BILL ANALYSIS � 1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
AB 1434 - Yamada Hearing Date:
June 23, 2014 A
As Amended: May 23, 2014 FISCAL B
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DESCRIPTION
Current law establishes the Department of Community Services and
Development (CSD) and charges it with improving the quality of
life for low-income Californians. (Government Code � 12085)
Current law requires the California Public Utilities Commission
(CPUC) to establish the California Alternate Rates for Energy
(CARE) program to discount rates for low-income gas and electric
customers whom are defined as those with incomes no greater than
200 percent of the federal poverty level. The average effective
CARE discount is limited to a range of 30 to 35 percent of the
revenues that would have been produced for the same billed usage
by non-CARE customers. (Public Utilities Code � 739.1)
Current law requires the CPUC to consider a program of rate
relief for low income customers of water corporations. (Public
Utilities Code � 739.8)
This bill requires the CSD to develop a plan for the funding and
implementation of a low income water rate assistance program.
BACKGROUND
Last fall the Assembly Committee on Utilities & Commerce, with
the Assembly Committee on Aging, held an oversight hearing on
water rates to specifically examine affordability for aging
populations and the low income. The CPUC regulates 115 water
utilities which are natural monopolies with no direct
competition. They are and are classified as:
Class A utilities (those with >10,000 connections).
These serve 95% of the 6 million customers of the IOU water
utilities and there are 10;
Class B (2,001-10,000 connections), total 6;
Class C (501-2,000 connections), total 23; and
Class D (<500 connections), total 76.
The CPUC assesses the fiscal condition of the water utilities
and provides a reasonable rate of return to ensure the ability
to provide customer service and satisfy shareholders. In 2012,
water utilities under CPUC's jurisdiction posted revenues
totaling $1.4 billion.
According to the committee the CPUC has ordered all Class A
water utilities (those with over 10,000 service connections) and
one Class B water corporation (between 2,000 and 10,000 service
connections) to establish rate assistance programs.
Collectively the Class B, C, and D water companies serve
approximately 300,000 customers and approximately 70,000 to
95,000 of those customers may be eligible for low income
assistance or as much as 30% of the customer base.
Consequently, the non-eligible rate base is not large enough to
spread the costs of the income assistance program due to the
likely significant bill impact on those ratepayers.
COMMENTS
1. Author's Purpose . The issue of exorbitant water rates
was brought to the author's attention as a result of a CPUC
filing by Cal Water for a water rate increase of 77% over
three years to ratepayers in Lucerne, one of Lake County's
most disadvantaged communities. The CPUC has the filing
under review and it appears that a pending settlement will
significantly reduce the increase to a more manageable
level. 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%.
Large rate increases are not limited to Lucerne.
The costs of water service are also growing significantly
in publicly owned utility districts. The CPUC has
implemented assistance programs for the larger water
corporations but the majority of water service providers
have chosen not to provide assistance for various reasons.
Some do not have enough customers to adequately cover their
cost for administering a program. Comparably, other
providers may have enough customers, but low-income
households might make up too high or low of a percentage of
their customer base to reasonably fund a program through
their normal water rates. With the implementation of new
regulations like the new maximum contaminant levels of
Hexavalent Chromium the Department of Public Health is
considering and the need to replace aging water delivery
infrastructure, the costs of delivering potable water will
continue to drive rates higher in the coming years.
2. The Study . The CPUC has addressed the issue of water
affordability for customers of the water corporations under
its jurisdiction and requires the companies with the
largest customer bases to offer an assistance program.
However, for the utilities that serve fewer connections,
the rate base over which an assistance program could be
supported is limited. To address this issue the CPUC is
considering policies to balance rates for multi-district
water utilities.
The study called for by this bill includes both
publicly-owned water utilities (POUs) and investor-owned
water utilities (IOUs) water utilities. Approximately 86%
of water customers in the state are served by POUs which
may be hampered in their efforts to provide assistance
programs as a result of Proposition 218. The author
reports that POUs must restrict water rates to the cost of
service - in sharp contrast to the IOUs, who are able to
generate a return on their investment.
ASSEMBLY VOTES
Assembly Floor (55-23)
Assembly Appropriations Committee (12-5)
Assembly Utilities and Commerce Committee
(9-5)
POSITIONS
Sponsor:
Author
Support:
American Federation of State, County and Municipal Employees
California Environmental Justice Alliance
Office of Ratepayer Advocates
Concern:
California Municipal Utilities Association
Oppose:
Association of California Water Agencies
Kellie Smith
AB 1434 Analysis
Hearing Date: June 23, 2014