BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
AB 1108 - Fuentes Hearing Date:
July 7, 2009 A
As Amended: June 29, 2009 FISCAL B
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DESCRIPTION
Current law requires mobilehome park owners who operate
submetered utility systems to charge residents the same rate for
utility service as is charged by the local utility.
Current law requires mobilehome park owners to be responsible
for the maintenance and repair of the submetered utility system.
Current law requires the utility to discount the rate charged to
the operator of a submetered utility system to cover the
reasonably incurred costs of owning, operating and maintaining
the submetered system.
This bill requires mobilehome park owners of submetered utility
systems to transfer ownership of their gas or electric systems
to the gas or electric corporation providing service in that
area. If the California Public Utilities Commission (CPUC)
finds that the mobilehome park owner has failed to maintain or
repair its facilities, the CPUC may order the repairs. The CPUC
may also order that the utility discount be held in trust to pay
for the maintenance and repair.
This bill requires the CPUC to open a proceeding to adopt rules
to establish the terms and conditions for the transfer of
ownership of the gas or electric systems by January 1, 2010.
All transfers shall be completed by January 1, 2016.
BACKGROUND
Most mobilehome parks are master metered, meaning that the
mobilehome park is the utility customer, receiving service
through a single meter. In turn, each of the mobilehome park
tenants either has their own submeter, and purchases their
utility service from the mobilehome park, or is unmetered and
the bill split proportionately. The utility discounts its
service to the mobilehome park owner, theoretically providing
the margin needed by the park owner to operate and maintain the
submetered system. In effect the mobilehome park owner operates
a small utility. In PG&E territory, the mobilehome park owner
receives a monthly discount of $11.38 on their electric service
and $10.68 on their gas service.
In 2004 the CPUC resolved issues regarding the types of costs
avoided by the utilities when the mobilehome park owner provides
the submetered service. Determining these costs are necessary
to determine the discount provided by the utility to the
mobilehome park owner. The CPUC decision (D.04-04-043) was a
joint recommendation by the interested parties. In a subsequent
2004 decision the CPUC determined the discount formula,
requiring that the discount be set "at the average cost that the
utility would have incurred in providing comparable services to
the tenant directly, which is avoided when the mobilehome park
is submetered."<1>
The inspection of mobilehome park utility systems is the
responsibility of the Department of Housing and Community
Development.
The provision of utility service by mobilehome parks was an
issue in the Legislature in 1996. AB 622 (Conroy: Chapter 424)
established a statutory framework to facilitate the voluntary
transfer of ownership of submetered utility systems in
mobilehome parks to utilities.
The mobilehome park industry estimates that 4000 mobilehome
parks are affected by this bill representing about 340,000
individual residences. Since 1997 no new mobilehome parks
provide mastermeter service.
COMMENTS
1. Author's Concerns - The goal of this bill is to ensure
that mobilehome park residents are provided with safe and
reliable electric service. The author is concerned that
residents of many mobilehome parks receive substandard, and
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<1> D.04-11-033, p.2.
sometimes unsafe, service. He is concerned that many
mobilehome park owners are not living up to their
responsibility of maintaining and operating the electric
and gas distribution system within the park, for which they
are paid.
2. Who's Responsible? - If an investor-owned utility were
providing inadequate or unsafe service the CPUC would step
in and require the utility to upgrade. The cost of such
upgrades would be passed onto utility customers unless the
CPUC found that the utility had been allocated adequate
funds and spent them elsewhere or if the utility had been
violating other CPUC rules or regulations. Under those
circumstances the utility would be penalized either through
fines or a reduction in their profits. These circumstances
are relatively rare though GTE, the predecessor to Verizon,
was penalized for inadequate service in the 1980's and PG&E
was penalized for inadequate tree trimming in the 1990's.
Once the mobilehome park chose to provide utility service,
it assumed the responsibility to ensure that the service
was provided in a safe, reliable and adequate manner. The
mobilehome parks were provided a discount by the utilities
to do just that. Similar to the utilities, if the
mobilehome park failed to do the work it was supposed to
do, it should be required to upgrade its system to provide
safe, reliable and adequate service. Those costs would
either be passed onto customers or be shouldered by the
mobilehome park, depending on the circumstances.
Some might argue that the discount received by the
mobilehome park is inadequate for them to do the job. That
argument is hard to understand as the current discount was
the result of an agreement between mobilehome park owners,
utilities and consumer groups.<2>
Allowing mobilehome parks to get out from under their
responsibilities without considering the discounts they
received and their culpability, if any, for the inadequate
service lets them transfer their costs to others who had no
responsibility for this unfortunate circumstance.
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<2> The discount was established in most recent CPUC decision
in this area, D.04-11-033 issued November 19, 2004. That
decision also determined that the mobilehome park owners don't
keep adequate records to determine their costs.
3. Costly Remedy - Requiring all mobilehome park owners to
sell their utility systems to the utilities is a strong
remedy. It is also costly. The electric and gas
distribution systems in mobilehome parks were not built to
the quality of the utility systems. Consequently,
utilities taking over mobilehome park systems don't simply
repair the existing systems. Instead they install entirely
new systems. Were this to be done for all the mobilehome
park systems the costs would exceed $1 billion according to
estimates by the utilities.
It may not be necessary to require all mobilehome park
owners to sell their utility systems in order to achieve
the author's goals. Some mobilehome park utility systems
may already provide safe and adequate service. Some
mobilehome park owners may be willing to invest their rate
discount to repair and maintain their utility distribution
systems, as is required under current law. So rather than
require the sale of all utility systems, the author and
committee may wish to consider requiring an assessment of
mobilehome park utility systems. If the system is found to
be unsafe or inadequate the mobilehome park owner would be
given the choice of either upgrading the system or turning
the gas or electric service over to the investor-owned
utility. If the mobilehome park owner chose to upgrade the
system an auditing and inspection program should be created
to ensure compliance. This alternative would make the
system transfer voluntary rather than compulsory and reduce
the number of systems transferred.
4. Who Pays? - Who would pay this cost? The easy answer is
existing utility customers because they are a large base
upon which these costs could be spread, resulting in a
relatively small cost per customer. This is analagous to
when a utility provides service to a new structure. Under
that circumstance the cost to serve that new customer (e.g.
poles, wires, lines, meters, labor) is paid for by all
other customers in most circumstances.
But there are other potential contributors to these costs.
As discussed above, perhaps the mobilehome park owner
should bear some of the burden of these costs because they
were paid to adequately repair and maintain the
distribution system and failed to do so. The former
mobilehome park customers are beneficiaries of this bill
because their service will be safer and more reliable, so a
case could be made for them to pay for at least part of the
cost through a rate surcharge, though they are innocent
victims. Again, as discussed above, if an investor-owned
utility were providing inadequate service the customers
would often bear the cost of making the service adequate.
And finally, utility shareholders stand to benefit from
this bill through an increased ratebase and therefore
higher profits.
5. Inadequate Upgrading - The CPUC staff believes that the
problems with mobilehome parks do not stem from poor
maintenance. Instead, they believe the problem is that the
electric load in mobilehome parks has grown beyond the
capacity of the system. Therefore, the problem is not a
maintenance issue, it is a system adequacy and upgrading
issue. As noted above, the CPUC sets the discount based on
the avoided costs of the utility, which probably does not
account for the cost of system upgrades.
6. Author's Amendments - The author will propose the
following minor amendments to deal with some of the
concerns expressed by the CPUC:
The CPUC is required to adopt a standard agreement for the
transfer of the gas or electric system by January 1, 2011.
The author proposes to change the date to January 1, 2012.
The CPUC is required to complete all the gas or electric
system transfers by January 1, 2016. The author proposes
to eliminate the 2016 deadline and instead require the CPUC
to determine a transfer schedule.
The author proposes that the CPUC coordinate with the
Department of Housing and Community Development and the
county departments of Weights and Measures to prioritize
the gas or electric system transfers.
ASSEMBLY VOTES
Assembly Floor (45-30)
Assembly Appropriations Committee (12-5)
Assembly Utilities and Commerce Committee
(11-2)
POSITIONS
Sponsor:
Author
Support:
Golden State Manufactured-Home Owners League
The Utility Reform Network
Oppose:
California Public Utilities Commission (unless amended)
Sempra Energy (unless amended)
Western Manufactured Housing Communities Association (unless
amended)
Randy Chinn
AB 1108 Analysis
Hearing Date: July 7, 2009