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Table of Contents Agenda 2 Request for Letter of ... - City of Kerman

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AB 327 (Perea)Rate Payer Equity Act(As amended 04/23/13)SUMMARYAB 327 would eliminate provisions in AB1 Xand SB 695 relating to residential rate designretuning the code to the language thatexisted prior to the energy crisis, whichallowed the CPUC to do ratemaking withminimal statutory restriction.BACKGROUNDDuring the energy crisis, the Legislatureenacted ABX1 1 (Keeley) Chapter 4, Statutes<strong>of</strong> 2001, First Extraordinary Session, whichincluded a provision that capped residentialelectricity rates <strong>for</strong> investor-owned utilities<strong>for</strong> usage up to 130 percent <strong>of</strong> baseline,meaning that the rates <strong>for</strong> Tier 1 and 2 usagecould not increase. This rate cap remained inplace until the enactment <strong>of</strong> SB 695 (Kehoe)Chapter 337, Statutes <strong>of</strong> 2009, which allowed<strong>for</strong> modest increases in rates in Tiers 1 and 2as well as customers on the Cali<strong>for</strong>niaAlternate Rates <strong>for</strong> Energy (CARE) program.Specifically, SB 695 allowed <strong>for</strong> non-CARErates in Tiers 1 and 2 to increase by 3-5percent annually based on the ConsumerPrice Index (CPI), and CARE rates to increaseby 0-3 percent annually based on the CalWORKS index.Over the course <strong>of</strong> the AB 1X rate cap, theincreased cost <strong>of</strong> electricity shifted completelyto the upper tiers (over 130 percent <strong>of</strong>baseline) usage, setting those rates at levelsfar above the actual cost <strong>of</strong> providing serviceto those customers. The increase in the cost<strong>of</strong> service was a result <strong>of</strong> higher costs undervarious public policies including enactment <strong>of</strong>the Renewable Portfolio Standard (RPS), theCali<strong>for</strong>nia Global Warming Solutions Act (AB32), reliability and safety investments,infrastructure replacement and inflation.In addition, Tier 1 and 2 rates are not keepingpace with the increased costs mentionedabove. Without an ability to keep pace withthe increase in costs in the lower tiers, theupper tier usage is saddled with theadditional cost burden resulting in thoserates being even higher than the costs toserve the customers paying those rates. Forexample, the gap between Tier 2 and Tier 3rates actually grew after enactment <strong>of</strong> SB 695going from 13.0 cents per kWh to 15.3 centsper kWh currently.Currently, the CPUC has an open proceeding-Order Instituting Rulemaking (OIR)-on policyguidance <strong>for</strong> rate design. This measure doesnot interfere with that proceeding instead itprovides the CPUC authority to actuallyimplement the policies that they ultimatelyadopt be<strong>for</strong>e there is a residential ratepayerrevolt as a result <strong>of</strong> the punitive upper tierrate structure.THIS BILLSpecifically, AB 327 would:• Repeal limitations to raising residentialrates adopted during the energy crisisthereby getting the Legislature out <strong>of</strong>the ratemaking business, which theCPUC is best equipped to do.• Requires the CPUC, when approvingchanges to rates, that the changes arereasonable and necessary.• Requires the CPUC to report to theLegislature findings andrecommendations related to tieredrates in a specified rulemaking byJanuary 21, 2014.SUPPORT1 st Guaranty Mortgage and Realty100 Black Men <strong>of</strong> Long BeachAge Well Senior Services5/20/2013 1:02 PM Office <strong>of</strong> Assemblymember Henry T. Perea • AB 327 Fact Sheet • Page 111

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