BILL ANALYSIS �
AB 1755
Page 1
Date of Hearing: April 16, 2012
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Steven Bradford, Chair
AB 1755 (Perea) - As Amended: February 17, 2012
SUBJECT : Electricity: rates
SUMMARY : This bill authorizes the California Public Utilities
Commission (PUC) to approve a fixed charge on utility bills.
Specifically, this bill :
1)Allows if, the PUC determines that a fixed charge on utility
bills is just and reasonable, the PUC may approve such a
charge.
2)Allows the PUC to approve a fixed charge to cover monthly
service costs on all of customers of investor-owned utilities
(IOU), including residential customers that receive special
discounted rates based on income.
3)The charge is necessary to provide rate relief to upper tier
residential customers.
EXISTING LAW
1)Authorizes the PUC to fix the rates and charges for every
public utility and requires those rates and charges to be just
and reasonable.
2)Requires electrical and gas corporations to file rates and
charges to be approved by the PUC, providing baseline rates.
3)Requires the PUC, in establishing baseline rates, avoid
excessive increases for residential customers.
4)Requires inclining block rates (known as tiers) on residential
customers. An Inclining Block Rate means that customers are
charged more for greater electricity usage. As a result,
usage in a higher tier is charged a higher price per
kilowatthour, irrespective of the cost of energy or energy
services.
5)Created the California Alternate Rates for Energy (CARE)
program to provide affordable service to low-income electric
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and gas customers.
6)Restricts rates for CARE customers to not exceed 80% of the
corresponding Tier 1, Tier 2, and Tier 3 rates charged to
residential customers.
7)Revises certain prohibitions upon raising residential
electrical rates adopted during the Energy Crisis of 2000-01,
authorizing the PUC to increase residential rates for
electricity usage up to 130% of baseline.
FISCAL EFFECT : Unknown
COMMENTS :
1)According to the author, "Over the course of the AB 1X rate
freeze, the increased cost of electricity service was shifted
completely to the upper tiers (over 130 percent of baseline)
usage, setting those rates at levels far above the actual cost
of providing service to those customers. The increase in the
cost of service was a result of higher costs under various
public policies, including enactment of the Renewable
Portfolio Standard (RPS), the California Global Warming
Solutions Act (AB 32), reliability and safety investments,
infrastructure replacement and inflation. AB 1755 seeks to
provide the PUC with the authority to approve a customer
charge on residential customers to recover fixed costs of
providing electric utility service, if it finds that the
customer charge is reasonable and necessary to provide rate
relief. This authority is intended to be another tool that can
be used by the PUC to reduce rates, in particular, for
customers who must pay for dramatically higher electricity
rates during the summer time."
2)The PUC has observed that "Over time, the rate tier
differentials have widened. Between 2001 and 2010, the
differentials between the Tiers 2 and 3 expanded from about 5
cents to 15 cents, and Tiers 3 and 4 and Tiers 4 and 5
expanded from about 4 and 2 cents per kilowatt-hour (kWh),
respectively, to about 13 and 7 cents per kWh. Between 2000
and 2009, the Tier 5 rate nearly doubled, increasing from 24.5
cents per kWh at the height of the energy crisis to 44.3 cents
per kWh at the end of 2009. PG&E's current Tier 4 rate is
still almost three times higher than the Tier 2 rate of 13.9
cents per kWh, constituting a subsidy paid by upper-tier to
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lower-tier consumers. Upper-tier rates can produce very high
bills when combined with high usage due to extreme
temperatures."
3)According to the PUC," ?higher-usage customers bear a
disproportionate burden of cost subsidies. For almost two
decades, CARE rates capped while the consumer price index has
increased by approximately 51 percent. Thus, CARE customers'
bills have declined in real terms by a significant amount. The
average CARE rate, adjusted for inflation, is 46 percent lower
than it was in 1991.
4)According to the PUC, "a growing disparity has developed in
the rates charged lower-versus-higher-usage residential
customers."
According to the Division of Ratepayer Advocates (DRA), since
2001, customers using the most electricity have paid higher
rates for electricity, because AB 1X (2001) had frozen the
rates for the first two tiers (i.e., up to 130% of baseline).
Therefore, almost all increases in residential rates were in
utility Tier 3 through Tier 5 rates between 2001 and 2010.
For customers with low energy usage or living in mild
climates, they have seen little or no energy bill increases
over the last 10 years. For customers with higher energy usage
or living in more extreme climates, they have seen large
energy bill increases.
5)Except for residential customers served by two investor owned
utilities (PG&E and SDG&E), all other customers currently pay
fixed monthly charges. Residential customers served by SCE
currently pay a fixed monthly charge that is less than $0.77
per month for billing services. In areas served by
California's Publicly Owned Utilities, nearly all of these
utilities include fixed charges ranging from $2.50 to $12.50
per month.
6)SB 695 (Kehoe, Chapter 337, Statutes of 2009) allows gradual,
limited increases in the Tier 1 and Tier 2 rates based on the
annual percentage increase in benefits under the CalWORKs
program as authorized by the Legislature for the fiscal year
in which the rate increase would take effect, but not to
exceed 3 percent per year.
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7)Financially disadvantaged customers are eligible for CARE
provides a discount of 20% for households with an annual
household income of no greater than 200 percent of the federal
poverty guideline levels. Financially disadvantaged customers
have no other sources of funds (with the possible exception of
housing subsidies that provide allowances for energy bills)
from which to pay higher utility rates of any amount, and as a
result, low-income customers will face greater risk of service
disconnection for non-payment of bills or possibly to
sacrifice other necessities to maintain electric service.
8)The author may wish to consider the following amendments:
a) Limit the scope of the bill to residential customers
because fixed charges are already in place for other
customers
On Page 4, line 20: after "applies to" delete "all" and
insert "residential"
b) Add language stating that:
"The PUC shall ensure that rates are affordable for
qualified low income ratepayers and may offer discounts or
other ratepayer subsidies to ensure safe, reliable, and
affordable electricity to these customers so that these
customers are not at risk of service disconnections that
would cause them to sacrifice electricity service."
REGISTERED SUPPORT / OPPOSITION :
Support
California Chamber of Commerce (CalChamber)
Pacific Gas and Electric Company (PG&E) (Sponsor)
San Diego Gas & Electric Company (SDG&E)
Southern California Edison (SCE)
Opposition
American Association of Retired Persons (AARP)
Division of Ratepayer Advocates (DRA) (unless amended)
Sierra Club California
The Greenlining Institute
The Utility Reform Network (TURN)
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Analysis Prepared by : Susan Kateley / U. & C. / (916)
319-2083