BILL ANALYSIS
AB 413
Page 1
ASSEMBLY THIRD READING
AB 413 (Fuentes)
As Amended June 1, 2009
Majority vote
UTILITIES AND COMMERCE 11-1
APPROPRIATIONS 12-5
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|Ayes:|Fuentes, Tom Berryhill, |Ayes:|De Leon, Ammiano, Charles |
| |Carter, Fong, Fuller, | |Calderon, Davis, Fuentes, |
| |Furutani, Huffman, | |Hall, John A. Perez, |
| |Krekorian, Skinner, | |Price, Skinner, Solorio, |
| |Swanson, Torrico | |Torlakson, Krekorian |
| | | | |
|-----+--------------------------+-----+---------------------------|
|Nays:|Blakeslee |Nays:|Nielsen, Duvall, Harkey, |
| | | |Miller, |
| | | |Audra Strickland |
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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 AB 1 X1
(Keeley), Chapter 4, Statutes of 2001. Specifically, 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, and be recovered from
specific public utilities on an equal cent-per-kilowatthour or
equal cents-per-them basis from all classes of customers, as
specified.
2)Requires 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
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poverty levels.
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.
5)Caps CARE electricity rates at 80% of the corresponding rates
charged to residential customers not participating in 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 PUC from requiring or permitting an electrical
corporation from employing mandatory or default time-variant
pricing for residential customers prior to January 1, 2016,
and permits PUC to authorize an electrical corporation to
offer residential customers the option of receiving service
pursuant to dynamic pricing.
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 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, in allocating the cost of new generation
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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.
EXISTING LAW :
1)Prohibits 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.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, the PUC can absorb most of the workload from this
bill with existing resources. The PUC indicates that the
current LIFE 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 : This bill lifts 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.
During the energy crisis in 2001, the Legislature passed AB 1 X1
(Keeley), Chapter 4, Statutes of 2001-02 First Extraordinary
Session, to protect California ratepayers from rampant price
fluctuations due to a dysfunctional wholesale electricity
market. AB 1 X1 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
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investor-owned utilities who couldn't keep up with the volatile
wholesale prices. Among other stabilizing efforts, AB 1 X1
included a provision that prohibits 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. AB 1 X1 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
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 AB 1 X1 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.
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 IOUs and threatened
catastrophic rate increases, AB 1 X1 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
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issue ratepayer-backed revenue bonds, and to prevent
cost-shifting from direct-access to bundled-service customers,
the Legislature directed 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 "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 : Gina Adams / U. & C. / (916) 319-2083
FN: 0001176