BILL ANALYSIS �
SB 1364
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Date of Hearing: August 6, 2014
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
SB 1364 (Fuller) - As Amended: July 1, 2014
Policy Committee: Utilities and
Commerce Vote: 14-0
Urgency: Yes State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill extends subsidy programs to provide universal
telephone service in high cost areas of the state for four
years. Specifically, this bill:
1) Extends the California High Cost Fund-A (CHCF-A) and High
Cost Fund-B (CHCF-B) universal telecommunication service
programs sunset dates from January 1, 2015 to January 1, 2019.
2)Extends the California Public Utility Commission's (PUC)
ability to collect customer surcharges to cover these costs.
3)Encourages the California Public Utilities Commission (PUC) to
maximize the amount of federal funding to California
participants in the federal programs.
4)Deletes the provision that states moneys in the funds are the
proceeds of rates and are held in trust to compensate
telephone corporations for their costs of providing universal
service.
FISCAL EFFECT
1)Annual revenues from customer surcharges of approximately $35
million to the CHCF-A Fund (special fund) until 2019. Annual
expenditures of approximately $40 million from the CHCF-A Fund
until 2019 to support small rural telephone companies.
Currently, the CHCF-A surcharge is 0.18% resulting in 2013-14
revenues of approximately $34 million. Annual expenditures
for this program exceed revenues in order to reduce fund
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reserves.
2)Annual revenues from customer surcharges in the low to
mid-tens of millions of dollars to the CHCF-B Fund (special
fund) until 2019. Annual expenditures of approximately $25
million from the CHCF-B Fund to support large telephone
companies providing service in high cost areas.
The CHCF-B surcharge was 0.3% but was reduced to 0.0% on
February 1, 2014 in anticipation of general fund loan
repayments which will likely cover the costs of the program
for a couple of years. The 2014-15 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 to a projected
program budget of $22.2 million for 2014-15. Lower claims will
extend the amount of time during which GF loan repayments can
replace surcharge revenues.
COMMENTS
1)Purpose. According to the author, building, operating and
maintaining telecommunications networks in rural areas is
extremely expensive on a per customer basis due to tough
terrain and sparse populations. This bill will help maintain
affordable rates for rural customers and provide access to
telecommunications services that would otherwise be
unavailable without state and federal support.
2)Background. California has established various public
programs to promote universal service. The California High
Cost Fund-A (CHCF-A) and High Cost Fund-B (CHCF-B) support
universal telephone service in rural, high-cost areas. In
conjunction with federal funding, these programs ensure rates
for Californians in rural areas remain reasonable and
comparable to rates in urban areas. CHCF-A and CHCF-B are
administered by the PUC and funded by a customer surcharge on
all telecommunications customers' intrastate services. The PUC
adjusts the surcharge, typically on an annual basis, to ensure
sufficient funding for carrier claims and administrative
costs.
Analysis Prepared by : Jennifer Galehouse / APPR. / (916)
319-2081
SB 1364
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