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Budget and Policy Post
February 14, 2018

The 2018-19 Budget

California Public Utilities Commission

The California Public Utilities Commission (CPUC) regulates privately owned electric, natural gas, telecommunications, water, railroad, rail transit, and certain passenger transportation companies. The agency’s mission is to ensure that regulated utilities provide safe and reliable services at affordable rates. In addition to its regulatory activities, CPUC also administers programs that provide subsidized utility services to certain underserved populations and supports energy-related research and development activities.

The Governor’s budget proposes $1.6 billion for CPUC in 2018‑19, a net decrease of about $200 million (11 percent) compared to the 2017-18 budget. This year-over-year decrease is largely the result of revised caseload and cost estimates for the California LifeLine Program in 2018-19. These estimates are based on recent data that shows caseload is lower than what was assumed in the 2017-18 budget. As described below, we recommend the Legislature make one minor modification to the proposed CPUC budget.

Gas and Electric Service Disconnections

Background. California residential gas and electric service disconnections for nonpayment have increased from 547,000 in 2010 to 816,000 in 2015. Chapter 362 of 2017 (SB 598, Hueso) requires CPUC to develop policies and rules to reduce the number of service disconnections to 2010 levels by 2024. Chapter 362 also requires the commission to assess the impact of proposed rate increases on service disconnections. The CPUC must also submit an annual report to the Legislature on service disconnections at the four largest utilities and all community choice aggregators, which also provide retail electricity services to residential customers.

Governor’s Proposal. The commission requests two permanent positions and $336,000 (Public Utilities Commission Utilities Reimbursement Account) to support (1) the identification of causes of and solutions to the trend of increasing rate of service disconnections, (2) a rulemaking proceeding to establish subsequent regulations, and (3) the completion of the required annual reports.

LAO Recommendation. In our view, it is reasonable to expect an increased workload for the commission in order to implement regulations and evaluate the subsequent outcomes related to reducing service disconnections. It is also reasonable to expect that the commission might need funding for the full six years before the legislative deadline to achieve disconnection goals because there could be more than one iteration of rulemaking required to substantially reduce the level of service disconnections. It is unclear, however, what the additional amount of commission workload will be, if any, beyond 2024. Future workload would depend on whether the Chapter 362 goal was achieved and what activities might be necessary to maintain any reductions in service disconnections. We recommend the Legislature approve the requested funding on a six-year limited-term basis. The administration can submit a request for ongoing resources in future years when more information about ongoing workload is available.