BILL ANALYSIS �
AB 1755
Page 1
REPLACE : 05/15/2012 Changes per consultant.
ASSEMBLY THIRD READING
AB 1755 (Perea)
As Amended April 23, 2012
Majority vote
UTILITIES & COMMERCE 9-1 APPROPRIATIONS
17-0
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|Ayes:|Bradford, Buchanan, |Ayes:|Fuentes, Harkey, |
| |Bonnie Lowenthal, Gorell, | |Blumenfield, Bradford, |
| | | |Charles Calderon, Campos, |
| |Roger Hern�ndez, Knight, | |Davis, Donnelly, Gatto, |
| |Ma, Nestande, Valadao | |Hall, Hill, Lara, |
| | | |Mitchell, Nielsen, Norby, |
| | | |Solorio, Wagner |
|-----+--------------------------+-----+--------------------------|
|Nays:|Huffman | | |
| | | | |
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SUMMARY : 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)States that 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.
AB 1755
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3)Requires the PUC, in establishing baseline rates, to 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)Creates the California Alternate Rates for Energy (CARE) program
to provide affordable service to low-income electric 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 : According to the Assembly Appropriations Committee,
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 CARE program, which provides
affordable electrical service to low-income customers.
COMMENTS : 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.
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.
AB 1755
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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 lower-tier
consumers. Upper-tier rates can produce very high bills when
combined with high usage due to extreme temperatures."
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."
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 1 X1 (Keely and Migden), Chapter 4, Statutes
of 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.
Except for residential customers served by two investor owned
utilities Pacific Gas and Electric (PG&E) and San Diego Gas and
Electric (SDG&E), all other customers currently pay fixed monthly
charges. Residential customers served by Southern California Edison
(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.
Analysis Prepared by : Susan Kateley / U. & C. / (916) 319-2083FN:
0003649