BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Kevin de Le�n, Chair
SB 1364 (Fuller) - Telecommunications universal service
programs: California High-Cost Fund A program.
Amended: As introduced Policy Vote: EU&C 9-0
Urgency: Yes Mandate: Yes (see staff comment)
Hearing Date: May 23, 2014 Consultant: Marie Liu
SUSPENSE FILE. AS AMENDED.
Bill Summary: SB 1364 would extend the sunset dates of the
California High Cost Fund A and B programs (CHCF-A, CHCF-B) for
four years to January 1, 2019.
Fiscal Impact (as approved on May 23, 2014):
For the CHCF-A program:
o Annual revenues of approximately $35 million to the
CHCF-A Administrative Committee Fund (special) until 2019
from customer surcharges.
o Annual expenditures of approximately $40 million from
the CHCF-A Fund until 2019 to support small rural telephone
companies.
For the CHCF-B program:
o Annual revenues in the low to mid-tens millions of
dollars to the CHCF-B Administrative Committee Fund
(special) until 2019 from customer surcharges (see staff
comment).
o Annual expenditures of approximately $25 million from
the CHCF-B Fund until 2019 to support large telephone
companies providing service in high cost areas.
Background: Existing law requires the California Public
Utilities Commission (CPUC) to oversee a variety of programs to
ensure universal access to telecommunications services by
California residents. These programs are supported by customer
surcharges on landline, wireless, and Voice over Internet
Protocol (VoIP) intrastate service. Specifically, the state has
two programs to promote universal service in rural, high-costs
areas. The CHCF-A program supports small rural telephone
companies by covering the company's revenue requirement (as
determined by the CPUC) and less collected rate revenue and
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federal support. There are currently ten telephone companies
receiving support under the CHCF-A program (13 companies are
eligible).
The California High Cost Fund B program (CHCF-B) supports large
carriers that are Carriers of Last Resort by covering costs of
providing service in high-costs exceeding a set baseline
(currently $36 per month). Recipients of support in the CHCF-B
program are AT&T California, Verizon of California, Frontier
Telecommunications Company of California, and Cox California
Telecom.
The CPUC adjusts the customer surcharge for the CHCF-A and
CHCF-B programs, typically on an annual basis, to ensure
adequate funding to cover carrier claims and administrative
costs.
The Federal Communications Commission (FCC) also provides
universal service funding to providers serving rural, high-cost
areas to pay for facilities that can provide both voice and
broadband service. Funding for the federal program comes from
customer surcharges on interstate services.
Proposed Law: This bill would extend the sunset date of the
CHCF-A and CHCF-B program from January 1, 2015 until January 1,
2019.
Related Legislation: SB 3 (Padilla) Chapter 695, Statutes of
2011 granted a two year extension of the CHCF-A and CHCF-B
program until January 1, 2015.
Staff Comments: By extending the sunset date of the CHCF-A and B
programs, this bill extends state expenditures of approximately
$65 million. This bill would also extend CPUC's ability to
collect customer surcharges to cover these costs. Currently, the
CHCF-A surcharge is 0.18% which is anticipated to result in $34
million in revenues for 2013-14. Annual expenses for this
program exceed revenues to reduce a reserve that has built-up in
this fund.
The CHCF-B surcharge was recently 0.3% but was reduced to 0.0%
on February 1, 2014 because the fund is anticipating General
Fund loan repayments that will negate the need for additional
customer surcharge revenue for a couple of years. The 2014-15
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Proposed Governor's Budget projects $75 million in 2014-15 and
$59 million in 2014-15 in loan repayments. Carrier claims from
the CHCF-B fund have also been declining in recent years from
about $50 million in 2010 down to a projected program budget of
$22.2 million for 2014-15. Lower claims will extend the amount
of time which GF loan repayments can replace surcharge revenues.
Staff notes that the anticipated revenues and expenditures for
both programs may fluctuate, perhaps significantly, as there are
changes to universal service communication programs being
discussed on the Federal level at this time. Because of the
overlap of the state and federal programs, the outcome of these
discussions could change the state subsidy needs of program
participants. The more funding the telecommunication providers
can receive from the federal program, the lower the cost
pressures on the CHCF-A and B funds. Ongoing legislative review
of these programs is necessary to ensure an appropriate balance
of state-federal support for these programs, and by extension,
to ensure effective use of customer surcharge revenues.
Currently, this bill simply extends the sunset dates on two
sections governing the CHCF-A and CHCF-B program. However, staff
notes that PUC �739.3 is unclearly worded. The author may wish
to improve the clarity of this section as part of the sunset
extension.
This bill effects the definition of a crime or infraction
because of requirements placed on program participants. While
this creates a state mandate, it is not reimbursable.
Committee amendments: Directs the CPUC to maximize the drawdown
of federal funds and makes clarification amendments to ��276,
739.3.