BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
SB 1097 - Strickland Hearing
Date: April 20, 2010 S
As Introduced FISCAL B
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DESCRIPTION
Current law permits mobilehome park (MHP) owners of parks
constructed prior to 1997 to provide gas and electric service
to MHP tenants and requires in this instance that the MHP owner
(the master-meter) charge the same rate for gas and electric
service that would be applicable if tenant received service from
an investor-owned utility (IOU).
Current law requires IOUs to discount the rate charged to a MHP
owner which is designed to reimburse MHP owners for the
reasonable average cost of providing sub-metered service and
system maintenance and improvement to tenants.
Current law establishes a mechanism which, at the option of the
MHP owner, compels an IOU to accept the transfer of a gas or
electric system if the system can safely and reliably provide
service to its existing customers, the system meets the
standards of general orders by the California Public Utilities
Commission (CPUC), and the system is capable of serving the
customary expected load of the MHP.
This bill mandates that IOUs purchase MHP electric or gas at the
option of the MHP owner and modifies the criteria upon which
acceptance is conditioned require only that the system was
constructed to meet standards in effect at the time of
construction.
Current law requires the IOU to compensate the MHP for the value
of the gas or electric system based on an appraisal including
specified factors and indemnity and liability issues. The IOU's
ratepayers must be held indifferent to the transfer.
This bill requires the appraisal value to include the value of
eliminating the submeter discount (differential) to the MHP
owner.
Current law permits either party to the transfer to apply to the
CPUC for informal mediation and resolution of any issue,
finding, determination, or delay in the transfer process.
This bill requires the IOU to pay the costs of mediation and to
hire an independent consultant to inspect and value the system.
Current law charges the Department of Housing and Community
Development (HCD) with inspecting MHPs including the inspection
of gas and electric infrastructure.
BACKGROUND
Mobilehome Parks - The state of California has approximately
4,800 mobile home parks with over 340,000 residents.
Approximately 88% of the state's 4,800 parks are more than 40
years old and many are likely to have an outdated gas and/or
electrical infrastructure that is both a problem for tenants
with modern appliances and a public safety concern. Most parks
are "master metered," meaning that the MHP owner is the utility,
receiving service through a single meter. The electricity is
then distributed to tenants who are billed by the MHP owner
based on usage or the service costs are split proportionately.
MHP Costs: The Differential - MHP owners are required to charge
the same rates for electricity and natural gas that would be
applicable if the IOU served the tenant directly. The IOUs are
required to provide the electricity and natural gas to the MHP
owner at a discount. The discount, also referred to as the
differential, is intended to reimburse the MHP owners for the
reasonable average cost of providing sub-metered service to the
tenants. According to the CPUC (D.04-04-043) the differential
represents the "average cost that the utility would have
incurred in providing comparable services to the tenant
directly, which is avoided when the mobile-home park is
submetered." It includes operation and maintenance expenses and
capital investment costs including capital expenditures for
"replacement, and improvement of the distribution system and
service facilities." As an example, in 2009 MHP owners in PG&E's
service territory received a discount of approximately $0.37 per
day per tenant.
Park Transfer Process - In 1996 the Legislature established a
statutory framework that allows a MHP owner to compel the
transfer a MHP utility system to an IOU if the condition of the
system satisfies three criteria:
It is capable of providing the end user a safe and
reliable source of gas or electric service;
It meets CPUC's general orders and safety and
reliability standards; and
It is capable of serving the customary expected load in
the park or community.
An appraisal of the system is required and the IOU must
compensate the MHP owner for that value, if any. If there is
disagreement among the parties, either party can apply to the
CPUC for mediation. Once the utility systems are transferred to
the regulated utility, the cost of the bill discount to all
residential ratepayers and the MHP owner is eliminated because
the discount ceases. There have been very few park transfers
since the 1996 legislation was adopted.
Harbor City Estates Case - A dispute concerning the transfer of
a gas system from a MHP owner, Harbor City Estates (HCE), and
Southern California Gas Company (Sempra) resulted in a review of
the transfer process by the CPUC. The ruling is significant
because it clarified the elements of the appraisal of the system
upon which the IOU payment would be based. The CPUC ruled that
"the submeter discount is designed only to compensate the MHP
operator for its costs of operating the submetered system; thus,
the discount is not part of the value of the system for purposes
of a transfer."
COMMENTS
1) Mobilehome Parks as Utilities - In recognition of the
fact that MHP owners are not situated to properly serve
tenants as a utility the Legislature has prohibited
master-meter owners since 1997. However, more than 4,000
mobilehome parks remain under this service structure.
Many if not most MHP owners would like to get out of the
utility business but anecdotal reports indicate that the
electrical and gas infrastructure of the parks has not been
maintained to serve current load demands at current safety
standards. Consequently if a MHP owner wants to transfer
the park's utility system to an IOU, the MHP park owner can
expect to receive little or no compensation for the
electric or gas infrastructure since the costs of bringing
the system up to current reliability and safety standards
could exceed its value.
This bill addresses that dilemma for the MHP owner in two
critical ways: (1) the system would only need to meet the
standards in effect at the time of construction; and (2)
the appraisal basis for the value of the system would be
modified to count the differential as a lost source of
revenue to the MHP owner rather than a monthly
reimbursement for the cost of providing service to tenants.
Both provisions run counter to the CPUC decision in the
Harbor City Estates case.
These two changes would likely result in the transfer of a
significant number of parks but the IOUs argue that the
valuation process as modified by this bill is inequitable
for other IOU ratepayers to which the costs of upgrading
the systems would be transferred.
2) System Evaluation . The current process for evaluating
the condition of the electrical or gas system requires the
MHP owner to pay a $150 fee to the IOU which is required to
do a comprehensive evaluation of the system and provide an
estimate of the costs of improvements necessary to bring
the system up to utility standard and an estimate of the
cost to transfer the system. If the parties cannot come to
agreement on the transfer, either can apply to the CPUC for
an informal mediation of differences. This bill would
additionally require the IOU to hire an independent
evaluator at the expense of the IOU (aka ratepayer) for an
independent qualified professional to evaluate the system
inspection and valuations and to advise the CPUC. The
committee has not been made aware of that the IOU
evaluations are faulty. Consequently it is not apparent
why this additional step and expense is warranted.
3) Ratepayer Impact . This bill allows a MHP owner to
transfer a system to an IOU with substandard infrastructure
even though, according to the CPUC, a differential paid to
the MHP owner included the average costs of upgrades to the
system. The basis for appraisal of the value of the system
would also be required to include the lost differential
payment to the MHP owner even though the differential is
designed to compensate the MHP owner for its costs of
operating as a utility - not as profit.
Thus ratepayers will not be held indifferent as required
under current law because in many instances they could be
required to fund the installation of an entirely new
electrical or gas distribution system which was the
responsibility of the MHP owner.
4) Related Legislation . AB 1108 (Fuentes, 2009) would have
required mobile-home park owners of sub-metered utility
systems to transfer ownership of their gas or electric
systems to the IOU and required the CPUC to open a
proceeding to develop procedures and schedules for the
transfers. Status: Held in Senate Appropriations
Committee.
POSITIONS
Sponsor:
Western Manufactured Housing Communities Association
Support:
Western Manufactured Housing Communities Association
Oppose:
Pacific Gas & Electric Company
Sempra Energy
Southern California Edison
TURN - The Utility Reform Network (unless amended)
Maurice Pitesky
Kellie Smith
SB 1097 Analysis
Hearing Date: April 20, 2010