BILL ANALYSIS
AB 413
Page 1
Date of Hearing: April 27, 2009
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Felipe Fuentes, Chair
AB 413 (Fuentes) - As Amended: April 20, 2009
SUBJECT : Energy: rates.
SUMMARY : Eliminates the current rate freeze for electricity
usage for residential customers of up to 130% of the baseline
rate, lifts the current suspension and provides limited
expansion of direct-access electricity service, and provides a
number of other rate stabilization measures to address emergency
measures instituted during the 2001 energy crisis by ABX1 1
(Keeley), Chapter 4, Statutes of 2001.
EXISTING LAW :
1)Prohibits the PUC from increasing electricity charges for
residential customers for usage of up to 130% of existing
baseline quantities, until the Department of Water Resources
(DWR) has recovered the costs of power it has procured for the
electrical corporation's retail end-use customers.
2)Suspends the right of retail end-use customers to acquire
direct-access service for electricity from other providers
until DWR no longer supplies power.
THIS BILL :
1)Requires electrical corporations to target energy efficiency
and solar programs toward upper-tier and multifamily customers
to reduce long-term energy usage.
2)Requires the PUC to direct the electrical corporations to
deploy enhanced Low-Income Energy Efficiency programs
targeting those customers occupying apartment houses or
similar multiunit residential structures.
3)Requires the California Alternate Rates for Energy (CARE)
program to be offered to low-income electric and gas customers
with annual household incomes at or below 200% of the federal
poverty levels, the costs of which shall be recovered on an
equal cent-per-kilowatthour or equal cent-per-therm basis for
customers of electrical and combined electric and gas
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corporations and from specified customers.
4)Restricts rate increases for CARE program participants for
electricity usage up to 130% of baseline quantities by the
annual percentage increase in benefits under the CalWORKs
program, not to exceed 3% per year, through January 1, 2019.
5)Caps CARE electricity rates at 80% of the corresponding rates
charged to residential customers not participating in the CARE
program.
6)Restricts rate increases charged to residential customers for
electricity usage up to 130% of the baseline quantities, by
the annual percentage change in the Consumer Price Index plus
1%, but not less than 3% and not more than 5% per year.
7)Prohibits the PUC from requiring or permitting an electrical
corporation from employing mandatory dynamic pricing for
residential customers, and permits the PUC to authorize an
electrical corporation to offer residential customers the
option of receiving service pursuant to dynamic pricing,
through January 1, 2016.
8)Deletes the suspension of direct-access service under
specified conditions, and requires the suspension to be lifted
by an act of the Legislature.
9)Permits the PUC to allow individual retail non-residential
end-use customers to acquire direct-access electric service
subject to the limitation that the total annual kilowatt-hours
supplied by all electric service providers to distribution
customers of an electrical corporation shall not exceed the
maximum total annual level of kilowatt-hours supplied by all
electric service providers, within that electrical
corporation's distribution service territory, during the
height of the direct-access market.
10)Ensures that electric service providers of direct-access
electricity are subject to the same resource adequacy,
renewables portfolio standards, and greenhouse gas emission
reduction laws and regulations as the investor-owned
utilities.
11)Requires the PUC to use a mechanism to allocate the net costs
of new generation resources acquired by an electrical
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corporation to meet system or local area reliability needs,
that ensures the net costs are allocated to all customers who
pay their net costs and states legislative intent that those
customers to whom the net costs and benefits of capacity are
allocated, are not required to pay for the costs of energy
they do not consume.
FISCAL EFFECT : Unknown.
COMMENTS : According to the author, the purpose of this bill is
to lift some of the emergency measures imposed during the energy
crisis that at the time, helped stabilize rates. Now those
actions may actually lead to dramatic rate changes if the rate
stabilization measures were suddenly released without measured
changes. Some actions the Legislature imposed included capping
residential retail rates and suspending the ability for
customers to choose a direct-access electricity provider.
1) Capped electricity rates: During the energy crisis in 2001,
the Legislature passed ABX1 1 (Keeley) Chapter 4, Statutes of
2001, to protect California ratepayers from rampant price
fluctuations due to a dysfunctional wholesale electricity
market. ABX1 1 authorized the Department of Water Resources
(DWR) to issue revenue bonds to purchase power at such prices
the department deems appropriate, on behalf of the cash-strapped
investor-owned utilities who couldn't keep up with the volatile
wholesale prices. Among other stabilizing efforts, ABX1 1
included a provision that prohibits the PUC from increasing
rates for usage under 130% of baseline until DWR bond charges
are paid off.
Energy charges for residential customers are based on the
quantity of electricity used by a customer, and each successive
block of electricity usage is billed at increased per-unit
prices. Each block is referred to as a tier. ABX1 1 capped the
lowest two tiers of electricity usage: (1) baseline and (2)
130% of baseline. These tiers are based on usage, and not
necessarily income levels.
Because rates in the lowest tiers are still capped, increased
costs such as rising fuel prices, and legislatively mandated and
PUC-created programs, are disproportionately borne by those
customers whose electricity usage falls in the upper tiers. For
example, in Pacific Gas & Electric's territory, the 130% of
baseline quantities cost is about $0.11 per kilowatt hour, while
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the top tiers are about $0.46 per kilowatt hour. Additional
costs associated with increasing the State's renewable portfolio
standard or reliability efforts will be imposed on the
ratepayers who use more than 130% of baseline.
It is uncertain when DWR will retire the ABX1 1 bond debt or
fully recovered its costs. At that time, the lower-tiered rates
are expected to skyrocket to provide less of a spread between
the 130% of baseline and the higher tiers. By restricting rate
increases to an annual narrow range and controlling the increase
within relatively small parameters, AB 413 is intended to
minimize spikes in electricity rates and provide relative
stability and predictability.
2) Dynamic pricing: Dynamic pricing models, also called
time-variant pricing, are intended to reduce demand during peak
periods. These include time-of-use, real-time pricing, and
other methods imposed to reduce electricity demand during peak
times. Time-of-use is the most common and applies different
fixed prices for different time blocks. Real-time pricing
applies time-varying retail prices by the hour.
While dynamic rates or time-of-use rates could provide an
incentive for customers to use less electricity at peak times,
consumer groups are concerned that it also punishes those
customers who may not be able to shift their electricity usage
to off-peak times. This bill prohibits the PUC from imposing
mandatory dynamic pricing rates until January 1, 2016, however,
it allows the PUC to allow a dynamic pricing rate structure as
an opt-in basis.
3) Direct-access service: Direct-access service is where an
electricity customer is allowed to choose alternate providers of
electricity, other than their utility. As part of the
restructuring of the electric industry, AB 1890 (Brulte) Chapter
854, Statutes of 1996, authorized direct access. To avoid the
dysfunctional spot market that financially decimated the IOUs
and threatened catastrophic rate increases, ABX1 1 established a
structure to permit DWR to buy needed electricity for
investor-owned utility (IOU) customers under long-term
contracts. To ensure the predictable revenue stream necessary
for long-term contracts and issue ratepayer-backed revenue
bonds, and to prevent cost-shifting from direct-access to
bundled-service customers, the Legislature directed the PUC to
suspend direct access to prevent additional migration of IOU
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customers.
The ability to choose direct-access service was officially
suspended on September 20, 2001. However, PUC rules allow
certain "eligible" customers to begin direct-access service
after the suspension date and switch between bundled service and
direct-access service. This bill would allow the expansion of
direct-access service to individual retail non-residential
end-use customers up to the total annual kilowatt-hours supplied
by electric service providers for any year after April 1, 1998.
REGISTERED SUPPORT / OPPOSITION :
Support
Alliance for Retail Energy Markets (AReM)
California Retailers Association (if amended)
California Rural Legal Assistance Foundation (CRLA)
Direct Energy
Pacific Gas and Electric Company (PG&E)
Sempra Energy
Southern California Edison (SCE)
The Utility Reform Network (TURN)
Western Center on Law and Poverty
Opposition
California Manufacturers & Technology Association (CMTA) (unless
amended)
Analysis Prepared by : Gina Adams / U. & C. / (916) 319-2083