BILL ANALYSIS � 1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
AB 724 - Bradford Hearing Date:
June 21, 2011 A
As Amended: May 17, 2011 FISCAL B
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DESCRIPTION
Current law permits owners of mobilehome parks (MHP) constructed
prior to 1997 to provide gas and electric service to MHP tenants
and requires that the MHP owner (the master-meter) charge the
same rate for gas and electric service that would be applicable
if the tenant received service from an investor-owned utility
(IOU).
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.
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 costs of the
transfer.
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 CPUC to open a rulemaking to evaluate
when an MHP should be required to transfer master-meter service
to the responsible IOU.
BACKGROUND
Mobilehome Parks - The state of California has approximately
4,800 MHPs 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likely to have an outdated gas and/or electrical infrastructure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 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 of the 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. There have been very few park transfers
since the 1996 legislation was adopted.
COMMENTS
1. Author's Purpose . The purpose of this bill is to ensure
residents of master- metered/submetered MHPs are provided
with safe and reliable gas or electric service at
reasonable rates while at the same time improving public
safety and grid reliability.
2. 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
MHPs 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 electric 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 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 usually exceed its
value.
This bill addresses that dilemma by calling for the CPUC
open a rulemaking to identify situations when transfer of
service from a MHP owner should be required.
Prior legislative attempts have mandated that the IOUs
takeover the master-meter MHPs but the broad impacts, both
fiscal and practical, of transferring 4,000 MHPs to the
IOUs have been a barrier. Practically speaking the IOUs
would be unable to do the necessary upgrades to take over
service immediately. Fiscally, upgrading the
infrastructure of all of those parks would result in an
expense to the MHP owner or the utility (meaning other
ratepayers) of tens of millions if not hundreds of millions
of dollars. Consequently those efforts have stalled.
3. Ratepayer Impact . The CPUC opened a rulemaking in
February to examine what it can and should do to encourage
IOU takeover of utility service for MHPs. This bill would
an additional element to that rulemaking to consider when
takeover should be mandated.
4. Prior Legislation .
AB 1108 (Fuentes, 2009) would have required MHP
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.
SB 1097 (Strickland, 2010) would have required
electric and natural gas utilities to accept the transfer
of electricity or natural gas systems serving
master-metered MHPs, provided that certain criteria were
met. Status: Held in Senate Appropriations Committee.
ASSEMBLY VOTES
Assembly Floor (62-15)
Assembly Appropriations Committee (13-3)
Assembly Utilities and Commerce Committee
(12-0)
POSITIONS
Sponsor:
Author
Support:
None on file
Oppose:
None on file
Kellie Smith
AB 724 Analysis
Hearing Date: June 21, 2011