AB 327 (Perea) Rate Payer Equity Act (As introduced 02/13/13)
SUMMARY AB 327 would eliminate provisions in AB1 X and SB 695 relating to residential rate design retuning the code to the language that existed prior to the energy crisis, which allowed the CPUC to do ratemaking with minimal statutory restriction.
BACKGROUND During the energy crisis, the Legislature enacted ABX1 1 (Keeley) Chapter 4, Statutes of 2001, First Extraordinary Session, which included a provision that capped residential electricity rates for investor-owned utilities for usage up to 130 percent of baseline, meaning that the rates for Tier 1 and 2 usage could not increase. This rate cap remained in place until the enactment of SB 695 (Kehoe) Chapter 337, Statutes of 2009, which allowed for modest increases in rates in Tiers 1 and 2 as well as customers on the California Alternate Rates for Energy (CARE) program. Specifically, SB 695 allowed for non-CARE rates in Tiers 1 and 2 to increase by 3-5 percent annually based on the Consumer Price Index (CPI), and CARE rates to increase by 0-3 percent annually based on the Cal WORKS index. Over the course of the AB 1X rate cap, the increased cost of electricity shifted completely to the upper tiers (over 130 percent of baseline) usage, setting those rates at levels far above the actual cost of providing service to those customers. The increase in the cost of service was a result of higher costs under various public policies including enactment of the Renewable Portfolio Standard (RPS), the California Global Warming Solutions Act (AB 32), reliability and safety investments, infrastructure replacement and inflation. In addition, Tier 1 and 2 rates are not keeping pace with the increased costs mentioned above. Without an ability to keep pace with 4/9/2013 9:02 AM
the increase in costs in the lower tiers, the upper tier usage is saddled with the additional cost burden resulting in those rates being even higher than the costs to serve the customers paying those rates. For example, the gap between Tier 2 and Tier 3 rates actually grew after enactment of SB 695 going from 13.0 cents per kWh to 15.3 cents per kWh currently. Currently, the CPUC has an open proceedingOrder Instituting Rulemaking (OIR)-on policy guidance for rate design. This measure does not interfere with that proceeding instead it provides the CPUC authority to actually implement the policies that they ultimately adopt before there is a residential ratepayer revolt as a result of the punitive upper tier rate structure.
THIS BILL Specifically, AB 327 would: •
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Repeal limitations to raising residential rates adopted during the energy crisis thereby getting the Legislature out of the ratemaking business, which the CPUC is best equipped to do. CTI Environmental, Inc. Requires the CPUC, when approving changes to rates, that the changes are reasonable and necessary. Requires the CPUC to report to the Legislature findings and recommendations related to tiered rates in a specified rulemaking by January 21, 2014.
SUPPORT Assured Coin and Loan Blong Xiong, Councilmember, City of Fresno
Office of Assemblymember Henry T. Perea
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AB 327 Fact Sheet
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Building Industry Association of Fresno/Madera Counties Building Industry Association of the Greater Valley
Sierra Dawn Estates (Mobile Home Park) Southern California Edison Thomas W. Amend Drywall Contractor
C&C Development (Affordable Housing) United Cambodian Community California Black Chamber of Commerce California League of Food Processors California Manufacturers & Technology Association (CMTA) California Retailers Association
OPPOSITION Division of Ratepayer Advocates (DRA) The Greenlining Institute The Utility Reform Network (TURN)
Central Valley Opportunity Center, Inc. City of Coalinga
FOR MORE INFORMATION
City of Livingston City of Reedley Congress of California Seniors
Celia Mata, Legislative Director Assemblymember Henry T. Perea Phone (916) 319-2031 Fax (916) 319-2131 Celia.Mata@asm.ca.gov
Costa Mesa Chamber of Commerce Fresno Barrios Unidos GRCN Connecting Communities, Inc. (Child and Youth Services) KernTax International Brotherhood of Electrical Workers (IBEW Local 47) Leticia Perez, 5th District Supervisor, Kern County LifeHOUSE Management Services Lumber Estimating Service Orange County Hispanic Chamber Orange Senior Center Pacific Gas and Electric Company (PG&E) San Diego Gas & Electric 4/9/2013 9:02 AM
Office of Assemblymember Henry T. Perea
AB 327 Fact Sheet
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