Existing law vests the Public Utilities Commission with regulatory authority over public utilities, including electrical corporations and gas corporations. Existing law requires the commission to annually prepare and submit to the Governor and Legislature a written report that contains the commissions recommendations for actions that can be undertaken during the succeeding 12 months to limit utility cost and rate increases consistent with the states energy and environmental goals, including goals for reducing emissions of greenhouse gases, and requires the commission, in preparing the report, to require certain electrical corporations and gas corporations to study and report on measures they recommend be undertaken to limit costs and rate increases.

This bill would require that the report also contain recommendations that may take longer than 12 months to implement, but could lead to substantial reductions in monthly electricity and natural gas utility bills, and considerations of how the adoption of decarbonization policies, including electrification, may impact total energy costs borne by consumers, as provided.

Under existing law, a violation of the Public Utilities Act or any order, decision, rule, direction, demand, or requirement of the commission is a crime.

Because the above provisions would be part of the act and a violation of a commission action implementing certain of these requirements would be a crime, the bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law vests the Public Utilities Commission with regulatory authority over public utilities, including electrical corporations and gas corporations. Existing law requires the commission to annually prepare and submit to the Governor and Legislature a written report that contains the commissions recommendations for actions that can be undertaken during the succeeding 12 months to limit utility cost and rate increases consistent with the states energy and environmental goals, including goals for reducing emissions of greenhouse gases, and requires the commission, in preparing the report, to require certain electrical corporations and gas corporations to study and report on measures they recommend be undertaken to limit costs and rate increases.

This bill would require that the report also contain recommendations that may take longer than 12 months to implement, but could lead to substantial reductions in monthly electricity and natural gas utility bills, and considerations of how the adoption of decarbonization policies, including electrification, may impact total energy costs borne by consumers, as provided.

Under existing law, a violation of the Public Utilities Act or any order, decision, rule, direction, demand, or requirement of the commission is a crime.

Because the above provisions would be part of the act and a violation of a commission action implementing certain of these requirements would be a crime, the bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law vests the Public Utilities Commission with regulatory authority over public utilities, including electrical corporations and gas corporations. Existing law requires the commission to annually prepare and submit to the Governor and Legislature a written report that contains the commissions recommendations for actions that can be undertaken during the succeeding 12 months to limit utility cost and rate increases consistent with the states energy and environmental goals, including goals for reducing emissions of greenhouse gases, and requires the commission, in preparing the report, to require certain electrical corporations and gas corporations to study and report on measures they recommend be undertaken to limit costs and rate increases.

This bill would require that the report also contain recommendations that may take longer than 12 months to implement, but could lead to substantial reductions in monthly electricity and natural gas utility bills, and considerations of how the adoption of decarbonization policies, including electrification, may impact total energy costs borne by consumers, as provided.

Under existing law, a violation of the Public Utilities Act or any order, decision, rule, direction, demand, or requirement of the commission is a crime.

Because the above provisions would be part of the act and a violation of a commission action implementing certain of these requirements would be a crime, the bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law vests the Public Utilities Commission with regulatory authority over public utilities, including electrical corporations and gas corporations. Existing law requires the commission to annually prepare and submit to the Governor and Legislature a written report that contains the commissions recommendations for actions that can be undertaken during the succeeding 12 months to limit utility cost and rate increases consistent with the states energy and environmental goals, including goals for reducing emissions of greenhouse gases, and requires the commission, in preparing the report, to require certain electrical corporations and gas corporations to study and report on measures they recommend be undertaken to limit costs and rate increases.

This bill would require that the report also consider how the adoption of electrification may impact total energy costs borne by consumers, as specified, and contain recommendations that may take longer than 12 months to implement, but could lead to substantial reductions in monthly electricity bills. The bill would also expand the above-described goals to additionally include goals for encouraging beneficial electrification. and natural gas utility bills, and considerations of how the adoption of decarbonization policies, including electrification, may impact total energy costs borne by consumers, as provided.

Under existing law, a violation of the Public Utilities Act or any order, decision, rule, direction, demand, or requirement of the commission is a crime.

Because the above provisions would be part of the act and a violation of a commission action implementing certain of these requirements would be a crime, the bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law vests the Public Utilities Commission with regulatory authority over public utilities, including electrical corporations and gas corporations. Existing law requires the commission to annually prepare a written report on the costs of programs and activities conducted by certain electrical corporations and gas corporations. Existing law requires the commission to annually prepare and submit to the Governor and Legislature a separate written report that contains the commissions recommendations for actions that can be undertaken during the succeeding 12 months to limit utility cost and rate increases consistent with the states energy and environmental goals, including goals for reducing emissions of greenhouse gases, and requires the commission, in preparing the separate report, to require certain electrical corporations and gas corporations to study and report on measures they recommend be undertaken to limit costs and rate increases.

This bill would require that the written report on the costs of programs and activities to also identify how the current rate trends affect households across their full portfolio of all energy uses, as provided, and how the adoption of electricity across more end-uses may reduce the total cost of energy for households over time. The bill would require the separate report to also consider how the adoption of electrification may impact total energy costs borne by consumers, as specified, and contain recommendations that may take longer than 12 months to implement, but could lead to substantial reductions in monthly electric bills, and would electricity bills. The bill would also expand the above-described goals to additionally include goals for encouraging beneficial electrification.

Under existing law, a violation of the Public Utilities Act or any order, decision, rule, direction, demand, or requirement of the commission is a crime.

Because the above provisions would be part of the act and a violation of a commission action implementing certain of these requirements would be a crime, the bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law vests the Public Utilities Commission with regulatory authority over public utilities, including electrical corporations and gas corporations. Existing law requires the commission to annually prepare a written report on the costs of programs and activities conducted by certain electrical corporations and gas corporations. Existing law requires the commission to annually prepare and submit to the Governor and Legislature a separate written report that contains the commissions recommendations for actions that can be undertaken during the succeeding 12 months to limit utility cost and rate increases consistent with the states energy and environmental goals, including goals for reducing emissions of greenhouse gases, and requires the commission, in preparing the separate report, to require certain electrical corporations and gas corporations to study and report on measures they recommend be undertaken to limit costs and rate increases.

This bill would require the written report on the costs of programs and activities to also identify how the current rate trends affect households across their full portfolio of all energy uses, as provided, and how the adoption of electricity across more end-uses may reduce the total cost of energy for households over time. The bill would require the separate report to contain recommendations that may take longer than 12 months to implement, but could lead to substantial reductions in monthly electric bills, and would expand the above-described goals to additionally include goals for encouraging beneficial electrification.

Under existing law, a violation of the Public Utilities Act or any order, decision, rule, direction, demand, or requirement of the commission is a crime.

Because the above provisions would be part of the act and a violation of a commission action implementing certain of these requirements would be a crime, the bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 2462

Author:(Calderon)

As Amended Ver:August 15, 2024

Majority vote

SUMMARY

Requires the California Public Utilities Commission (CPUC) to include, in an existing annual report regarding costs of electricity utility bills, consideration of how the adoption of decarbonization policies may impact total energy costs borne by consumers and recommendations for limiting or lowering energy utility rates.

Senate Amendments

Restructured and included clarifying changes to the reporting requirements to make clear the added reporting proposed by the bill is in addition to existing reporting requirements.

COMMENTS

AB 1279 (Muratsuchi, Chapter 337, Statutes of 2022) codified into law the state's goals to achieve net zero greenhouse gas (GHG) emissions and a reduction of statewide anthropogenic GHGs to at least 85% below 1990 levels by 2045. This parallels the state's goals for 100% new zero-emission sales by 2035 and 100% clean energy by 2045, as established by Governor Newsom's Executive Order N-79-20 and SB 100 (de León, Chapter 312, Statutes of 2018), respectively. Together, a slate of bills passed by the Legislature in recent years emphasize California's desire to achieve ambitious climate targets across all sectors.

A major trend for consumers in California's energy transition is the electrification of energy demand. The rapid growth in consumer demand of electricity necessitates updating and expanding our distribution and transmission systems, the costs of which are borne by ratepayers. What this means for individual consumers – especially those that electrify their vehicle and house – is higher and higher electricity bills. These bill increases can harm customers; they can also hinder achievement of the state's clean energy goals, since realization of those goals hinges, to a large extent, upon electrification of much of the economy, and customers who perceive electricity costs as increasing are less likely to adopt electric technologies.

An important consideration to the affordability of electrification is a household's full energy portfolio, which seeks to capture the totality of energy costs a consumer bears, inclusive of electricity, natural gas, and fuel for transportation. Merely tracking customer electric or gas bills can miss major contributors to consumers' monthly energy expenditures. For example, switching to an electric vehicle means saving at the gasoline pump, savings that would not be revealed by tracking electricity usage, and billing, alone.

To aid cost management, the CPUC annually puts forth a report of actions that could be taken within the succeeding 12 months to limit utility costs and rate increases, as directed by the Legislature through the enactment of SB 695 (Kehoe, Chapter 337, Statutes of 2009). The report includes information about electricity and natural gas utility bills, cost drivers, forecast of rates, and actions taken to address affordability, among others. This bill would require the CPUC to add to this report a routine evaluation of the future impacts of electrification on total household energy costs and recommendations with potential to reduce utility costs to ratepayers that may take longer than 12 months to implement.

According to the Author

"Utility bills have increased beyond the rate of inflation over the past few years. This can be attributed to several factors, such as utility companies increasing their wildfire mitigation efforts and ongoing infrastructure maintenance expenditures. With increased costs and subsequent increased rates expected to continue, we must take a broad approach in identifying measures that can reduce the costs of providing energy. Thus, [this bill] requires the California Public Utilities Commission to publish holistic and long-term recommendations, as part of existing annual reports, which aim to decrease the costs of energy, and provide much needed rate relief for California ratepayers."

Arguments in Support

Southern California Edison (SCE) writes in support, "[This bill] would make clear the benefits to overall household energy expenses from the clean energy transition… Furthermore, [this bill] would assess existing costs and programs and have the CPUC provide both short and long-term solutions to reduce electricity bills… By requiring the CPUC to report on the performance of programs with respect to ratepayer's energy costs and usage, the CPUC can evaluate the efficacy of these programs and make improvements that could help households see significant savings in their energy bills. Statewide policies to support customer affordability and greater electrification, such as [this bill], will not only support California's progress in meeting its climate goals, but will continue to make household energy bills more affordable in the long run."

Arguments in Opposition

None on file.

FISCAL COMMENTS

According to the Senate Committee on Appropriations, this bill would incur one-time costs of $400,000 and ongoing costs of $50,000 (ratepayer funds) at the CPUC for the creation of additional modeling capacity integrating forthcoming electric rate reforms with natural gas rates and gasoline prices, among other things.

VOTES:

ASM UTILITIES AND ENERGY: 16-0-0

YES: Petrie-Norris, Jim Patterson, Bauer-Kahan, Calderon, Chen, Connolly, Friedman, Holden, Joe Patterson, Reyes, Santiago, Schiavo, Ting, Wallis, Wood, Zbur

ASM APPROPRIATIONS: 15-0-0

YES: Wicks, Sanchez, Arambula, Bryan, Calderon, Wendy Carrillo, Dixon, Mike Fong, Grayson, Haney, Hart, Jim Patterson, Pellerin, Ta, Villapudua

ASSEMBLY FLOOR: 72-0-8

YES: Addis, Aguiar-Curry, Alanis, Alvarez, Arambula, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Chen, Connolly, Davies, Dixon, Flora, Mike Fong, Vince Fong, Friedman, Gabriel, Gallagher, Garcia, Gipson, Grayson, Haney, Hart, Hoover, Irwin, Jackson, Jones-Sawyer, Kalra, Lackey, Lee, Low, Lowenthal, Maienschein, McCarty, McKinnor, Muratsuchi, Stephanie Nguyen, Ortega, Pacheco, Papan, Jim Patterson, Joe Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Rendon, Reyes, Rodriguez, Sanchez, Santiago, Schiavo, Soria, Ta, Ting, Valencia, Villapudua, Waldron, Wallis, Ward, Weber, Wilson, Wood, Zbur, Robert Rivas

ABS, ABST OR NV: Cervantes, Megan Dahle, Essayli, Holden, Mathis, Luz Rivas, Blanca Rubio, Wicks

SENATE FLOOR: 40-0-0

YES: Allen, Alvarado-Gil, Archuleta, Ashby, Atkins, Becker, Blakespear, Bradford, Caballero, Cortese, Dahle, Dodd, Durazo, Eggman, Glazer, Gonzalez, Grove, Hurtado, Jones, Laird, Limón, McGuire, Menjivar, Min, Newman, Nguyen, Niello, Ochoa Bogh, Padilla, Portantino, Roth, Rubio, Seyarto, Skinner, Smallwood-Cuevas, Stern, Umberg, Wahab, Wiener, Wilk

UPDATED

VERSION: August 15, 2024

CONSULTANT: Kathleen Chen / U. & E. / (916) 319-2083 FN: 0004897

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 2462

Author:(Calderon)

As Amended Ver:August 15, 2024

Majority vote

SUMMARY

Requires the California Public Utilities Commission (CPUC) to include, in an existing annual report regarding costs of electricity utility bills, consideration of how the adoption of decarbonization policies may impact total energy costs borne by consumers and recommendations for limiting or lowering energy utility rates.

Senate Amendments

Restructured and included clarifying changes to the reporting requirements to make clear the added reporting proposed by the bill is in addition to existing reporting requirements.

COMMENTS

AB 1279 (Muratsuchi, Chapter 337, Statutes of 2022) codified into law the state's goals to achieve net zero greenhouse gas (GHG) emissions and a reduction of statewide anthropogenic GHGs to at least 85% below 1990 levels by 2045. This parallels the state's goals for 100% new zero-emission sales by 2035 and 100% clean energy by 2045, as established by Governor Newsom's Executive Order N-79-20 and SB 100 (de León, Chapter 312, Statutes of 2018), respectively. Together, a slate of bills passed by the Legislature in recent years emphasize California's desire to achieve ambitious climate targets across all sectors.

A major trend for consumers in California's energy transition is the electrification of energy demand. The rapid growth in consumer demand of electricity necessitates updating and expanding our distribution and transmission systems, the costs of which are borne by ratepayers. What this means for individual consumers – especially those that electrify their vehicle and house – is higher and higher electricity bills. These bill increases can harm customers; they can also hinder achievement of the state's clean energy goals, since realization of those goals hinges, to a large extent, upon electrification of much of the economy, and customers who perceive electricity costs as increasing are less likely to adopt electric technologies.

An important consideration to the affordability of electrification is a household's full energy portfolio, which seeks to capture the totality of energy costs a consumer bears, inclusive of electricity, natural gas, and fuel for transportation. Merely tracking customer electric or gas bills can miss major contributors to consumers' monthly energy expenditures. For example, switching to an electric vehicle means saving at the gasoline pump, savings that would not be revealed by tracking electricity usage, and billing, alone.

To aid cost management, the CPUC annually puts forth a report of actions that could be taken within the succeeding 12 months to limit utility costs and rate increases, as directed by the Legislature through the enactment of SB 695 (Kehoe, Chapter 337, Statutes of 2009). The report includes information about electricity and natural gas utility bills, cost drivers, forecast of rates, and actions taken to address affordability, among others. This bill would require the CPUC to add to this report a routine evaluation of the future impacts of electrification on total household energy costs and recommendations with potential to reduce utility costs to ratepayers that may take longer than 12 months to implement.

According to the Author

"Utility bills have increased beyond the rate of inflation over the past few years. This can be attributed to several factors, such as utility companies increasing their wildfire mitigation efforts and ongoing infrastructure maintenance expenditures. With increased costs and subsequent increased rates expected to continue, we must take a broad approach in identifying measures that can reduce the costs of providing energy. Thus, [this bill] requires the California Public Utilities Commission to publish holistic and long-term recommendations, as part of existing annual reports, which aim to decrease the costs of energy, and provide much needed rate relief for California ratepayers."

Arguments in Support

Southern California Edison (SCE) writes in support, "[This bill] would make clear the benefits to overall household energy expenses from the clean energy transition… Furthermore, [this bill] would assess existing costs and programs and have the CPUC provide both short and long-term solutions to reduce electricity bills… By requiring the CPUC to report on the performance of programs with respect to ratepayer's energy costs and usage, the CPUC can evaluate the efficacy of these programs and make improvements that could help households see significant savings in their energy bills. Statewide policies to support customer affordability and greater electrification, such as [this bill], will not only support California's progress in meeting its climate goals, but will continue to make household energy bills more affordable in the long run."

Arguments in Opposition

None on file.

FISCAL COMMENTS

According to the Senate Committee on Appropriations, this bill would incur one-time costs of $400,000 and ongoing costs of $50,000 (ratepayer funds) at the CPUC for the creation of additional modeling capacity integrating forthcoming electric rate reforms with natural gas rates and gasoline prices, among other things.

VOTES:

ASM UTILITIES AND ENERGY: 16-0-0

YES: Petrie-Norris, Jim Patterson, Bauer-Kahan, Calderon, Chen, Connolly, Friedman, Holden, Joe Patterson, Reyes, Santiago, Schiavo, Ting, Wallis, Wood, Zbur

ASM APPROPRIATIONS: 15-0-0

YES: Wicks, Sanchez, Arambula, Bryan, Calderon, Wendy Carrillo, Dixon, Mike Fong, Grayson, Haney, Hart, Jim Patterson, Pellerin, Ta, Villapudua

ASSEMBLY FLOOR: 72-0-8

YES: Addis, Aguiar-Curry, Alanis, Alvarez, Arambula, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Chen, Connolly, Davies, Dixon, Flora, Mike Fong, Vince Fong, Friedman, Gabriel, Gallagher, Garcia, Gipson, Grayson, Haney, Hart, Hoover, Irwin, Jackson, Jones-Sawyer, Kalra, Lackey, Lee, Low, Lowenthal, Maienschein, McCarty, McKinnor, Muratsuchi, Stephanie Nguyen, Ortega, Pacheco, Papan, Jim Patterson, Joe Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Rendon, Reyes, Rodriguez, Sanchez, Santiago, Schiavo, Soria, Ta, Ting, Valencia, Villapudua, Waldron, Wallis, Ward, Weber, Wilson, Wood, Zbur, Robert Rivas

ABS, ABST OR NV: Cervantes, Megan Dahle, Essayli, Holden, Mathis, Luz Rivas, Blanca Rubio, Wicks

SENATE FLOOR: 40-0-0

YES: Allen, Alvarado-Gil, Archuleta, Ashby, Atkins, Becker, Blakespear, Bradford, Caballero, Cortese, Dahle, Dodd, Durazo, Eggman, Glazer, Gonzalez, Grove, Hurtado, Jones, Laird, Limón, McGuire, Menjivar, Min, Newman, Nguyen, Niello, Ochoa Bogh, Padilla, Portantino, Roth, Rubio, Seyarto, Skinner, Smallwood-Cuevas, Stern, Umberg, Wahab, Wiener, Wilk

UPDATED

VERSION: August 15, 2024

CONSULTANT: Kathleen Chen / U. & E. / (916) 319-2083 FN: 0004897

 THIRD READING  

Bill No: AB 2462

Author: Calderon (D), et al.

Amended: 8/15/24 in Senate

Vote: 21

SENATE ENERGY, U. & C. COMMITTEE: 18-0, 6/18/24

AYES: Bradford, Dahle, Ashby, Becker, Caballero, Dodd, Durazo, Eggman, Gonzalez, Grove, Limón, Min, Newman, Rubio, Seyarto, Skinner, Stern, Wilk

SENATE APPROPRIATIONS COMMITTEE: 7-0, 8/15/24

AYES: Caballero, Jones, Ashby, Becker, Bradford, Seyarto, Wahab

ASSEMBLY FLOOR: 72-0, 5/23/24 - See last page for vote

SUBJECT: Public Utilities Commission: written reports: energy

SOURCE: Author

DIGEST:

This bill requires additional information in an existing annual report regarding costs of electricity utility bills, including requiring the California Public Utilities Commission (CPUC) to identify how current rate trends affect households across their energy uses.

ANALYSIS:

Existing law:

1. Establishes and vests the CPUC with regulatory authority over public utilities, including electrical corporations and gas corporations. (Article XII of the California Constitution)
2. Requires all charges demanded or received by any public utility, or by any two or more public utilities, for any product or commodity furnished or to be furnished or any service rendered or to be rendered shall be just and reasonable. Every unjust or unreasonable charge demanded or received for such product or commodity or service is unlawful. (Public Utilities Code §451)
3. Requires the CPUC to prepare a written report on the costs of programs and activities conducted by each electrical corporation and gas corporation with more than 1,000,000 and 500,000 retail customers in California, respectively. Requires the report to be completed on an annual basis before April 1^st of each year, and shall identify all of the following:
4. Each program mandated by statute and its annual cost to ratepayers;
5. Each program mandated by the CPUC and its annual cost to ratepayers;
6. Energy purchase contract costs and bond-related costs incurred pursuant to Division 27 (commencing with §80000) of the Water Code; and
7. All other aggregated categories of costs currently recovered in retail rates as determined by the CPUC. (Public Utilities Code §913)
8. Requires the CPUC, by May 1^st of each year, to prepare and submit a written report with recommendations for actions that can be undertaken during the succeeding 12 months to limit utility cost and rate increases, known as the SB 695 Report. (Public Utilities Code §913.1)

This bill requires that the SB 695 Report also include: (1) recommendations that may take longer than 12 months to implement, but could lead to substantial reductions in monthly electricity and natural gas utility bills; and (2) considerations of how the adoption of decarbonization policies, including electrification, may impact total energy costs borne by consumers, including electricity, natural gas, and fuel for transportation, consistent with the state’s energy and environmental goals for reducing emissions of greenhouse gases (GHG).

Background

1. Energy utility costs rising. Californians generally enjoyed lower energy bills when compared to the rest of the country, largely due to milder weather and investments in energy efficiency, even as electric rates have been higher than many other states. However, in more recent years, these trends have been changing as California’s higher energy rates are also resulting in higher energy utility bills, both electricity and natural gas. As such, there are growing concerns about the affordability of utility bills on household budgets and commercial and industrial entities’ balance sheets. Many Californians have also struggled to overcome economic challenges, including impacts from the COVID-19 pandemic. Low-income and fixed-income residents have fallen behind on paying their bills, including the utility debt accumulated over the time of the pandemic. The Legislature and Governor have helped alleviate these concerns by approving over $2 billion in funding to address energy utility bill arrearages and another $1 billion to address water utility bill arrearages. Nonetheless, the growing costs for goods and services due to inflation and supply shortages is also affecting the cost of utility bills and the ability for Californians to manage their household budgets. Utility bill affordability has been a topic of two hearings by the Senate Committee on Energy, Utilities and Communications within the past two years, and continues to be an area of concern.

On electric side of the equation, a number of drivers are increasing costs. According to the CPUC’s 2022 annual SB 695 report, since 2013, bundled residential average rates have increased at an annual average rate of about seven percent for Pacific Gas and Electric (PG&E), five percent for Southern California Edison (SCE), and 10 percent for San Diego Gas and Electric (SDG&E). The primary drivers include wildfire mitigation investments, and transmission and distribution costs. Pushing electrification policies and practices will likely place further pressure on electric costs for distribution, transmission, and generation. On the natural gas side of the equation, Californians have seen a rise in natural gas utility costs, partly associated with safety improvements in response to the tragic explosion in San Bruno in 2008. Additionally, just last winter, Californians experienced disparate price spikes compared to most part of the country as the commodity price of natural gas increased significantly, most acutely in California and other West Coast states.

Utility bill affordability concerns are exacerbated by the interest to adopt policies to reduce the state’s GHG emissions by shifting away from fossil fuels towards alternatives, including electrification in the transportation and building sectors. Such a transition relies on changing customer behaviors, in addition to policies. However, Californians may be reluctant to switch fuels if utility costs are unaffordable, thereby potentially slowing progress towards the state’s climate goals.

1. SB 695 Report. To aid cost management, the CPUC annually puts forth a report of actions that could be taken within the succeeding 12 months to limit utility costs and rate increases, as directed by the Legislature through the enactment of SB 695 (Kehoe, Chapter 337, Statutes of 2009). The report includes information about electricity and natural gas utility bills, cost drivers, forecast of rates, information broken out by large electrical corporations, and actions taken to address affordability, among others. More recently, the report has included affordability outlook as measured by a CPUC adopted “affordability ratio” developed in the CPUC Affordability proceeding (R. 18-07-006), which uses the most recently available data and presents affordability results for essential level of electricity service for forecasts years.

1. Seeking more info on affordability impacts. While many studies on the impacts of electrification and our clean energy transition conclude that energy costs will go down – helped by advances in renewable energy technology or greater distribution across a larger pool of customers – it is also important to quantify and qualify the affordability of this energy transition for households today, in order to enhance equitable adoption of electrification. An important consideration to the affordability of electrification is a household's full energy portfolio, which seeks to capture the totality of energy costs a consumer bears, inclusive of electricity, natural gas, and fuel for transportation. Merely tracking customer electric or gas bills can miss major contributors to consumers' monthly energy expenditures. For example, switching to an electric vehicle means saving at the gasoline pump, savings that would not be revealed by tracking electricity usage, and billing, alone.
2. Need for this bill. In a recent SB 695 Report, the CPUC utilized a calculator to better quantify the various customer expenses and to estimate the future impacts of electrification on total household energy costs. This bill would make this evaluation a routine component of the annual SB 695 reports. Utilizing this methodology to track utility costs to ratepayers as GHG policies move natural gas and gasoline costs into electricity bills could provide the Legislature with a clear understanding of the impacts of proposals for new or augmented programs will have on affordability.

This bill also requires the CPUC to publish in the annual SB 695 report recommendations with potential to reduce utility costs to ratepayers that may take longer than 12 months to implement. The upward trend in rates is likely to persist over the next decade. As the CPUC's forecasts of energy costs have gradually extended towards looking over the next five to 10 years, the CPUC has also made efforts to pose and solicit from other stakeholders long-term solutions to try to address the forecasted increases in utility costs. Since the CPUC has already indicated an interest to identify long-term actions, requiring this practice in reports submitted to the Legislature could provide a clearer understanding of how the Legislature can support those actions and provide relief to ratepayers.

Related/Prior Legislation

SB 695 (Kehoe, Chapter 337, Statutes of 2009) required the CPUC to annually report on recommendations for actions that can be undertaken during the succeeding 12 months to limit utility cost and rate increases, consistent with the state’s energy and environmental goals.

AB 67 (Levine, Chapter 562, Statutes of 2005) required the CPUC to annually report on the costs of programs and activities conducted by an electrical corporation or gas corporation that have more than 1,000,000 and 500,000 retail customers, respectively, in California, including activities conducted to comply with their duty to serve.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes

According to the Senate Committee on Appropriations, the CPUC estimates one-time costs of $400,000 and ongoing costs of $50,000 (ratepayer funds) for the creation of additional modeling capacity integrating forthcoming electric rate reforms (income graduated fixed charges and alternative Time-of-Use pricing structures) with natural gas rates and gasoline prices, among other things

SUPPORT: (Verified 8/15/24)

Building Decarbonization Coalition
California Chamber of Commerce
Natural Resources Defense Council

Pacific Gas and Electric Company
Silicon Valley Leadership Group

Southern California Edison

OPPOSITION: (Verified 8/15/24)

None received

ARGUMENTS IN SUPPORT: Southern California Edison (SCE) expresses the following in support of this bill:

AB 2462 would make clear the benefits to overall household energy expenses from the clean energy transition. AB 2462 would evaluate current household energy trends, including cumulative energy usage, such as transportation and home heating fuels. …Furthermore, AB 2462 would assess existing costs and programs and have the CPUC provide both short and long-term solutions to reduce electricity bills. …By requiring the CPUC to report on the performance of programs with respect to ratepayer’s energy costs and usage, the CPUC can evaluate the efficacy of these programs and make improvements that could help households see significant savings in their energy bills. Statewide policies to support customer affordability and greater electrification, such as AB 2462, will not only support California’s progress in meeting its climate goals, but will continue to make household energy bills more affordable in the long run.

ASSEMBLY FLOOR: 72-0, 5/23/24

AYES: Addis, Aguiar-Curry, Alanis, Alvarez, Arambula, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Chen, Connolly, Davies, Dixon, Flora, Mike Fong, Vince Fong, Friedman, Gabriel, Gallagher, Garcia, Gipson, Grayson, Haney, Hart, Hoover, Irwin, Jackson, Jones-Sawyer, Kalra, Lackey, Lee, Low, Lowenthal, Maienschein, McCarty, McKinnor, Muratsuchi, Stephanie Nguyen, Ortega, Pacheco, Papan, Jim Patterson, Joe Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Rendon, Reyes, Rodriguez, Sanchez, Santiago, Schiavo, Soria, Ta, Ting, Valencia, Villapudua, Waldron, Wallis, Ward, Weber, Wilson, Wood, Zbur, Robert Rivas

NO VOTE RECORDED: Cervantes, Megan Dahle, Essayli, Holden, Mathis, Luz Rivas, Blanca Rubio, Wicks

Prepared by: Nidia Bautista / E., U. & C. / (916) 651-4107

8/19/24 12:35:54

**** END ****

SENATE COMMITTEE ON

Senator Anna Caballero, Chair

2023 - 2024 Regular Session

AB 2462 (Calderon) - Public Utilities Commission: written reports: energy

Bill Summary:

This bill would require an existing California Public Utilities Commission (CPUC) report on electricity bill costs to include consideration of how the adoption of decarbonization policies may impact total energy costs borne by consumers and recommendations for limiting or lowering energy utility rates.

*********** ANALYSIS ADDENDUM – SUSPENSE FILE ***********

The following information is revised to reflect amendments

adopted by the committee on August 15, 2024

Fiscal Impact:

• The CPUC estimates one-time costs of $400,000 and ongoing costs of $50,000 (ratepayer funds) for the creation of additional modeling capacity integrating forthcoming electric rate reforms (income graduated fixed charges and alternative Time-of-Use pricing structures) with natural gas rates and gasoline prices, among other things.

Author Amendments:

These amendments would add a coauthor.

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SENATE COMMITTEE ON

Senator Anna Caballero, Chair

2023 - 2024 Regular Session

AB 2462 (Calderon) - Public Utilities Commission: written reports: energy

Bill Summary:

This bill would require an existing California Public Utilities Commission (CPUC) report on electricity bill costs to include consideration of how the adoption of decarbonization policies may impact total energy costs borne by consumers and recommendations for limiting or lowering energy utility rates.

Fiscal Impact:

• The CPUC estimates one-time costs of $400,000 and ongoing costs of $50,000 (ratepayer funds) for the creation of additional modeling capacity integrating forthcoming electric rate reforms (income graduated fixed charges and alternative Time-of-Use pricing structures) with natural gas rates and gasoline prices, among other things.

Background:

Californians generally enjoyed lower energy bills when compared to the rest of the country, largely due to milder weather and investments in energy efficiency, even as electric rates have been higher than many other states. However, in more recent years, these trends have been changing as California’s higher energy rates are also resulting in higher energy utility bills, both electricity and natural gas. As such, there are growing concerns about the affordability of utility bills on household budgets and commercial and industrial entities’ balance sheets. Many Californians have also struggled to overcome economic challenges, including impacts from the COVID-19 pandemic. Low-income and fixed-income residents have fallen behind on paying their bills, including the utility debt accumulated over the time of the pandemic. The Legislature and Governor have helped alleviate these concerns by approving over $2 billion in funding to address energy utility bill arrearages and another $1 billion to address water utility bill arrearages.

On electric side of the equation, a number of drivers are increasing costs. According to the CPUC’s 2022 annual SB 695 report, since 2013, bundled residential average rates have increased at an annual average rate of about seven percent for PG&E, five percent for SCE, and 10 percent for SDG&E. The primary drivers include wildfire mitigation investments, and transmission and distribution costs. Pushing electrification policies and practices will likely place further pressure on electric costs for distribution, transmission, and generation. On the natural gas side of the equation, Californians have seen a rise in natural gas utility costs, partly associated with safety improvements in response to the tragic explosion in San Bruno in 2008. Additionally, just last winter, Californians experienced disparate price spikes compared to most part of the country as the commodity price of natural gas increased significantly, most acutely in California and other West Coast states.

Utility bill affordability concerns are exacerbated by the interest to adopt policies to reduce the state’s greenhouse gas (GHG) emissions by shifting away from fossil fuels towards alternatives, including electrification in the transportation and building sectors. Such a transition relies on changing customer behaviors, in addition to policies. However, Californians may be reluctant to switch fuels if utility costs are unaffordable, thereby potentially slowing progress towards the state’s climate goals.

To aid cost management, the CPUC annually puts forth a report of actions that could be taken within the succeeding 12 months to limit utility costs and rate increases, as directed by the Legislature through the enactment of SB 695 (Kehoe, Chapter 337, Statutes of 2009). The report includes information about electricity and natural gas utility bills, cost drivers, forecast of rates, information broken out by large electrical corporations, and actions taken to address affordability, among others. More recently, the report has included affordability outlook as measured by a CPUC adopted “affordability ratio” developed in the CPUC Affordability proceeding (R. 18-07-006), which uses the most recently available data and presents affordability results for essential level of electricity service for forecasts years.

Proposed Law:

This bill would require an existing CPUC report to include consideration of how the adoption of decarbonization policies may impact total energy costs borne by consumers and recommendations for limiting or lowering energy utility rates. Specifically, this bill would add to the report:

1. CPUC recommendations for actions that can be undertaken during the succeeding 12 months to limit electrical corporations’ and gas corporations’ utility costs and rate increases.
2. CPUC recommendations that may take longer than 12 months to implement, but could lead to substantial reductions in monthly electricity and natural gas utility bills.
3. Considerations of how the adoption of decarbonization policies, including electrification, may impact total energy costs borne by consumers, including electricity, natural gas, and fuel for transportation, consistent with the state’s energy and environmental goals, including goals for reducing emissions of greenhouse gases.

Related Legislation:

SB 695 (Kehoe, Chapter 337, Statutes of 2009) required the CPUC to annually report on recommendations for actions that can be undertaken during the succeeding 12 months to limit utility cost and rate increases, consistent with the state’s energy and environmental goals.

AB 67 (Levine, Chapter 562, Statutes of 2005) required the CPUC to annually report on the costs of programs and activities conducted by an electrical corporation or gas corporation that have more than 1,000,000 and 500,000 retail customers, respectively, in California, including activities conducted to comply with their duty to serve.

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SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS

Senator Steven Bradford, Chair

2023 - 2024 Regular

Bill No: AB 2462 Hearing Date: 6/18/2024

SUBJECT: Public Utilities Commission: written reports: energy

DIGEST: This bill requires additional information in an existing annual report regarding costs of electricity utility bills, including requiring the California Public Utilities Commission (CPUC) to identify how current rate trends affect households across their energy uses and how electrification across more end-uses may reduce the total cost of energy for households over time in an existing annual written report to the Governor and the Legislature.

ANALYSIS:

Existing law:

1. Establishes and vests the CPUC with regulatory authority over public utilities, including electrical corporations and gas corporations. (Article XII of the California Constitution)
2. Requires all charges demanded or received by any public utility, or by any two or more public utilities, for any product or commodity furnished or to be furnished or any service rendered or to be rendered shall be just and reasonable. Every unjust or unreasonable charge demanded or received for such product or commodity or service is unlawful. (Public Utilities Code §451)
3. Requires the CPUC to prepare a written report on the costs of programs and activities conducted by each electrical corporation and gas corporation with more than 1,000,000 and 500,000 retail customers in California, respectively. Requires the report to be completed on an annual basis before April 1^st of each year, and shall identify all of the following:
4. Each program mandated by statute and its annual cost to ratepayers;
5. Each program mandated by the CPUC and its annual cost to ratepayers;
6. Energy purchase contract costs and bond-related costs incurred pursuant to Division 27 (commencing with Section 80000) of the Water Code; and
7. All other aggregated categories of costs currently recovered in retail rates as determined by the CPUC. (Public Utilities Code §913)
8. Requires the CPUC, by May 1^st of each year, to prepare and submit a written report with recommendations for actions that can be undertaken during the succeeding 12 months to limit utility cost and rate increases, known as the SB 695 Report. (Public Utilities Code §913.1)

This bill:

1. Requires that the SB 695 Report also include:
   1. Consideration of how the adoption of electrification may impact total energy costs borne by consumers, including electricity, natural gas, and fuel for transportation, and 
   2. Recommendations that may take longer than 12 months to implement, but could lead to substantial reductions in monthly electricity bills.
2. This bill would also expand the goals of the recommendations to reduce utility costs to additionally include goals for encouraging beneficial electrification.

Background

Energy utility costs rising. Californians generally enjoyed lower energy bills when compared to the rest of the country, largely due to milder weather and investments in energy efficiency, even as electric rates have been higher than many other states. However, in more recent years, these trends have been changing as California’s higher energy rates are also resulting in higher energy utility bills, both electricity and natural gas. As such, there are growing concerns about the affordability of utility bills on household budgets and commercial and industrial entities’ balance sheets. Many Californians have also struggled to overcome economic challenges, including impacts from the COVID-19 pandemic. Low-income and fixed-income residents have fallen behind on paying their bills, including the utility debt accumulated over the time of the pandemic. The Legislature and Governor have helped alleviate these concerns by approving over $2 billion in funding to address energy utility bill arrearages and another $1 billion to address water utility bill arrearages. Nonetheless, the growing costs for goods and services due to inflation and supply shortages is also affecting the cost of utility bills and the ability for Californians to manage their household budgets. Utility bill affordability has been a topic of two hearings by this committee within the past two years, and continues to be an area of concern.

On electric side of the equation, a number of drivers are increasing costs. According to the CPUC’s 2022 annual SB 695 report, since 2013, bundled residential average rates have increased at an annual average rate of about seven percent for PG&E, five percent for SCE, and 10 percent for SDG&E. The primary drivers include wildfire mitigation investments, and transmission and distribution costs. Pushing electrification policies and practices will likely place further pressure on electric costs for distribution, transmission, and generation. On the natural gas side of the equation, Californians have seen a rise in natural gas utility costs, partly associated with safety improvements in response to the tragic explosion in San Bruno in 2008. Additionally, just last winter, Californians experienced disparate price spikes compared to most part of the country as the commodity price of natural gas increased significantly, most acutely in California and other West Coast states.

Utility bill affordability concerns are exacerbated by the interest to adopt policies to reduce the state’s greenhouse gas (GHG) emissions by shifting away from fossil fuels towards alternatives, including electrification in the transportation and building sectors. Such a transition relies on changing customer behaviors, in addition to policies. However, Californians may be reluctant to switch fuels if utility costs are unaffordable, thereby potentially slowing progress towards the state’s climate goals.

SB 695 Report. To aid cost management, the CPUC annually puts forth a report of actions that could be taken within the succeeding 12 months to limit utility costs and rate increases, as directed by the Legislature through the enactment of SB 695 (Kehoe, Chapter 337, Statutes of 2009). The report includes information about electricity and natural gas utility bills, cost drivers, forecast of rates, information broken out by large electrical corporations, and actions taken to address affordability, among others. More recently, the report has included affordability outlook as measured by a CPUC adopted “affordability ratio” developed in the CPUC Affordability proceeding (R. 18-07-006), which uses the most recently available data and presents affordability results for essential level of electricity service for forecasts years.

Seeking more info on affordability impacts. While many studies on the impacts of electrification and our clean energy transition conclude that energy costs will go down – helped by advances in renewable energy technology or greater distribution across a larger pool of customers – it is also important to quantify and qualify the affordability of this energy transition for households today, in order to enhance equitable adoption of electrification. An important consideration to the affordability of electrification is a household's full energy portfolio, which seeks to capture the totality of energy costs a consumer bears, inclusive of electricity, natural gas, and fuel for transportation. Merely tracking customer electric or gas bills can miss major contributors to consumers' monthly energy expenditures. For example, switching to an electric vehicle means saving at the gasoline pump, savings that would not be revealed by tracking electricity usage, and billing, alone.

Need for this bill. The CPUC has developed a calculator to calculate these various customer expenses and to estimate the future impacts of electrification on total household energy costs. This bill would make this evaluation a routine component of the annual SB 695 reports. Utilizing this methodology to track costs to ratepayers as GHG policies move natural gas and gasoline costs into electricity bills could provide the Legislature with a clear understanding of the impacts proposals for new or augmented programs will have on affordability.

This bill would also require the CPUC to publish in the annual SB 695 report recommendations with potential to reduce utility costs to ratepayers that may take longer than 12 months to implement. The upward trend in rates is likely to persist over the next decade. As the CPUC's forecasts of energy costs have gradually extended towards looking over the next five to 10 years, the CPUC has also made efforts to pose and solicit from other stakeholders long-term solutions to try to address the forecasted increases in utility costs. Since the CPUC has already indicated an interest to identify long-term actions, requiring this practice in reports submitted to the Legislature could provide a clearer understanding of how the Legislature can support those actions and provide relief to ratepayers.

Clarifying amendments needed. Amendments are needed to help clarify the proposed changes by this bill are not intended to supplant the continued reporting in the SB 695 report of both cost information reported of both electricity and natural utility bills. As such, the author and committee may wish to amend this bill to restructure and include clarifying changes to the reporting requirements to make clear the added reporting proposed by this bill is in addition to the existing elements required in the SB 695 report.

913.1.

 (a) The commission, by May 1, 2010, and by each May 1 thereafter, shall prepare and submit a written report, separate from and in addition to the report required by Section 913, to the Governor and Legislature that considers how the adoption of electrification may impact total energy costs borne by consumers, including electricity, natural gas, and fuel for transportation,  contains contains:

1. the commission’s recommendations for actions that can be undertaken during the succeeding 12 months to limit electric and natural gas utility cost and rate increases, and increases.
2. the commission’s recommendations that may take longer than 12 months to implement, but could lead to substantial reductions in monthly electricity and natural gas utility bills, bills. 
3. Considerations for how the adoption of decarbonization, including electrification, may impact total energy costs borne by consumers, including electricity, natural gas, and fuel for transportation consistent with the state’s energy and environmental goals, including goals for reducing emissions of greenhouse gases. gases and encouraging beneficial electrification.

(b) In preparing the report required by subdivision (a), the commission shall require electrical corporations with 1,000,000 or more retail customers in California, and gas corporations with 500,000 or more retail customers in California, to study and report on measures the corporation recommends be undertaken to limit costs and rate increases.

(c) The commission shall post the report required by subdivision (a) in a conspicuous area of its Internet Web site. internet website. 

Prior/Related Legislation

SB 695 (Kehoe, Chapter 337, Statutes of 2009) required the CPUC to annually report on recommendations for actions that can be undertaken during the succeeding 12 months to limit utility cost and rate increases, consistent with the state’s energy and environmental goals.

AB 67 (Levine, Chapter 562, Statutes of 2005) required the CPUC to annually report on the costs of programs and activities conducted by an electrical corporation or gas corporation that have more than 1,000,000 and 500,000 retail customers, respectively, in California, including activities conducted to comply with their duty to serve.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes

SUPPORT:

Building Decarbonization Coalition
California Chamber of Commerce
Natural Resources Defense Council

Pacific Gas and Electric Company
Silicon Valley Leadership Group

Southern California Edison

OPPOSITION:

None received

ARGUMENTS IN SUPPORT: Southern California Edison (SCE) expresses the following in support of this bill:

AB 2462 would make clear the benefits to overall household energy expenses from the clean energy transition. AB 2462 would evaluate current household energy trends, including cumulative energy usage, such as transportation and home heating fuels. …Furthermore, AB 2462 would assess existing costs and programs and have the CPUC provide both short and long-term solutions to reduce electricity bills. …By requiring the CPUC to report on the performance of programs with respect to ratepayer’s energy costs and usage, the CPUC can evaluate the efficacy of these programs and make improvements that could help households see significant savings in their energy bills. Statewide policies to support customer affordability and greater electrification, such as AB 2462, will not only support California’s progress in meeting its climate goals, but will continue to make household energy bills more affordable in the long run.

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ASSEMBLY THIRD READING

ATR Bill Id:AB 2462

Author:(Calderon)

As Amended Ver:April 8, 2024

Majority vote

SUMMARY

Requires the California Public Utilities Commission (CPUC) to include evaluations of consumers' full energy portfolio in its annual utility cost report, including the costs of electricity, natural gas, and fuel for transportation. Also requires the CPUC to include in the report recommendations for long-term (>12 months) actions that can be undertaken to reduce utility costs, consistent with the state's carbon reduction, energy, and environmental goals.

COMMENTS

AB 1279 (Muratsuchi) Chapter 337, Statutes of 2022 codified into law the state's goals to achieve net zero greenhouse gas (GHG) emissions and a reduction of statewide anthropogenic GHGs to at least 85% below 1990 levels by 2045. This parallels the state's goals for 100% new zero-emission sales by 2035 and 100% clean energy by 2045, as established by Governor Newsom's Executive Order N-79-20 and SB 100 (de León) Chapter 312, Statutes of 2018, respectively. Together, a slate of bills passed by the Legislature in recent years emphasize California's desire to achieve ambitious climate targets across all sectors.

Spurred by the climate goals the state has set, a major trend for consumers in the energy transition is the electrification of energy demand. Electrification is expected to progress most rapidly in the transportation sector with the growing adoption of electric vehicles (EVs). In the last year, Californians bought nearly 470,000 EVs, a record number up 29% from 2022. Electrification of residential buildings, which could involve retrofitting with heat pumps, induction cooktops, and upgraded breaker boxes, will also be a major pathway to meeting decarbonization goals.

The rapid growth in consumer demand of electricity necessitates updating and expanding our distribution and transmission systems, the costs of which are borne by ratepayers. What this means for individual consumers – especially those that electrify their vehicle and house – is higher and higher electricity bills. These bill increases can harm customers; they can also hinder achievement of the state's clean energy goals, since realization of those goals hinges, to a large extent, upon electrification of much of the economy, and customers who perceive electricity costs as increasing are less likely to adopt electric technologies. To aid cost management, the CPUC annually puts forth a report of actions that could be taken within the succeeding 12 months to limit utility costs and rate increases, as directed by the Legislature through the enactment of SB 695 (Kehoe) Chapter 337, Statutes of 2009.

While many studies on the impacts of electrification and our clean energy transition conclude that energy costs will go down – helped by advances in renewable energy technology or greater distribution across a larger pool of customers – it is also important to quantify and qualify the affordability of this energy transition for households today, in order to enhance equitable adoption of electrification. An important consideration to the affordability of electrification is a household's full energy portfolio, which seeks to capture the totality of energy costs a consumer bears, inclusive of electricity, natural gas, and fuel for transportation. Merely tracking customer electric or gas bills can miss major contributors to consumers' monthly energy expenditures. For example, switching to an EV means saving at the gasoline pump, savings that would not be revealed by tracking electricity usage, and billing, alone.

The CPUC has developed a "total energy bill" calculator to calculate these various customer expenses and to estimate the future impacts of electrification on total household energy costs. They have published their conclusions in prior SB 695 reports. This bill would make this evaluation a routine component of the annual SB 695 reports. Utilizing this methodology to track costs to ratepayers as GHG policies move natural gas and gasoline costs into electricity bills could provide the Legislature with a clear understanding of the impacts proposals for new or augmented programs will have on affordability.

This bill would also require the CPUC to publish in the annual SB 695 report recommendations with potential to reduce utility costs to ratepayers that may take longer than 12 months to implement. The upward trend in rates is likely to persist over the next decade. As the CPUC's forecasts of energy costs have gradually extended towards looking over the next five to ten years, the CPUC has also made efforts to pose and solicit from other stakeholders long-term solutions to try to address the forecasted increases in utility costs. Since the CPUC has already indicated an interest to identify long-term actions, requiring this practice in reports submitted to the Legislature could provide a clearer understanding of how the Legislature can support those actions and provide relief to ratepayers.

According to the Author

"Utility bills have increased beyond the rate of inflation over the past few years. This can be attributed to several factors, such as utility companies increasing their wildfire mitigation efforts and ongoing infrastructure maintenance expenditures. With increased costs and subsequent increased rates expected to continue, we must take a broad approach in identifying measures that can reduce the costs of providing energy. Thus, [this bill] requires the California Public Utilities Commission to publish holistic and long-term recommendations, as part of existing annual reports, which aim to decrease the costs of energy, and provide much needed rate relief for California ratepayers."

Arguments in Support

Southern California Edison (SCE) writes, "[This bill] would make clear the benefits to overall household energy expenses from the clean energy transition. [This bill] would evaluate current household energy trends, including cumulative energy usage, such as transportation and home heating fuels. In SCE's analysis, the current average household spends approximately $4,550 annually on energy costs. With greater adoption of electrification, household energy costs could drop to $3,130 annually resulting in customers saving approximately 10% by 2030 and 40% by 2045. Statewide policies to support customer affordability and greater electrification, such as [this bill], will not only support California's progress in meeting its climate goals, but will continue to make household energy bills more affordable in the long run."

Arguments in Opposition

None on file.

FISCAL COMMENTS

According to the Assembly Committee on Appropriations, costs of this bill will be moderate since the bill expands the analytical work the CPUC will need to do beyond that which current law requires. The CPUC estimates costs of $450,000 for the first year of implementation to develop the cost modeling tool, followed by costs of $50,000 annually to pay for regular updates to commercially available price data. These costs will come from the Public Utility Commission Utility Reimbursement Account (PUCURA), which is funded through a statutory surcharge on customers' monthly utility bills.

VOTES

ASM UTILITIES AND ENERGY: 16-0-0

YES: Petrie-Norris, Jim Patterson, Bauer-Kahan, Calderon, Chen, Connolly, Friedman, Holden, Joe Patterson, Reyes, Santiago, Schiavo, Ting, Wallis, Wood, Zbur

ASM APPROPRIATIONS: 15-0-0

YES: Wicks, Sanchez, Arambula, Bryan, Calderon, Wendy Carrillo, Dixon, Mike Fong, Grayson, Haney, Hart, Jim Patterson, Pellerin, Ta, Villapudua

UPDATED

VERSION: April 8, 2024

CONSULTANT: Kathleen Chen / U. & E. / (916) 319-2083 FN: 0003201

Date of Hearing: April 24, 2024

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Buffy Wicks, Chair

ABPCA Bill Id:AB 2462

Author:(Calderon) – As Amended Ver:April 8, 2024

Urgency: No State Mandated Local Program: Yes Reimbursable: No

SUMMARY:

This bill requires the California Public Utilities Commission (CPUC) to include in its annual report on actions to limit utility cost and rate increases (commonly known as the “SB 695 report”) consideration of how the adoption of electrification may impact total energy costs borne by consumers, including the costs of electricity, natural gas and fuel for transportation. The bill also requires the CPUC to include in the report recommendations that may take longer than 12 months to implement, but could lead to substantial reductions in monthly electricity bills.

FISCAL EFFECT:

The work required by this bill largely dovetails with work statute already requires the CPUC to complete, as described below. However, the bill expands the analytical work the CPUC will need to do beyond that which current law requires and, therefore, will entail costs of some amount. It is reasonable to expect those costs to exceed $150,000 in any given year.

The CPUC pegs these costs at $450,000 for the first year of implementation to expand the “functionality in existing Income Graduated Fixed Charges and TOU [time of use] rate design tool to enable cross-tab comparisons of electricity, gas and gasoline costs at the household level,” which the CPUC contends will enable the cost modeling this bill calls for (Public Utility Commission Utility Reimbursement Account (PUCURA).

Following the first year of implementation, the CPUC anticipates its costs to drop to $50,000 annually to pay for regular updates to commercially available price data (PUCURA).

COMMENTS:

State law requires the CPUC to report to the Legislature on the costs of programs to the ratepayers of regulated utilities (often referred to as “investor-owned utilities,” or “IOUs”) as well as actions that can be taken to limit these costs. Specifically, statute requires the CPUC to issue report two annual, related reports on IOU costs.

The first report, known as the California Electric and Gas Utility Costs Report: AB 67 Annual Report to the Governor and Legislature (named after the legislation that established the reporting requirement in 2005), is due April 1 of each year and must include the following topics as they relate to the state’s larger IOUs:

• Each program mandated by statute and its annual cost to ratepayers.
• Each program mandated by the CPUC and its annual cost to ratepayers.
• Energy purchase contract costs and bond-related costs incurred pursuant to specified sections of the Water Code.
• All other aggregated categories of costs currently recovered in retail rates as determined by the CPUC.

The second report is known as the “Senate Bill 695 Report: Report to the Governor and Legislature on Actions to Limit Utility Cost and Rate Increases Pursuant to Public Utilities Code Section 913.1” or, more commonly, the “SB 695 Report”, (so called for the legislation that established the reporting requirement in 2010). The SB 695 Report is due May 1 and is to contain the CPUC’s recommendations for actions that can be undertaken during the succeeding 12 months to limit IOU cost and rate increases, consistent with the state’s energy and environmental goals, including goals for reducing emissions of greenhouse gases.

Rates paid by the customers of the state’s IOUs have increased considerably over the past decade. According the Public Advocates Office (PAO) at the CPUC, the rates for electricity charged by Pacific Gas and Electric (PG&E), Southern California Edison and San Diego Gas and Electric have increased over the past ten years by 127%, 91% and 72%, respectively. Similarly, many IOU customers have seen their electric utility bills increase, in some cases dramatically from month to month.

Electric bill increases are, in part, an effect of electric rate increases, which the PAO attributes, in part, to wildfire mitigation, transmission and distribution investments and rooftop solar incentives, though the PAO also notes higher bills often coincide with increased electricity use, such as greater reliance on air conditioning. In any case, the higher cost of electricity, and the jump in monthly electric bills, has led to concerns over affordability and about the ability of the state to meet its climate goals through widespread electrification (electric vehicle adoption and installation of heat pumps, for example). Similarly, customers of the state’s gas IOUs have experienced dramatic increases in bills in recent years, due mainly to increases in the cost of natural gas.

These increases in IOU rates and IOU customer bills can harm customers. They also can hinder achievement of the state’s clean energy goals, since realization of those goals hinges, to a large extent, upon electrification of much of the economy, and customers who perceive electricity costs as increasing are less likely to adopt electric technologies.

The author intends the information required by this bill to help reduce ratepayer costs by taking a long-term perspective on IOU costs and actions that might reduce ratepayer expenses. As the author puts it, “Assembly Bill 2462 requires the California Public Utilities Commission to publish holistic and long-term recommendations, as part of existing annual reports, which aim to decrease the costs of energy, and provide much needed rate relief for California ratepayers.” Similarly, PG&E, writing in support of the bill and noting its support for the state’s clean energy goals, similarly asserts this bill will help policy makers and IOU customers “better understand the scope of the energy sources accounted for in the energy transition” and, potentially “reduce the total cost of energy for households in the long run.”

Analysis Prepared by: Jay Dickenson / APPR. / (916) 319-2081

Date of Hearing: April 3, 2024

ASSEMBLY COMMITTEE ON UTILITIES AND ENERGY

Cottie Petrie-Norris, Chair

ABPCA Bill Id:AB 2462 (

Author:Calderon) – As Introduced Ver:February 13, 2024

SUBJECT: Public Utilities Commission: written reports: energy

SUMMARY: Requires the California Public Utilities Commission (CPUC) to identify how current rate trends affect households across their energy uses and how electrification across more end-uses may reduce the total cost of energy for households over time in an existing annual written report to the Governor and the Legislature. Also requires the CPUC to annually provide recommendations for long-term (> 12 months) actions that can be undertaken to reduce utility costs, consistent with the state’s carbon reduction, energy, and environmental goals.

EXISTING LAW:

1. Requires the CPUC to prepare a written report on the costs of programs and activities conducted by each electrical corporation and gas corporation with more than 1,000,000 and 500,000 retail customers in California, respectively. The report shall be completed on an annual basis before April 1 of each year, and shall identify all of the following:
2. Each program mandated by statute and its annual cost to ratepayers;
3. Each program mandated by the commission and its annual cost to ratepayers;
4. Energy purchase contract costs and bond-related costs incurred pursuant to Division 27 (commencing with Section 80000) of the Water Code; and
5. All other aggregated categories of costs currently recovered in retail rates as determined by the commission. (Public Utilities Code § 913)
6. Requires the CPUC, by May 1 of each year, to prepare and submit a written report with recommendations for actions that can be undertaken during the succeeding 12 months to limit utility cost and rate increases. (Public Utilities Code § 913.1)

FISCAL EFFECT: Unknown. This bill is keyed fiscal and will be referred to the Committee on Appropriations for its review.

BACKGROUND:

California climate goals – AB 1279 (Muratsuchi, Chapter 337, Statutes of 2022) codified into law the state’s goals to achieve net zero greenhouse gas (GHG) emissions and a reduction of statewide anthropogenic GHGs to at least 85% below 1990 levels by 2045. This parallels the state’s goals for 100% new zero-emission vehicle (ZEV) sales by 2035 and 100% clean energy by 2045, as established by Governor Newsom’s Executive Order N-79-20 and SB 100 (De León, Chapter 312, Statutes of 2018), respectively. Together, a slate of bills passed by the Legislature in recent years emphasize California’s desire to achieve ambitious climate targets across all sectors.

Reflecting on the past year – The cost structures and rate-setting process for California’s utilities are inherently complex and can be difficult to track over time. To help create more transparency in the rate-setting process, the Legislature passed AB 67 (Levine, Chapter 562, Statutes of 2005), which established an annual reporting requirement at the CPUC to identify the costs to ratepayers in the prior year of all electric and gas utility programs and activities recovered in retail rates.

In the most recent report released in April 2023, the CPUC reported that for electric rates, overall distribution and transmission costs increased from 2021 to 2022.^[1] Beyond capital additions, the significant increase in distribution costs was largely attributable to the approval of higher wildfire mitigation and vegetation management expenses, and significantly higher wildfire liability insurance coverage. The increase in transmission costs are attributable to approved grid hardening expenses; but also reflects efforts to meet the need for an unprecedented amount of new renewable resources and a vast expansion of transmission capacity to interconnect those resources.^[2],^[3]

In the same report, the CPUC highlighted an 18.6% increase in total natural gas utility costs from 2021 to 2022. The increase was primarily driven by increased commodity prices, which felt upward pressure from gas market conditions, colder winter weather, and gas pipeline infrastructure and storage issues. Costs of operating the natural gas transportation system and costs associated with gas public purpose programs (PPPs) also added slight increases to natural gas utility costs.

Setting goals for the new year – Since 2013, rates have increased across all three investor-owned utilities (IOUs) and exceeded the assumed rate of inflation.^[4] Compounded by other economic stressors, including inflation and rising housing and food costs, about 2.4 million customers of California’s three largest utilities are behind on their bills.^[5] The upward trend in energy rates is expected to continue in the near term through 2030, largely due to capital expenditures (infrastructure build) and wildfire mitigation.^[6] The projected growth in electricity costs over the coming decade suggests that many California households may struggle with energy affordability.

To complement AB 67, the Legislature passed SB 695 (Kehoe, Chapter 337, Statutes of 2009), directing the CPUC to annually put forth actions that could be taken within the succeeding 12 months to limit utility costs and rate increases. In their 2023 report, the CPUC mentioned 6 actions the agency can implement for cost management:

(1) Implement an income-graduated fixed charge;
(2) Encourage state efforts to use the General Fund to support decarbonization and clean energy policies;
(3) Pursue federal funding opportunities;
(4) Investigate high gas prices of Winter 2022-2023 and consider fixed charges in natural gas rate design;
(5) Monitor and plan long-term gas cost and infrastructure; and
(6) Use affordability impact analyses in applications requesting revenue increases.⁶

COMMENTS:

1. Author’s statement. According to the author, “Utility bills have increased beyond the rate of inflation over the past few years. This can be attributed to several factors, such as utility companies increasing their wildfire mitigation efforts and ongoing infrastructure maintenance expenditures. With increased costs and subsequent increased rates expected to continue, we must take a broad approach in identifying measures that can reduce the costs of providing energy. Thus, Assembly Bill 2462 requires the California Public Utilities Commission to publish holistic and long-term recommendations, as part of existing annual reports, which aim to decrease the costs of energy, and provide much needed rate relief for California ratepayers.”
2. Striving for a negative sum game. A major trend for consumers in the energy transition is the electrification of energy demand. Electrification is expected to progress most rapidly in the transportation sector with the growing adoption of electric vehicles (EVs).^[7] In the last year, Californians bought nearly 470,000 EVs, a record number up 29% from 2022.^[8] Electrification of residential buildings, which could involve retrofitting with heat pumps, induction cooktops, and upgraded breaker boxes, will also be a major pathway to meeting decarbonization goals.

The rapid growth in consumer demand of electricity necessitates updating and expanding our distribution and transmission systems, the costs of which are borne by ratepayers. What this means for individual consumers – especially those that electrify their vehicle and house – is higher and higher electricity bills. While many studies on the impacts of electrification and our clean energy transition conclude that energy costs will go down – helped by advances in renewable energy technology or greater distribution across a larger pool of customers^[9],^[10] – it is also important to quantify and qualify the affordability of this energy transition for households today, in order to enhance equitable adoption of electrification. Meeting the state’s climate goals will require urgent and fundamental changes to how all California residents use energy.

An important consideration to the affordability of electrification is a household’s full energy portfolio, which seeks to capture the totality of energy costs a consumer bears, inclusive of electricity, natural gas, and fuel for transportation. Merely tracking customer electric or gas bills can miss major contributors to consumers’ monthly energy expenditures. For example, switching to an EV means saving at the gasoline pump, savings that would not be revealed by tracking electricity usage, and billing, alone. A 2018 study by the University of Michigan’s Transportation Research Institute found that the average cost to fuel an electric car was $485 a year, compared to $1,117 for a gas-powered vehicle.^[11] Switching to a heat pump means reducing natural gas usage. Although the net bill differential of this switch can vary based on location and the fluctuating cost of natural gas,^[12] heat pumps tend to be far more efficient than traditional heating systems,^[13] thereby offering utility cost savings even in times when natural gas may be cheaper than electricity.

The CPUC has developed a “total energy bill” calculator to calculate these various customer expenses and to estimate the future impacts of electrification on total household energy costs.^[14] They have published their conclusions in prior SB 695 reports.^4,6 In conversations with the committee, the author has indicated the desire for this “total energy bill” evaluation to become a routine component of the annual SB 695 report. As such, the committee should consider clarifying the new reporting requirements of this measure to explicitly direct the CPUC to include evaluations of consumers’ full energy portfolio into the SB 695 reports. Utilizing this methodology to track costs to ratepayers as GHG policies move natural gas and gasoline costs into electricity bills could provide the Legislature with a clear understanding of the impacts proposals for new or augmented programs will have on affordability.

1. A sprint and a marathon. The upward trend in rates is likely to persist over the next decade. As the CPUC’s forecasts of energy costs have gradually extended towards looking over the next five to ten years, the CPUC has also made efforts to pose and solicit from other stakeholders near-term and long-term solutions to try to address the forecasted increases in utility costs.^4,6,[15] Since the CPUC has already indicated an interest to identify long-term actions with potential to reduce utility costs to ratepayers, requiring this practice in reports submitted to the Legislature could provide a clearer understanding of how the Legislature can support those actions and provide relief to ratepayers.
2. Prior legislation.

AB 1297 (Muratsuchi) declared the policy of the state to achieve net zero GHG emissions by 2045 and to ensure that, by 2045, statewide anthropogenic GHGs are reduced to at least 85% below 1990 levels. Status: Chapter 337, Statutes of 2022.

SB 350 (de León) required 50% of electricity to be generated from eligible renewable energy resources by 2030, and set GHG reduction targets to be achieved by 2030 through a variety of measures, including supporting electrification of the transportation system and established requirements of CPUC in adopting EV charging proposals from the IOUs. Status: Chapter 547, Statutes of 2015.

SB 695 (Kehoe) required the CPUC to annually report on recommendations for actions that can be undertaken during the succeeding 12 months to limit utility cost and rate increases, consistent with the state’s energy and environmental goals. Status: Chapter 337, Statutes of 2009.

AB 67 (Levine) required the CPUC to annually report on the costs of programs and activities conducted by an electrical corporation or gas corporation that have more than 1,000,000 and 500,000 retail customers, respectively, in California, including activities conducted to comply with their duty to serve. Status: Chapter 562, Statutes of 2005.

REGISTERED SUPPORT / OPPOSITION:

Support

CalChamber

Edison International and Affiliates, Including Southern California Edison

Pacific Gas and Electric Company and Its Affiliated Entities

Silicon Valley Leadership Group

Opposition

None on file.

Analysis Prepared by: Kathleen Chen / U. & E. / (916) 319-2083

1. CPUC; “2022 California Electric and Gas Utility Costs Report: AB 67 Annual Report to the Governor and Legislature”; April 2023. ↑

2. D. 20-05-003, CPUC; Decision Ordering Supplemental Mid-term Reliability Procurement (2026-2027) and Transmitting Electric Resource Portfolios to California Independent System Operator for 2023-2024 Transmission Planning Process; February 2023. ↑

3. Lucid Catalyst, Clean Air Task Force, Environmental Defense Fund; “California’s Clean Energy Transition: Understanding Today’s Challenges to Reach Tomorrow’s Goals”; January 2022. ↑

4. CPUC; “Utility Costs and Affordability of the Grid of the Future: An Evaluation of Electric Costs, Rates, and Equity Issues Pursuant to P.U. Code Section 913.1”; May 2021. ↑

5. R. 18-07-005, CPUC; Disconnection Settlement Monthly Reports of PG&E, Southern California Edison, and SDG&E; November 2023. ↑

6. CPUC; “2023 Senate Bill 695 Report: Report to the Governor and Legislature on Actions to Limit Utility Cost and Rate Increases Pursuant to Public Utilities Code Section 913.1”; May 2023. ↑

7. US Bureau of Labor Statistics; “Charging into the future: The transition to electric vehicles”; February 2023. ↑

8. Veloz; “Q4 2023 data shows a 29% year-over-year increase in EV sales in California, with over 1.2 million EVs sold nationally”; February 2024. ↑

9. Rocky Mountain Institute; “X-change: Electricity”; July 2023. ↑

10. Synapse Energy Economics, Inc.; “Electric Vehicles are Driving Electric Rates Down”; June 2020. ↑

11. University of Michigan; http://www.umich.edu/~umtriswt/PDF/SWT-2018-1_Abstract_English.pdf; January 2018. ↑

12. Wood Mackenzie; “US gas enters an era of increased price volatility”; February 2024. ↑

13. MIT Technology Review; “Everything you need to know about the wild world of heat pumps”; February 2023. ↑

14. CPUC; “Key Takeaways from the CPUC Rates and Costs En Banc Hearing and Update on Affordability Metrics”; June 2021. ↑

15. CPUC; https://www.cpuc.ca.gov/industries-and-topics/electrical-energy/affordability/phase-3; March 2022. ↑