BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 1090|
|Office of Senate Floor Analyses | |
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THIRD READING
Bill No: SB 1090
Author: Fuller (R)
Amended: 5/27/14
Vote: 21
SENATE ENERGY, UTILITIES & COMMUNIC. COMM. : 9-0, 4/1/14
AYES: Padilla, Fuller, Cannella, Corbett, DeSaulnier, Hill,
Knight, Pavley, Wolk
NO VOTE RECORDED: Block, De Le�n
SENATE APPROPRIATIONS COMMITTEE : 7-0, 5/23/14
AYES: De Le�n, Walters, Gaines, Hill, Lara, Padilla, Steinberg
SUBJECT : Electricity: rates: default time-of-use pricing
SOURCE : The Utility Reform Network
DIGEST : This bill requires the Public Utilities Commission
(PUC) to make specified findings before it can require or
authorize an electrical corporation to employ default
time-of-use (TOU) pricing to residential customers.
ANALYSIS :
Existing law:
1. Requires that all rates for any service or product charged
by an electrical corporation (investor-owned utility or IOU)
be just and reasonable.
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2. Permits IOUs, with approval of the PUC, to offer residential
customers the option of receiving electric service pursuant
to "time-variant pricing," which includes TOU rates, critical
peak-pricing, and real-time pricing. Beginning in 2018, an
IOU can employ default TOU pricing as long as the customer is
provided with a rate comparison for one year of all billing
options (commonly referred to as shadow-billing) and
associated customer education. Subsequently, the customer
must be guaranteed for one year that the total amount paid
for electric service will not exceed the amount that would
have been due under the customer's previous rate schedule
(commonly referred to as bill protection).
3. Requires the PUC to ensure that any TOU rate schedule does
not cause unreasonable hardship for senior citizens or
economically vulnerable customers in hot climate zones.
This bill prohibits the PUC from requiring or authorizing
default TOU pricing unless it explicitly considered whether
hardship will be caused on either of the following:
Customers located in hot, inland areas, assuming no changes in
overall usage by those customers during peak periods; and
Residential customers living in areas with hot summer weather,
as a result of seasonal bill volatility, assuming no change in
summertime usage or in usage during peak periods.
Background
The PUC is responsible for setting reasonable rates for
utilities. In efforts to mitigate the impact of the energy
crisis in 2000 and 2001 on customer bills, the Legislature
adopted a number of restrictions on the PUC's rate making
abilities and rate design. Last year, by passing AB 327 (Perea,
Chapter 611, Statutes of 2013), the Legislature removed many of
these statutory restrictions. AB 327 also explicitly allowed
the PUC, beginning in January 1, 2018, to require or authorize
an electrical corporation to employ default TOU pricing for
residential customers if specific conditions are met, including
that the TOU rate schedule does not cause "unreasonable hardship
for senior citizens or economically vulnerable customers in hot
climate zones."
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In response to the passage of AB 327, the PUC opened a
proceeding on rate design (R. 12-06-013). The scoping memo for
this proceeding was released April 15, 2014. The proceeding
will address a number of issues regarding TOU pricing, including
pilot TOU programs for the summer of 2015 and the possibility of
default TOU pricing beginning in 2018. This proceeding is
anticipated to be completed in the first quarter of 2015.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee, one-time costs
of up to $220,000, but likely minor and absorbable, from the PUC
Utilities Reimbursement Account (special) for a proceeding.
SUPPORT : (Verified 5/27/14)
The Utility Reform Network (source)
AARP
The Greenlining Institute
OPPOSITION : (Verified 5/27/14)
Office of Ratepayer Advocates
ARGUMENTS IN SUPPORT : According to the author's office, in
its ongoing rate design rulemaking, the PUC has yet to analyze
the impact of default TOU rates on customers living in hot,
inland climates and has limited its analysis of rate impacts to
annual averages (rather than summer bills). It is not clear if
the PUC has considered if default TOU rates will result in
significant reductions in usage by customers during peak
periods, thereby causing unintended impacts on customers who do
not adjust their usage patterns. Finally, the adoption of an
extremely expedited schedule for the current proceeding (with a
final decision in the fall of 2014) suggests that there is
little opportunity to perform a careful, in-depth review of
these impacts. This bill makes sure that imposition of a new
TOU rate structure via default rates would not harm ratepayers
in the hot summertime areas, and will make sure that any new
rate structure will be carefully designed to take into
consideration any unanticipated consequences for all areas of
the state into account.
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ARGUMENTS IN OPPOSITION : Office of Ratepayer Advocates (ORA)
states, "We share your concern about the effects of possible
default time-of-use (TOU) rate design on residential customers
in the hot inland areas of California. Any new rate design has
the potential to affect different people in different ways.
However, in the case of TOU rate design, ORA's analysis, and the
analysis from the CPUC's report that you cited in your March
24th fact sheet, actually demonstrates that residential
customers will be better off with TOU rates. TOU rates are
transparent and predictable and give customers the ability to
save money because they know when rates will be higher and when
they will be lower.
Current tiered rates don't offer customers that same level of
transparency and predictability without signing up for tier
alerts from the utilities, which most customers do not do. But
the most important aspect of TOU rates is that the analysis
shows that most customers' bills will be about the same with or
without TOU rates, assuming they do nothing to change their
energy use pattern. So a customer that must use air
conditioning in the afternoon in their home should not see a
larger monthly bill under TOU rates as compared to tiered rates.
However, if the same customer can defer some electricity use to
the evenings and weekends, that customer can save money on their
monthly energy bills by taking advantage of lower night and
weekend rates. And for the subset of customers that actually
experience higher bills under TOU, and can't change their energy
use, they can opt-out to tiered rates."
JG:k 5/27/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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