BILL ANALYSIS � 1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
AB 2672 - Perea Hearing Date:
June 23, 2014 A
As Amended: May 27, 2014 FISCAL B
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DESCRIPTION
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 make specific written findings
if it considers the extension of gas service to new or existing
customers. (Public Utilities Code � 783)
Current orders of the CPUC require that the costs of gas main or
pipeline extensions to serve new or existing customers be borne
by the customer or project developer.
This bill requires the CPUC to conduct a study to determine the
economic feasibility of extending natural gas pipelines to
economically disadvantaged communities in the San Joaquin
Valley, increasing electric subsidies for those customers, and
other alternatives that would increase access to affordable
energy. The CPUC would be required to take action and determine
a funding source.
BACKGROUND
Residential Heating Costs - According to the U.S. Department of
Energy's Energy Information Administration (EIA) since
California has a milder climate than other areas of the United
States, space heating and air conditioning make up a relatively
small portion of energy use. In California homes, heating and
cooling combined account for 31% of total energy use. Compared
to the U.S. average, a greater share of California residents use
natural gas for heating (59%). Due to the mild climate, 14% of
California homes are not heated.
Where natural gas service is unavailable, households and
businesses use propane or electricity for space and water
heating. The cost of propane tends to be much higher than
alternative fuel sources such as natural gas. According to the
EIA, in the fall of 2013, the cost to heat with propane was
approximately three times more than with natural gas.
Moreover, Sempra reports that a "gas hot water heater, for
example, produces over twice as much hot water per dollar as an
electric hot water heater."
California Alternate Rates for Energy (CARE) - The CARE program
was originally intended to provide a 20% discount on monthly gas
and electric bills to income-qualified customers at their
primary residence and is funded through a rate surcharge paid by
all other utility customers. The income cap on CARE eligibility
is up to 200% above Federal Poverty Guidelines, which are
updated annually in June. Electric rates for tier 1 and 2
investor-owned utilities (IOU) customers were frozen in 2001 as
a result of the electricity crisis. Consequently the effective
CARE discount increased two to three times what was intended.
In a 2013 rate reform bill the discount was re-set to 30 to 35
percent. The CPUC has a proceeding underway to implement the
legislation.
CARE programs are reviewed and modified by the CPUC every three
years for the subsequent three-year cycle. The CPUC completed
its last review of the program in August 2012 and at that time
approved a $3.8 billion program budget for the four IOUs for the
2012-2014 cycle.
Other Ratepayer Assistance Programs - For decades, the state and
federal governments have overseen low income programs to provide
low income customers discounts on their utility bills and energy
efficiency assistance to the extent the customer meets the
program eligibility requirements. The following is a breakdown
of select programs:
The Family Electric Rate Assistance Program offers
assistance to families whose household income slightly
exceeds the low-income energy program allowances by billing
some of their electricity usage at a lower rate;
The Energy Savings Assistance Program provides no-cost
weatherization services to low-income households who meet
the CARE income guidelines. Services provided include attic
insulation, energy efficient refrigerators, energy
efficient furnaces, weather stripping, caulking, low-flow
showerheads, water heater blankets, and door and building
envelope repairs which reduce air infiltration; and
The Department of Community Services and Development
administers federal low-income home energy assistance,
energy crisis intervention, and low-income weatherization
programs. These programs are funded by federal grants to
provide weatherization services and financial assistance to
help low-income customers pay their energy bills.
COMMENTS
1. Author's Purpose . According to the author, AB 2672
would require a gas corporation that provides natural gas
in the Valley to identify communities without gas service
by January 31, 2015. It would require the CPUC to initiate
a new proceeding to conduct an affordable energy
feasibility study by March 31, 2015 for the identified
communities without gas service and it would require the
CPUC to determine if any options in the study would
increase access to affordable energy.
Many disadvantaged communities in the San Joaquin Valley do
not enjoy the benefits of an affordable energy service such
as natural gas. Gas lines simply do not extend into their
communities and they must choose among more costly, less
convenient and more potentially hazardous fuels to heat
their homes, their water, and their food. Other fuels such
as propane, wood and electricity are more costly and less
environmentally friendly and leave residents more prone to
health and safety issues.
Communities that wish to transition to a more affordable
energy source often times don't have the resources to pay
for projects without financing the project over time.
Currently, there is no program within the CPUC to enable
communities to understand the costs associated with
transitioning to an affordable energy source. There is also
no program to help identify potential funding sources
available to assist with affordable energy projects.
2. Adaptive costs . Even if the CPUC and utilities derived
a source of funding to extend gas service to what are
primarily rural communities, it is not clear that those
customers would have the resources necessary to adapt their
homes for natural gas. Gas company rates do not cover the
cost of conversions beyond the meter. The utility can only
provide pipelines to the meter of the residence but the
pipes and appliances on the customer's side of the meter
would also likely require upgrades or adaptation. If there
is no gas service in the home, pipelines would have to be
run and heating and appliances switched out from electric
to gas. The cost and necessity of the change-out for a
home that currently utilizes propane are unknown and would
depend on the type and age of the home, appliances, and the
material composition of the existing home piping system.
3. An All-Electric Future ? Some researchers opine that by
2050 significant electrification of end uses will likely be
required to reach the California 2050 greenhouse gas
reduction goal and make the following point:
?electrification of direct fuel uses will increase
costs in the residential, commercial, and industrial
sectors, especially for heating; hence, there is a
need for EE and design of new infrastructure in these
sectors to minimize lifecycle costs. Because much of
the required technology and infrastructure for a basic
transformation of the energy system is not yet
commercialized, comparative lifecycle costs are highly
uncertain?.Therefore, it is too soon to say that
all-electric house is "better from a GHG emissions"
perspective. The most you can say is that this
research suggests that it might be necessary to reach
the 2050 goals. Alternative pathways might include
decarbonizing of the pipeline.<1>
Additionally, the CEC and the CPUC continue their work to
establish a zero net energy standard for consumption in
residential and commercial buildings. Under this concept,
the amount of energy provided by on-site renewable energy
sources is equal to the amount of energy used by the
building. To some degree this plan is likely to
significantly reduce the use of natural gas and could be on
a path to an all-electric future for buildings.
4. Scope of Review . The bill references work by "a" gas
corporation and "the San Joaquin Valley." The scope of the
study changes depending on the definition of the San
Joaquin Valley which generally is thought to include the
counties of Fresno, Kings, Madera, Tulare, Merced,
Stanislaus, San Joaquin, and Kern. These counties
encompass the service territories of two gas corporations.
The author and committee may want to more clearly define
the geographic boundaries of the study and disadvantaged
communities. The gas corporations have a community readily
identified which would be customers enrolled in the CARE
program which may assist in defining the scope of the
study. Alternatively, the CalEPA CalEnviroScreen is now
used to identify "environmental justice communities" by
policymakers to prioritize regulatory enforcement and
public/private resources and investments to communities.
While environmental justice communities are often
"disadvantaged" they are not interchangeable but this
screening tool may also be of use.
5. Ratepayer Impact . The CPUC advises that the bill does
not authorize new funding sources or reallocation of
existing funding sources; instead it directs the CPUC to
determine appropriate funding sources. Without explicit
new funding sources, this means that costs would have to be
borne by other ratepayers of the relevant gas corporations.
ASSEMBLY VOTES
Assembly Floor (61-7)
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<1> The Technology Path to Deep Greenhouse Gas Emissions Cuts by
2050: the Pivotal Role of Electricity, James H. Williams,
Science, 335, 53 (2012)
Assembly Appropriations Committee (12-0)
Assembly Utilities and Commerce Committee
(10-1)
POSITIONS
Sponsor:
Leadership Counsel for Justice and Accountability
Self-Help Enterprises
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
Monterey Park Tract Community Services District
West Goshen Mutual Water Company
Western State Council of Sheet Metal Workers
Oppose:
The Utility Reform Network
Kellie Smith
AB 2672 Analysis
Hearing Date: June 23, 2014