BILL ANALYSIS                                                                                                                                                                                                    �



                                                                  SB 1090
                                                                  Page  1

          Date of Hearing:   August 6, 2014

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                  Mike Gatto, Chair

                    SB 1090 (Fuller) - As Amended:  July 1, 2014 

          Policy Committee:                             Utilities and  
          Commerce     Vote:                            14-0

          Urgency:     No                   State Mandated Local Program:  
          No     Reimbursable:              

           SUMMARY  

          This bill requires the California Public Utilities Commission  
          (PUC) to explicitly consider whether hardship will be caused to  
          customers living in hot, inland areas before authorizing  
          electrical corporations to impose default time-of-use (TOU)  
          residential rates.

           FISCAL EFFECT  

          Absorbable costs to the PUC.

           COMMENTS  

           1)Rationale.   The PUC is currently prohibited from authorizing  
            electrical corporations to impose mandatory or default  
            time-variant pricing for residential customers until January  
            1, 2018.   Rather than a single flat rate for energy usage,  
            TOU pricing refers to a rate structure with higher rates when  
            electricity demand is higher.  Many business and agricultural  
            investor-owned utility (IOU) customers have already  
            transitioned to TOU rates.

            The IOUs currently offer TOU rates as a voluntary option for  
            residential customers. If default TOU rates are implemented,  
            residential customers would be automatically switched to these  
            rates unless they take action to affirmatively notify the  
            utility company to opt-out.  
                
            The Utility Reform Network (TURN) notes that under one  
            currently pending proposal for the establishment of default  
            TOU rates, approximately 97% of PG&E residential customers in  








                                                                  SB 1090
                                                                  Page  2

            the Bakersfield area would experience higher summer bills with  
            almost 60% paying at least $30 more per month during the  
            summer compared to 2013 rates.  

            According to the author, the purpose of this bill is to ensure  
            the PUC thoroughly examines the potential hardship for  
            residential customers in very hot climates when considering  
            the imposition of default TOU rates.  

           2)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, AB 327 (Perea) Chapter 611, Statutes of 2013,  
            removed many of these statutory restrictions. AB 327 also  
            explicitly allowed the PUC, beginning in January 1, 2018, to  
            require or authorize electrical corporations to employ default  
            TOU pricing for residential customers if specific conditions  
            are met.  One of the conditions mandates the TOU rate schedule  
            will not cause unreasonable hardship for senior citizens or  
            economically vulnerable customers in hot climate zones.

            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 early in 2015.




           Analysis Prepared by  :    Jennifer Galehouse / APPR. / (916)  
          319-2081