BILL ANALYSIS �
AB 1755
Page 1
Date of Hearing: May 9, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 1755 (Perea) - As Amended: April 23, 2012
Policy Committee: UtilitiesVote:9-1
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill authorizes the Public Utilities Commission (PUC) to
approve a fixed charge, on all residential customers of
commission-regulated electrical corporations, to cover the fixed
costs of providing electrical service, if the commission finds
such a charge to be just and reasonable and necessary to provide
rate relief to upper tier residential customers.
The bill also requires the commission to ensure rates are
affordable to low-income residential ratepayers and to require
the electrical corporations to offer these customers discounts
or subsidies to avoid the risk of service disconnections.
FISCAL EFFECT
Absorbable costs to the PUC, which indicates that the bill's
provisions can be implemented with existing staff resources
involved with rate design and with the California Alternate
Rates for Energy (CARE) program, which provides affordable
electrical service to low-income customers.
COMMENTS
1)Background . During the energy crisis, ABX1 1 of 2001 protected
ratepayers from rampant price fluctuations due to a
dysfunctional wholesale electricity market. ABX1 1 authorized
the Department of Water Resources (DWR) to issue revenue bonds
to purchase power on behalf of the cash-strapped
investor-owned utilities who couldn't keep up with the
volatile wholesale prices. Among other stabilizing efforts,
ABX1 1 prohibited the PUC from increasing rates for usage
under 130% of baseline usage (Tiers 1 and 2) until DWR bond
AB 1755
Page 2
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.)
Capping rates in the lowest tiers resulted in increased costs,
such as from rising fuel prices and legislatively mandated and
PUC-created programs, being disproportionately borne by
customers whose electricity usage falls in the upper tiers. SB
695 (Kehoe)/Chapter 337 of 2009, subsequently allowed gradual,
limited increases in the Tier 1 and Tier 2.
The PUC indicates that rate tier differentials have widened
significantly. From 2001 and 2010, for example, the
differential between the Tiers 2 and 3 expanded from 5 cents
to 15 cents per kilowatt-hour (kWh). PG&E's current Tier 4
rate is still almost three times higher than the Tier 2 rate
of 13.9 cents per kWh, which commission describes as "a
subsidy paid by upper-tier to lower-tier consumers. Upper-tier
rates can produce very high bills when combined with high
usage due to extreme temperatures."
2)Purpose . According to the author, given that the increased
cost of electricity service has shifted almost completely to
the upper tiers, AB 1755 provides the PUC with the authority
to approve a charge to recover fixed costs of providing
electric utility service, if it finds that the customer charge
is reasonable and necessary to provide rate relief. The author
contends this provides another tool that can be used by the
PUC to reduce rates, in particular, for customers
significantly impacted by higher energy bills during the
summer time. This bill is supported by the three
investor-owned electrical utilities and by the California
Chamber of Commerce.
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 pay
a fixed monthly charge that is less than $0.77 per month for
billing services. In areas served by publicly-owned utilities,
nearly all include fixed charges ranging from $2.50 to $12.50
per month.
AB 1755
Page 3
3)Opposition . The bill is opposed by The Utilities Reform
Network (TURN), the AARP, and the PUC's Division of Ratepayer
Advocates, among others. Opponents are concerned with the
impact of a fixed fee on low-income ratepayers, and that the
resulting benefit would accrue to high-usage customers, which
are generally those with higher incomes. Opponents argue that
the bill is contrary to the compromise among stakeholders that
resulted in SB 495.
Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081