BILL ANALYSIS �
AB 2672
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Date of Hearing: April 7, 2014
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Steven Bradford, Chair
AB 2672 (Perea) - As Introduced: February 21, 2014
SUBJECT : Gas: extension of service: disadvantaged communities.
SUMMARY : This bill requires the California Public Utilities
Commission (PUC) to develop a program, via a proceeding, that
enables disadvantaged communities in the San Joaquin Valley to
finance the cost of extending natural gas service within those
communities. Specifically, this bill :
1)Authorizes the PUC to require gas corporations that provide
natural gas service in the San Joaquin Valley to:
a. Identify disadvantaged communities in the San
Joaquin Valley lacking gas service
b. Assess the cost of extending gas lines to
disadvantaged communities
c. Work with disadvantaged communities and local
agencies desiring gas service to develop and implement a
financing plan to provide gas service to those
disadvantaged communities
2)Requires the PUC to identify a funding source for the program.
EXISTING LAW
1)Requires the PUC to investigate the terms and conditions of
extending gas service to existing residential customers and
make written findings on the economic effect, the effect of
requiring existing customers who apply to receive service in
the future, the effect of existing customers to be responsible
for the extension of gas service, the effect on gas service
extension on existing ratepayers, the effect on energy
consumption and conservation of energy. (Public Utilities Code
783(b))
2)Establishes a surcharge on customers of gas corporations to
provide assistance to low income customers (Public Utilities
Code 890)
FISCAL EFFECT : Unknown
AB 2672
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COMMENTS :
1)Author's statement: "Many disadvantaged communities within the
San Joaquin Valley do not have access to natural gas service.
Gas lines simply do not extend to some of these communities
and the cost of line extensions are typically unaffordable.
Without natural gas service, residents have to rely on
alternative fuel sources such as propane, electricity or wood
burning to heat their homes, food and water. These alternative
sources are expensive, less environmentally friendly and can
expose residents to health and safety issues. Cost is a huge
determining factor for individuals and is one of the main
reasons communities wish to transition to natural gas service.
By developing a program at the CPUC to look at the financing
costs of extending natural gas service and potential available
funding sources, disadvantaged communities would be able to
plan for and understand what it would take to realize the
benefits of natural gas and transition to a safer, healthier
and more affordable utility service."
2)The lack of natural gas service and its effect on low-income
communities. Where natural gas service is unavailable,
households and businesses use propane or electricity for space
and water heating.<1> The cost of propane tends to be much
higher than alternative fuel sources such as natural gas.
According to the U.S. Department of Energy's Energy
Information Administration, toward the end of 2013, the cost
to heat with propane was approximately three times more than
with natural gas.<2>
In addition, as opposed to natural gas, which tends to rise
and dissipate into the air, leaking propane poses a greater
explosive risk because it is heavier than air and more likely
to collect on the ground. Regarding environmental impact,
propane and natural gas have similar profiles, but natural gas
is often considered cleaner burning. Therefore, when
available, natural gas is a safer and more cost effective
energy solution than propane. Regarding environmental impact,
propane and natural gas have similar profiles. For low-income
households, the use of natural gas can decrease utility costs,
--------------------------
<1> California Energy Commission. Energy Almanac.
http://energyalmanac.ca.gov/propane/
<2> U.S. Department of Energy's Energy Information
Administration. Heating Fuel Calculator, using Oct. and Nov.
2013 average U.S. residential prices.
http://www.eia.gov/neic/experts/heatcalc.xls
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increase overall financial health, and provide a safer means
of heating and cooling space and water.
3)San Joaquin Valley communities lacking gas service. This bill
would affect the San Joaquin Valley Counties of Kern, Tulare,
Kings, Fresno, Madera, Merced, Stanislaus, and San Joaquin.
Some of the San Joaquin Valley's low-income communities
lacking access to natural gas service include:
-------------------------------------
|County |Community|2010 |Percent of |
| | |populat|population |
| | |ion |under |
| | | |poverty |
| | | |level<3> |
|-------+---------+-------+-----------|
|Fresno |Cantua | 466 |67% |
| |Creek | | |
|-------+---------+-------+-----------|
|Fresno |Perry | 380 |64% |
| |Colony | | |
|-------+---------+-------+-----------|
|Fresno |Rolinda | 37 | 25% |
|-------+---------+-------+-----------|
|Kings |Hardwick | 138 | 50% |
|-------+---------+-------+-----------|
|Madera |La Vina | 279 | 23% |
|-------+---------+-------+-----------|
|Madera |Ripperdan| 84 | 51% |
| | | | |
|-------+---------+-------+-----------|
|Merced |El Nido | 330 | 22% |
|-------+---------+-------+-----------|
|Merced |Le Grand | 1,659 | 25% |
|-------+---------+-------+-----------|
|Merced |Snelling | 231 | 43% |
|-------+---------+-------+-----------|
|Merced |Volta | 246 | 20% |
|-------+---------+-------+-----------|
|Tulare |Allenswor| 471 | 54% |
| |th | | |
|-------+---------+-------+-----------|
|Tulare |Ducor | 612 | 36% |
|-------+---------+-------+-----------|
|Tulare |Hypericum| 160 | 34% |
---------------------------
<3> USA.com, Local Data Search.
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| | | | |
|-------+---------+-------+-----------|
|Tulare |Lemon | 308 | 49% |
| |Cove | | |
|-------+---------+-------+-----------|
|Tulare |Lindcove | 140 | 37% |
|-------+---------+-------+-----------|
|Tulare |Seville | 480 | 31% |
|-------+---------+-------+-----------|
|Tulare |West | 511 | 82% |
| |Goshen | | |
|-------+---------+-------+-----------|
|Stanisl|Cowan | 318 |31% |
|aus |Tract | | |
-------------------------------------
The populations of these communities are relatively small,
with the percent of the population under the poverty level
often far beyond that for California as a whole (about 15%).
Southern California Gas Company and Pacific Gas & Electric
provide natural gas service in these areas. Communities can be
overlaid upon maps of existing gas transmission lines, but
exact distances from existing lines are unknown.
Gas corporations currently provide estimates, in response to a
request from customer(s), for the cost of extending gas line
services. Costs for extending gas line service to these
communities are not known.
4)Rate impacts. The bill is not anticipated to increase rates
for existing natural gas customers. The pressing issue is how
a gas line extension will impact the bills in a community that
desires and acquires gas service. For the community of
Allensworth, a rough estimate puts the cost of a gas line
extension at about $2.6 million, plus about ~$2,000 per
customer connection. With a population of about 500 people, if
every person lived by themselves, they would be expected to
pay about $7,200 over the course of 20 years, or about
$360/year and $30/month. The economics of this would be
affected by the potential savings from reduced electricity
bills.
5)Alternatives to natural gas service. Instead of natural gas,
it may be more cost-effective to utilize electricity to heat
and cool homes. Electricity service is safe and reliable, and
does not pose the risk of explosions. The cost of electricity
is typically less than propane but more than natural gas. EIA
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projects that homes using electric heat will spend $909 this
winter - a figure about 1.8 times less than the cost of
propane but 1.5 times more than natural gas.<4> In the
Central Valley, where temperatures can reach extremes, it may
be difficult for low-income families to afford the high usage
of electricity to adequately heat or cool their homes and
provide hot water.
6)California versus the San Joaquin Valley. Current bill
language refers to low-income communities throughout
California, but the bill relates only to those in the San
Joaquin Valley.
The author may wish to consider an amendment to the bill
declarations specifying that many low-income communities
throughout the San Joaquin Valley lack gas service.
7)Deadline to establish program. Current bill language does not
direct the PUC to establish the program by a certain date.
The author may wish to consider an amendment that inserts a
target date.
8)Support and opposition. Supporters state many San Joaquin
Valley communities currently lack access to natural gas
service, and claim many are forced to use propane or wood as
heating and cooking fuels. They also indicate that propane is
very expensive and its cost fluctuates widely, and that wood
is not always available for fuel and has a detrimental effect
on air quality. Other supporters say small, rural, and
unincorporated communities in the San Joaquin Valley are
burdened with high poverty rates and not well equipped to pay
for the high cost of propane and other energy sources.
9)Summary of suggested amendments.
SECTION 1. The Legislature finds and declares the following:
(a) Many low-income communities throughout California's San
Joaquin Valley lack access to natural gas lines.
(b) Increasing access to natural gas can improve the health,
safety, and financial security of these communities.
(c) Increasing access to natural gas has the potential of
improving energy affordability and air quality.
SEC. 2. Section 783.5 is added to the Public Utilities Code,
--------------------------
<4> U.S. Department of Energy's Energy Information
Administration.
http://www.eia.gov/todayinenergy/detail.cfm?id=13311
AB 2672
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to read:
783.5. (a) The commission shall develop a program by December
1, 2015 , through an existing or new proceeding, to enable
disadvantaged communities in the San Joaquin Valley to finance
the cost of extending natural gas service within those
communities.
(b) The commission shall require a gas corporation that
provides natural gas service in the San Joaquin Valley to do
the following:
(1) Identify disadvantaged communities in the San Joaquin
Valley that do not have gas service.
(2) Assess the cost of extending gas lines to disadvantaged
communities.
(3) Work with disadvantaged communities and local agencies
that desire gas service to develop and implement a financing
plan to provide gas service to those disadvantaged
communities.
(c) The commission shall identify potential sources of funds
available for the program, including funds from ratepayers
within each disadvantaged community desiring gas service,
funds generated from the surcharge imposed on natural gas
pursuant to Section 890, or any other sources of funds that
may be allocated to the program to reduce the cost to
disadvantaged communities of extending gas service under the
program.
REGISTERED SUPPORT / OPPOSITION :
Support
Allensworth Community Services District
Allensworth Elementary School District
California State Association of Electrical Workers
California State Pipe Trades Council
Center on Race, Poverty & the Environment
Fairmead Community & Friends
Leadership Counsel for Justice and Accountability
Monterey Park Tract Community Services District
Self-Help Enterprises
West Goshen Mutual Water Company
Western States Council of Sheet Metal Workers
Opposition
None on file.
Analysis Prepared by : Brandon Gaytan / U. & C. / (916)
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