Division of Ratepayer Advocates

Responses to Questions in Preparation for the Energy, Utilities and Communication Committee Hearing on February 22, 2006

Question No. 1 – The interests of low income, rural, and minority communities tend to be underrepresented at the CPUC. As the director of the division statutorily directed to represent the interests of all consumers, how do you envision ensuring that those underrepresented interests get represented at the CPUC? Is there a role for collaboration with the Public Advisor?

Answer: DRA advocates for the interests of underrepresented communities in the following ways:

Electricity & Gas

• In 2005, DRA effectively advocated on behalf of low income customers through participation in PG&E’s General Rate Case (GRC) Phase II, Rate Design and Cost Allocation. PG&E sought to substantially raise rates for low-income residential customers (“California Alternate Rates for Energy” customers) and non-CARE residential customers and proposed the introduction of tier 3 and tier 4 CARE rates which would have resulted in even higher increases. DRA proposed lower increases for the residential customer class, and no rate increases for CARE customers. DRA further opposed the creation of the tier 3 and tier 4 rates for CARE customers as advocated by PG&E. DRA successfully negotiated these issues; the result being no rate increases for CARE customers, and no tier 3 and tier 4 rates for CARE customers.
   
• In SDG&E’s 2005 Rate Design Window, SDG&E sought moderate increases for the residential customer class and CARE customers. DRA recommended no rate increase for CARE customers as part of a settlement that was ultimately adopted by the CPUC.
   
• DRA supported the proposal of Southern California Gas Company to reclassify 4 BCF of cushion gas to working gas and to transfer that gas to CARE ratepayers, resulting in gas cost savings estimated at $50 million.
   
• DRA was a party to the recent settlement agreement filed in Sierra Pacific Power Company's GRC which proposes a 10% increase in electric rates for residential and CARE customers in contrast to the 19% increase proposed by Sierra Pacific. The reduction was based mainly on DRA’s testimony.
   
• DRA is currently evaluating PG&E's proposal in its GRC application to close all 84 of the front counters at its local offices on June 30, 2007. Among other things, DRA will investigate the impact of the proposed closures on low income, rural and minority customers and communities.
   
• DRA opposed a change to the historic equal-cents-per therm allocation of CARE surcharge costs proposed by PG&E in its last Biennial Cost Allocation Proceeding for gas costs. The proposed change would have allocated a larger share of these costs, amounting to a $21 million increase, to residential customers. The CPUC declined to change the allocation method.
   
• As part of DRA's analysis of PG&E’s GRC application to close local offices, DRA is assessing the appropriateness of applying PG&E's “restoration for non-payment fee” on low income customers.
   
• DRA is a member of the Stewardship Council, created as part of PG&E’s bankruptcy settlement. DRA works with Latino Issues Forum, Regional Council of Rural Counties, Tribal Representatives and other groups that are also members of the Stewardship Council. The Stewardship Council has had numerous public outreach meetings in rural areas throughout the state addressing land use issues, and meetings in rural and urban areas on programs for disadvantaged and underserved youth.

Low Income Proceeding (Rulemaking 04-01-006)

DRA is gathering information from the utilities on the status of new low income program activities responsive to D.05-10-044, which addressed winter initiatives aimed at informing and assisting low income customers on mitigating the impacts of high gas costs on total energy utility bills.

• Specifically, DRA is focusing on utility outreach activities and direct assistance weatherization/energy efficiency installations. DRA is interested in insuring that utilities are actively targeting and communicating with the most vulnerable low income customers, as well as relevant agencies and organizations.
   
• In addition, DRA seeks to assess the success of alternative payment options recently made available to all residential customers (including low income) for purposes of preventing or limiting the number of shut-offs of utility service during the winter months.
   
• Shut-Off Moratorium - Shut-off of gas or electric service for non-payment can be avoided if a residential customer pays 50% or more of a bill amount and enters into an arrangement to pay the remainder over time (about 9 months, or Level Pay Plan).

DRA will participate in the CPUC workshop on February 17 regarding the status of utility winter initiatives adopted in D.05-10-044. (Results of the workshop are likely to be relevant to the inquiries of the Senate hearings on Feb. 22).

Low Income Energy Efficiency (LIEE) Programs

DRA participates in the ongoing processes to establish the design, planning and budget allocation of the utility LIEE programs. In addition to reviewing and commenting on utility applications and advice letters regarding program funding and design, DRA is a standing participant in the activities of the LIEE Standardization Team. The Standardization Team is charged by the Commission to periodically refine and adjust the results of measurement, evaluation, and cost-benefit analyses regarding weatherization/energy efficiency measures to be installed in income-eligible households (which is roughly defined as those with incomes twice the federal definition of poverty levels.) The Team also revises standard installation and other protocols governing the conduct of installation contractors hired by the utilities to implement the LIEE program.

DRA also attends the meetings of the Low Income Oversight Board, and although DRA is not a chartered member, as an interested party it offers comments and information to the board members where appropriate. DRA finds that meetings often reveal valuable insights, given the wide range of interests and representation of the various board members, from state agencies, local agencies and community organizations, utilities, as well as representatives in the contractors industry.

Telecommunications

DRA’s Telecommunications Section advocates the needs and interests of under-represented groups in a number of different venues:

• A number of Public Purpose Programs were established by statute to fund and provide discounts, special services or equipment to target groups in California. DRA serves on each of the Advisory Committees of these boards to provide advice and direction so that policy choices and implementation decisions keep pace both with the needs of the recipients and the development of new technologies and so that the underrepresented communities are optimally served:
  
  § The Universal Lifeline Telephone Service (ULTS) fund provides a substantial discount for residential service to low-income households. This fund subsidizes both the installation charges and the monthly service for individuals and families statewide.
  
  § The California High-Cost Funds (CHCF) A and B subsidize the carriers directly, enabling them to provide reasonably-priced service in designated high-cost areas, many of which are rural communities served by smaller carriers (A fund).
  
  § The Telecommunications Assistive Devices for the Deaf and Disabled Advisory Committee (TADDAC) is the subcommittee of the Deaf and Disabled Telephone Program (DDTP). The DDTP funds, selects, and provides, through the TADDAC, specific equipment, signaling devices, and other communications appliances for the deaf, disabled, and special needs customers regardless of income. The California Relay Service, also contracted and funded through the DDTP, provides the operator and switching services to connect special needs customers with the rest of the world, e.g. reading the text message typed by a deaf customer for a hearing customer-recipient of a phone call.
  
  § The California Teleconnect Fund (CTF) provides funding for discounted equipment and services (including internet access) for schools, libraries, rural health services and other non-profit organizations that qualify, in order to improve education and interconnection for high speed access to information services.
  
  § The Universal Service Fund is a federal program, funded by an FCC-imposed surcharge, which contributes money to states to assist with the provision of ULTS services. DRA has been active in the streamlining and modification of federally-imposed qualification criteria so that customers are not deterred from applying for ULTS Services by an unnecessarily restrictive or daunting process.
   
• In the CPUC’s Uniform Regulatory Framework (URF) proceeding, addressing the regulation of most wireline telecommunications carriers, DRA proposes to establish a 3-year rate freeze for residential and small business customers, in the event that the CPUC decides to lift all price caps and forbear from any rate regulation. The utilities have argued for deregulation in the URF proceeding, claiming that competition will be sufficient to protect customers. DRA also proposes that the extent of competition and the need for protection be re-evaluated in three years before any rate freezes are lifted.
   
• In the Consumer Bill of Rights proceeding, now in its sixth year, DRA continues to advocate for basic rules to be established and enforced against wireline and wireless carriers alike.
   

Water Rates & Policy

In addition to DRA’s statutory mandate “to obtain the lowest possible rate for service consistent with reliable and safe service levels,” as set forth in Public Utilities Code section 309.5, Public Utilities Code section 739.8 states that access to an adequate supply of healthful water is a basic necessity of human life and shall be made available to all California residents at an affordable cost.

In keeping with these mandates, DRA has paid attention to the affordability of utility bills for low income customers. There are large numbers of households who face tough choices and real economic hardship. Any water service termination due to bill nonpayment has the potential to adversely affect the health and safety of the occupants and habitability of the housing unit. DRA strives to ensure that water rates for basic human needs should be low enough so that those on low- or fixed-incomes will not need to curtail or eliminate other essential services to pay their water bills.

The following are examples of DRA’s advocacy in these areas:

• Ensuring Water Affordability. DRA urged the CPUC to establish “Water Affordability” as a fifth guiding principle for its Water Action Plan to highlight the importance of access to water to meet basic human needs as a fundamental human right. Water affordability is determined by three factors: the price of water, the amount of water used and the customer’s ability to pay (income levels). DRA assesses all three of these factors in considering ways to maintain safe, affordable drinking water.
   
• Good working relationships with interveners. We actively reach out to environmental justice and other groups that have been involved in water policy issues. We seek to build alliances with these groups, and to encourage those who have not previously intervened to bring their expertise to CPUC water proceedings. Recently we hosted a conference call with a dozen groups to discuss the CPUC’s new Water Action Plan and strategize ways to effectively coordinate efforts. Since most of these parties had never intervened at the CPUC, DRA invited the Public Advisor to join the call to explain the CPUC’s processes, procedures and ways to intervene.
   
• Collaboration with the Public Advisor. The Public Advisor and DRA regularly collaborate on the review of public notices that are required to be mailed to customers announcing requested rate increases. While the Public Advisor retains final approval of any proposed public notice, the Public Advisor relies on DRA to specifically review these notices for numerical accuracy, and to ensure that information on proposed rate increases is straightforward, complete, and as understandable as possible.
   
• Onsite Community Presence. Another way DRA represents the interests of rural, low income and minority communities is by going out into the community. When a utility requests a rate increase, DRA staff members visit the district and tour the water system to assess whether requested costs are truly needed, and if so, are reasonable. DRA staff return to the district to listen to public comment in public participation hearings on proposed rate increases held locally. In addition, the Public Advisor forwards all customer letters commenting on utility matters to DRA where we carefully read them and follow-up as necessary. DRA also coordinates with and supports local customer groups to keep costs down.
   
• Low Income Rate Assistance Programs. DRA has advocated for the establishment of low income water rate assistance programs for Class A water utilities. DRA has made recommendations to provide meaningful benefits to low income customers while minimizing the impact on other residential and small business customers.
   
• Subsidies for Disadvantaged Communities. DRA recently provided testimony on fair and equitable ways to provide subsidies to disadvantaged water districts. For example, in the California Water Service general rate case, DRA and the company settled on an innovative funding proposal that will provide a $1 million subsidy to Kern River Valley area ratepayers to offset the extremely high cost of infrastructure improvements needed to comply with new arsenic treatment requirements in that area. The assistance will flow directly to customers, with each customer receiving a $17/month credit on their water bill – an approximate 20% discount. The negotiated settlement agreement also provides additional assistance for low income program participants. The assistance will be funded by a very small charge on each unit of water sold by the company.
   
• Access to Proposition 50 Grant Funds. DRA has made recommendations to the CPUC on rules to ensure that ratepayers in low-income and disadvantaged communities that are served by investor-owned water companies are able to benefit from Proposition 50 grant funds for water and wastewater system improvements. Historically, with some exceptions, general obligation bond funding has been limited to public agencies, yet all Californians pay for these bonds through their taxes. Most investor owned water companies are small water companies with fewer than 500 customers. These small water companies face the same types of problems as do local public agencies in gaining access to private capital to fund water infrastructure improvements, and in not having enough customers to pay for needed improvements. In addition, even the largest utilities serve low-income districts where customers would be faced with unaffordable rate increases to make necessary improvements to meet water quality and safety standards. DRA has recommended rules to ensure that privately held water companies would not be able to profit in any way from Proposition 50 grant (or other) grant funds.

DRA and the Public Advisor

DRA recognizes the importance of public participation at the CPUC. That is why DRA actively encourages consumer groups and other interested parties we routinely work with, or come in contact with, that are unaware of how to become involved, to contact the Public Advisor for procedural advice on how to participate in CPUC proceedings, file formal complaints and learn more important information about the Intervenor Compensation Program. (See description of collaboration with Public Advisor’s Office in the section on “Water Rates & Policy”). DRA also works directly with the Public Advisor to disseminate important consumer-related information to the public. DRA looks forward to continuing its mission and is grateful the Public Advisor is there to provide guidance to those parties that are also interested in participating in CPUC proceedings.

Question No. 2: DRA has historically had a close relationship with the CPUC: DRA has relied upon the CPUC for legal and administrative expertise; staff has often been loaned between DRA and the CPUC. To encourage stronger consumer representation, recently enacted law (SB 608 – Escutia) provided for independence of the DRA from the CPUC. Does the DRA now have sufficient independence from the CPUC? If not, why not?

Answer: Effective January 1, 2006, SB 608 (Escutia) has sufficiently brought the reality of DRA independence to bear by (i) authorizing the hiring of a “Lead Attorney” who would report to the Director, (ii) providing the Director with express authority to encumber funds in the DRA budget which is separate from the CPUC budget and which may only be used by and for DRA purposes; and (iii) expressly authorizing the DRA budget to be developed by the Director. Since SB 608 was enacted as a manifestation of the will of the Legislature with the approval of the Governor, I trust that the CPUC will honor the terms and intent of SB 608 as we progress through this first year of its enactment.

Question No. 3: Does the DRA have sufficient resources to perform its statutorily required duties?

Answer: In fulfilling the statutory mission of DRA, there is never a shortage of issues and proceedings of both a technical and policy nature to evaluate and comment on. Given our current resources, it remains a continuing challenge to staff all of the proceedings at a level that effectively represents ratepayers. Consequently, we engage in prioritization in an attempt to cover the most significant proceedings. With the hiring of two new Deputy Directors and a Lead Attorney, DRA will achieve greater productivity from our current resources, and consequently, more effective representation of ratepayers. Once efficiencies are realized with the help of these new management additions, we will be able to determine the extent of resource shortfalls, if any. The one exception to this “let’s see” scenario is in the area of water utility rate cases and policy implementation. DRA has been short for years in this area, and though some resource efficiencies will no doubt be identified, DRA will continue to fall short of the resources needed to process water utility rate cases on a 3 year cycle, particularly with the addition of significant policy issues also being introduced in these rate cases as a result of adoption of the CPUC’s Water Action Plan.
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Question No. 4: In what areas does DRA need improvement? What are your plans for improving DRA’s effectiveness?

Answer: DRA has made a lot of progress in the year and one-half that I have been Director, but we still have a lot of room for improvement. As I mentioned in my response to the previous question, I am in the process of hiring two new Deputy Directors who will be strong managers committed to implementing process improvements throughout DRA. Internally, DRA needs to be consistent in its positions. To ensure consistency, those positions need to be discussed, approved and adopted by DRA management. DRA needs to better ensure the quality of its work and the rationality and practicality of its positions and recommendations. It needs to work better and faster at this with team approaches that incorporate processes and systems that will make it less likely that issues are missed, solutions misapplied, or positions misstated. Externally, DRA needs to be more engaged with, and aware of, the concerns of government officials for their constituents, collaborate with other consumer advocacy groups and consumer based organizations and talk more with representatives of the regulated industries to better understand their concerns. In addition to hiring the Deputy Directors and Lead Attorney, a management consultant has been hired to perform an “organizational review” of DRA to determine where improvements in efficiency and quality control can be made. Results and recommendations are expected within the next 30 days.