BILL ANALYSIS �
AB 1693
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Date of Hearing: April 9, 2014
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 1693 (Perea) - As Amended: April 2, 2014
Policy Committee: Utilities and
Commerce Vote: 15-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill requires the Public Utilities Commission (PUC) to
issue a final decision on a general rate increase case of a
small independent telephone corporation within a specific
timeframe. Specifically, this bill:
1)Requires the PUC to issue a final decision on a general rate
case of a small independent telephone corporation no later
than 330 days following the corporation's initial filing of
the general rate case application or advice letter.
2)Establishes an interim rate period. If the PUC fails to issue
a final decision by the 330th day, the rate design proposed by
the telephone corporation will take effect on an interim basis
beginning 360 calendar days following the filing of the
application or advice letter. This interim rate is subject to
an accounting true-up in the final decision, if the decision
is issued within 540 days of filing. If the decision is not
issued within 540 days, the interim rate will be in place
until the PUC issues a final decision and will not be subject
to an accounting true-up.
3)Requires any new rate design adopted in a final decision or
resolution issued by the PUC after the 540-day period to take
effect prospectively.
4)Allows the required time frames to be waived by mutual consent
of the executive director of the PUC and the telephone
corporation.
FISCAL EFFECT
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Additional absorbable costs of less than $100,000 (special fund)
to the PUC to operate within the timeframes. In 2006, the PUC
deregulated rates for the larger telephone companies and now
only processes small company rate cases for approximately 10
corporations.
COMMENTS
1)Purpose. According to the author, the most recent small
telephone company rate case by the Sebastian Kerman Telephone
Company has been pending for almost two-and-a-half-years.
This delay prevents the planning necessary to make investments
in infrastructure upgrades to improve service for their
customers. Since rates do not go into effect until they are
approved by the PUC and are not retroactive, the more costly a
delay becomes for the phone company
In 2003, the Legislature passed AB 1735 (Assembly Utilities
and Committee, Statutes of 2003) to address delays in
resolving rate and quasi-legislative cases. AB 1735 requires
the PUC to resolve rate-setting and quasi-legislative cases
within 18 months of issuance of a scoping memo, and grants
the PUC authority to extend this deadline either at the outset
of the proceeding, in the scoping memo, or by PUC decision or
resolution in 60-day increments without limit. However, there
are no consequences for the PUC if it fails to act in a timely
manner or decides not to resolve an open case.
This bill requires the PUC to issue a final decision within
330 days of the filing of a small telephone company's general
rate case or advice letter. If the PUC fails to meet the
deadline, the request would be deemed approved. The deadline
in the bill can be waived by mutual consent of the PUC and
small telephone company.
2)Background. In 2006, the PUC eliminated pricing regulation
for all but basic residential telephone services. Carriers
may now offer services such as Caller ID, Call Waiting, and
Call Forwarding through service agreements directly with
consumers. Small independent telephone corporations were not
included in the 2006 de-regulation and must submit rate cases
for all services through formal application or informal advice
letter.
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Currently, there are approximately 10 small independent
telephone corporations primarily serving customers in rural
areas of the state subject to PUC regulation. Small telephone
companies must obtain PUC review and approval to change any
rates. The companies are: Calaveras Telephone, Cal-Ore
Telephone, Ducor Telephone, Sebastian dba Foresthill Telephone
and Kerman Telephone, Pinnacles Telephone, Ponderosa
Telephone, Sierra Telephone, and Siskiyou Telephone, and TDS
Telecom.
According to the PUC, Kerman's request for interim relief was
denied because they requested a 56% increase in California
High Cost Fund (CHCF) revenues (supplemental revenues designed
to assist telephone companies serving rural or difficult to
serve areas of the state) just one month after the PUC
rejected a settlement of a 24% increase. The PUC initiated a
rulemaking in November 2011 to review CHCF in response to
market, regulatory and technological changes since the program
was first established. Several carriers have had their rate
increases frozen pending completion of the rulemaking. It is
unlikely the PUC will rule on any rates cases while the
rulemaking procedure is pending.
3)Support. This bill is supported by the California Independent
Telecommunications Companies and the California Communications
Association to prevent unnecessary ambiguity and complexities
when a rate case is not resolved in a timely manner. Further,
proponents claim that the PUC has not acted in a timely manner
because they are considering changing rules for small
telephone companies in a separate proceeding which unfairly
delays plans to make investments in infrastructure and capital
improvements.
4)Opposition. The Utility Reform Network (TURN) opposed the
previous version of this bill. TURN agrees that company rates
cases should be resolved in a timely manner but is concerned
that by providing automatic rate increases, this bill may harm
telephone customers. The Utilities and Commerce Committee
adopted amendments to address this concern although opposition
has not been removed.
The Office of Ratepayers is concerned that an expedited
process may hinder the PUCs' ability to ensure universal
telephone services is provided consistent with public benefit
requirements.
AB 1693
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Analysis Prepared by : Jennifer Galehouse / APPR. / (916)
319-2081