BILL ANALYSIS
AB 413
Page 1
Date of Hearing: May 20, 2009
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Kevin De Leon, Chair
AB 413 (Fuentes) - As Amended: May 5, 2009
Policy Committee:
UtilitiesVote:11-1
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill eliminates the current rate freeze on electricity
usage for residential customers of up to 130% of the baseline
rate, allows limited expansion of direct access purchases of
electricity, and provides several other rate stabilization
measures. Specifically, this bill:
1)Requires electrical corporations to target energy efficiency
and solar programs toward upper-tier (high-energy use) and
multifamily customers to reduce long-term energy usage.
2)Requires the PUC to direct the electrical corporations to
deploy low-income energy efficiency (LIEE) programs targeting
customers occupying apartment houses or similar multiunit
residential structures, and to reach as many eligible
customers as practicable by December 31, 2014.
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
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
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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% or more than 5% per year.
7)Prohibits the PUC from requiring or permitting an electrical
corporation from employing mandatory time-variant pricing for
residential customers, but permits the PUC to authorize an
electrical corporation to offer residential customers the
option of receiving service pursuant to dynamic pricing
(opt-in), and authorizes the PUC, commencing January 1, 2016
to authorize electrical corporations to allow customers to opt
out of receiving time-variant pricing.
8)Requires the suspension of direct access, i.e the ability of a
customer of an electrical corporation to instead contract for
their electricity needs with another electrical service
provider, to be lifted only by an act of the Legislature.
9)Permits the PUC, notwithstanding the above, 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)Requires that electric service providers of direct-access
electricity are subject to the same resource adequacy,
renewable portfolio standards (RPS), and greenhouse gas
emission reduction laws and regulations as the investor-owned
utilities.
11)Requires the PUC, in allocating the cost of new generation
resources acquired by an electrical corporation to meet
reliability needs, to ensure that the net costs and benefits
of the new capacity are allocated such that users are not
assessed for the costs of energy that they do not consume.
FISCAL EFFECT
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The PUC can absorb most of the workload from this bill with
existing resources. The PUC indicates that the current LIEE
program goal is to reach every low-income household by 2020.
The commission would incur annual costs of about $210,000 for
two staff due to the increased workload associated with moving
up this goal to 2014 and the need to adjust the
currently-approved program, which is formally adopted by the PUC
in three-year cycles, with the current cycle covering 2009
through 2011. [Public Utilities Reimbursement Account]
COMMENTS
1)Purpose . According to the author, the purpose of this bill is
to lift some of the emergency measures imposed during the
energy crisis-including capping residential retail rates and
suspending the ability of customers to choose a direct-access
electricity provider-that at the time helped stabilize rates.
Maintaining current policies could actually lead to dramatic
rate changes if the rate stabilization measures imposed during
the crisis were suddenly released without the incremental
changes proposed in this bill.
AB 413 also requires the utilities' energy efficiency programs
to emphasize assisting high-energy users and those in
multi-unit dwellings. For tenants in multi-unit dwellings, it
may not be feasible for the user to invest on their own to
reduce energy use because most energy efficiency measures stay
with the dwelling, which they might not own.
2)Capped electricity rates : During the energy crisis, ABX1 1
(Keeley)/Chapter 4 of 2001 protected 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 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 prohibited 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
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billed at increased per-unit prices. Each block is referred to
as a tier.)
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
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 the top tiers are about $0.46 per kilowatt hour. It is
uncertain when DWR will retire the ABX1 1 bond debt or fully
recover its costs. At that time, however, 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.
3)Dynamic pricing : Dynamic pricing models, also called
time-variant pricing, are intended to reduce demand during
peak periods. 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 use to off-peak times. This bill prohibits the PUC
from imposing mandatory dynamic pricing rates until January 1,
2016, but allows the PUC to allow a dynamic pricing rate
structure on an opt-in basis up until that time.
4)Direct-access service : Direct-access service, whereby an
electricity customer may choose providers of electricity other
than their utility, was authorized as part of the
restructuring of the electric industry, AB 1890
(Brulte)/Chapter 854 of 1996. To ensure the predictable
revenue stream necessary for long-term contracts procured by
the DWR during the energy crisis, 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 customers. The ability to
choose direct-access service was officially suspended on
September 20, 2001. However, PUC rules allow certain
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"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.
Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081