BILL ANALYSIS �
AB 1434
Page A
ASSEMBLY THIRD READING
AB 1434 (Yamada)
As Amended May 23, 2014
Majority vote
UTILITIES & COMMERCE 9-5
APPROPRIATIONS 12-5
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|Ayes:|Bradford, Bonilla, Fong, |Ayes:|Gatto, Bocanegra, |
| |Garcia, Roger Hern�ndez, | |Bradford, |
| |Mullin, Quirk, Rendon, | |Ian Calderon, Campos, |
| |Skinner | |Eggman, Gomez, Holden, |
| | | |Pan, Quirk, |
| | | |Ridley-Thomas, Weber |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Patterson, Ch�vez, Dahle, |Nays:|Bigelow, Donnelly, Jones, |
| | | |Linder, Wagner |
| |Beth Gaines, Jones | | |
| | | | |
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SUMMARY : Requires the Department of Community Services &
Development (CSD) to develop a plan for a Low-Income Water Rate
Assistance Program, report to the Legislature on the feasibility
and structure of the program by January 1, 2016. Specifically,
this bill :
1)Requires CSD, in collaboration with the State Board of
Equalization (BOE), to develop a plan by January 1, 2016,
regarding the feasibility, structure, funding, and
implementation of a Low-Income Water Rate Assistance Program.
2)Requires CSD to report to the Legislature by January 1, 2016,
on its findings related to the program, including any
recommendations for legislative action that may need to be
taken to ensure the successful implementation of the program.
FISCAL EFFECT :
1)Increased General Fund 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.
AB 1434
Page B
2)Minor and absorbable costs to the California Public Utilities
Commission (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 establish the program.
3)Minor, absorbable costs for the BOE.
COMMENTS :
1)Author's statement: "The passage of AB 685 (Eng), [Chapter
524, Statutes of] 2012, established state policy for the right
for every human being to safe, clean, affordable water. As
part of this obligation, the CPUC is required to consider
low-income rate relief programs. However, they are currently
not required by statute to implement these programs. In
addition, they have no authority over utilities that qualify
as public agencies, the vast majority of water service
providers in the state.
"Without a mandate to operate such programs, the majority of
water service providers have chosen not to provide assistance,
leaving at least three quarters of Californians without any
assistance for water affordability. Even in areas covered by
a program, the lack of a standardized benefit structure
results in many discounts so small as to be insignificant."
2)Large water rate increases in Lucerne. A major driver of this
bill is the struggle between the Lake County community of
Lucerne and the investor-owned water utility (IOU) California
Water Service Company (Cal Water). In July 2012, Cal Water
filed a request with the 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 - this occurring
in an area with a median household income of approximately
$25,000 (versus California's median income of approximately
$61,000). A pending settlement between PUC and Cal Water
would 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
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Page C
2009, Cal Water requested an increase of 54.9%, and received
approval for an increase of 41.8%. Large rate increases are
not limited to Lucerne - many similar increases have been
approved by the PUC for other water companies.
3)Investor-owned versus publicly-owned water utilities. The PUC
is charged with ensuring California's 115 IOUs and 14
investor-owned wastewater utilities provide safe and reliable
water to customers at reasonable rates.<1> Water utilities
regulated by the PUC deliver water service to about 16%
(approximately 6 million) of the state's population.
The remaining water customers in California are served by
publicly-owned utilities (cities, water districts, and mutual
water companies), which are self-regulated and not under PUC
jurisdiction.
4)Voter Approved Propositions affect Water Rates. California
voters approved amendments to the California Constitution
through Proposition 218 in 1996. One of the provisions in
Proposition 218 restricts water rates for publicly-owned water
utilities (POUs) to the cost of service.
Propositions 13 and 26, enacted in 1979 and 2010 respectively,
provide that, "Special taxes shall not include any fee which
does not exceed the reasonable cost of providing the service
or regulatory activity for which the fee is charged."
"?[L]ocal government bears the burden of proving by a
preponderance of the evidence that a levy, charge, or other
exaction is not a tax, that the amount is no more than
necessary to cover the reasonable costs of the governmental
activity, and that the manner in which those costs are
allocated to a payor bear a fair or reasonable relationship to
the payor's burdens on, or benefits received from, the
governmental activity."
5)Support and opposition. American Federation of State, County,
and Municipal Employees (AFSCME) supports this bill, claiming
that it would provide low-income families with access to
affordable water, and that subsidies and discounts would help
Californians fulfill their most basic needs without having to
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<1> California Public Utilities Commission. 2012 Annual Report.
http://www.cpuc.ca.gov/NR/rdonlyres/E47E6D16-C37F-446B-B606-92437
8794A14/0/CPUC2012AnnualReport.pdf
AB 1434
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worry about a large financial burden. The PUC Office of
Ratepayer Advocates also supports this bill, arguing that
those most in need will be eligible for discounted clean and
reliable water service and that the costs associated with the
program will be shared by all California water users.
The California Municipal Utilities Associated (CMUA) has
strong concerns with current bill language. They state they do
not oppose the concept of the bill, but they worry that the
proposed funding source of the program appears to violate the
California Constitution under the provisions of Proposition
218. CMUA is concerned that if implemented, the program could
expose water providers to legal challenge.
Analysis Prepared by : Brandon Gaytan / U. & C. / (916)
319-2083
FN: 0003739