electricity raise 39% over just a one-year period.
During this same one-year period (fiscal year 2014-15)
electricity usage only rose by 6%. This energy rate shock
resulted in nearly $30 million being diverted from educational
programs to pay for additional, unplanned operational costs.
Schools districts have few options for creating additional
revenue in response to increased operational costs.
Consequently, school districts must reduce expenditures in
other areas in order to mitigate the impact, thereby
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negatively affecting educational programs and services for
students."
5)Arguments in Opposition: According to the California Municipal
Utilities Association (CMUA), "CMUA members already adopt rate
structures that are just and reasonable." Unlike IOUs, "POUs
go through a transparent public process when adopting rate
increases that are voted upon by a locally elected body."
"The bill provides no guarantee for cheaper rates and the
process once completed and approved may actually result in
higher rates as schools will be their own stand alone rate
case. While the exact circumstances leading to the energy rate
hikes in the San Diego Unified School District are unclear to
CMUA, the truth is energy rates are increasing, as complying
with state energy goals and maintaining utility assets results
in increased costs that must be borne on the electric
rate-payer.
"CMUA worries that special rates for public schools will
translate very soon to special rates for hospitals, community
centers, non-profit organizations, and many other customers
that provide public benefits. However, pulling these
customers out from their existing customer rate class may
actually lead to higher energy rates not cheaper ones."
6)Prior Legislation:
AB 2120 (Weber) of 2016: Makes school districts eligible to
receive intervenor compensation from the CPUC for substantial
contributions to rate cases on energy as specified. Pending in
Senate Energy, Utilities, and Communications Committee.
AB 2218 (Bradford), Chapter 581, Statutes of 2014: Requires
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
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same.
REGISTERED SUPPORT / OPPOSITION:
Support
Association of California School Administrators
Contra Costa County Superintendents' Coalition
San Diego County Office of Education
San Diego Schools Coalition for Electricity Cost Reduction
School Energy Coalition
School for Integrated Academics and Technologies
Opposition
California Municipal Utilities Association
PacifiCorp
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Sacramento Municipal Utility District
Analysis Prepared by:Darion Johnston / U. & C. / (916)
319-2083