BILL ANALYSIS �
AB 1434
Page 1
Date of Hearing: May 14, 2014
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 1434 (Yamada) - As Amended: April 24, 2014
Policy Committee: Utilities and
Commerce Vote: 9-5
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill requires the Department of Community Services and
Development (CSD), in collaboration with the Board of
Equalization (BOE) and relevant stakeholders, to develop a plan
to fund and implement the Low-Income Water Rate Assistance
Program by January 1, 2016 as specified. Specifically, this
bill:
1)Requires investor- and publicly-owned water service providers
to offer a discount or subsidy to eligible low-income
residential water ratepayers who enroll in the program.
2)Authorizes CSD to collect documentation from ratepayers
demonstrating program eligibility (income equal to or less
than 200% of the federal poverty level guidelines).
3)Limits a water rate discount or subsidy to 20% of the
ratepayer's total bill or $60 per month, whichever is less.
4)Creates the Low-Income Water Rate Assistance Fund in the State
Treasury, and designates monies deposited in this fund for the
purposes of this program.
5)Requires CSD to implement the program by January 1, 2017 if
the funding has been identified and appropriated.
FISCAL EFFECT
1)Unknown, significant cost pressures or cost shifts,
potentially in the millions of dollars, to fund and implement
the water rate assistance program.
AB 1434
Page 2
2)Increased GF costs to CSD in the $350,000 range over a
two-year period to conduct the feasibility study and develop
the rate assistance program. Unknown ongoing implementation
costs for CSD.
3)Minor and absorbable costs to the PUC to participate in the
development of the plan and unknown increased costs to ensure
proper compliance with the rate assistance program for
investor-owned water utilities should the CSD Department
establish the program.
4)Minor, absorbable costs for the BOE.
COMMENTS
1)Purpose. In 2012, AB 685 (Eng) declared it the established
policy of the state that every human being has the right to
safe, clean, affordable, and accessible water adequate for
human consumption, cooking, and sanitary purposes. All
relevant state agencies, including the Department of Water
Resources, the State Water Resources Control Board, and the
State Department of Public Health, are required to consider
this state policy when revising, adopting, or establishing
policies, regulations, and grant criteria.
According to the author, without a mandate to operate
low-income rate relief programs, the majority of water service
providers have not provided assistance, leaving the majority
of low-income Californians without assistance.
2)Background. This bill, in part, is a result of the struggle
between the community of Lucerne (Lake County) and the
investor-owned water utility (IOU) Cal Water. In July 2012,
Cal Water filed a request with the California Public Utilities
Commission (PUC) for a water rate increase of 77% over three
years to ratepayers in Lucerne, one of Lake County's most
disadvantaged communities. The average resident's water bill,
according to local news accounts, would have doubled from
$62.85 to $124.22 per month. Lucerne is an area with a median
annual household income of approximately $25,000 as opposed to
the statewide median annual income of approximately $61,000.
A recent pending settlement between PUC and Cal Water would
AB 1434
Page 3
not drastically increase water rates in Lucerne. However, over
recent years, Lucerne has been subject to large rate
increases. In 2005, Cal Water sought a 247% rate increase,
receiving PUC approval for a 120% rate increase. In 2009, Cal
Water requested an increase of 54.9%, and received approval
for an increase of 41.8%.
The US Environmental Protection Agency (EPA) and the
California Department of Public Health use a "water
affordability threshold" to factor in variable costs of living
across California. For example, at a threshold of 1.5%, a
household at the California median income of $61,000 would not
be expected to pay over $915 per year for water
($76.25/month). Households with water bills exceeding this
threshold are considered to be paying a cost that is
unaffordable and a "high burden." In the case of Lucerne, it
is estimated an affordable monthly bill would be $32.50 or
less. In reality, the average bill is $85 - about 2.5 times
the affordable amount.
3)Water Services Providers. The PUC is charged with ensuring
California's 115 investor-owned water utilities and 14
investor-owned wastewater utilities provide safe and reliable
water to customers at reasonable rates. Water utilities
regulated by the PUC deliver water service to about 16% of the
state's population.
The remaining water customers in California are served by
publicly-owned utilities (POU) (cities, water districts, and
mutual water companies), which are self-regulated and not
under PUC jurisdiction. POUs must restrict water rates to
the cost of service. It is unclear how POUs will be able to
offer rate assistance without violating special tax and fee
laws.
Analysis Prepared by : Jennifer Galehouse / APPR. / (916)
319-2081