Legislative Analyst's Office Analysis of the 2002-03 Budget Bill

Public Utilities Commission (8660)

The California Public Utilities Commission (CPUC) is responsible for the regulation of privately owned "public utilities," such as gas, electric, telephone, and railroad corporations, as well as certain passenger and household goods carriers. The commission's primary objective is to ensure adequate facilities and services for the public at equitable and reasonable rates. The commission also promotes energy and resource conservation through its various regulatory decisions.

Proposed Funding. The budget proposes total CPUC expenditures of $1.3 billion in the budget year from various special funds and federal funds. This is a $329 million reduction from the current year. The large 2002-03 reduction is mainly due to one-time General Fund monies appropriated in Chapter 7x, Statutes of 2001 (SB 5x, Sher), which have been spent in the current year for various programs to promote energy efficiency and provide discounted electricity service to low-income customers. The Governor's budget also proposes 25.7 new personnel-years (PYs) to administer five universal service telephone programs, bringing the commission's budget-year staffing level to 921.9 PYs.

New Programs in Budget Totals. In the current year, spending on five existing universal service telephone programs was included in the budget of the CPUC pursuant to Chapter 677, Statutes of 1999 (SB 669, Polanco). The remaining universal service telephone program, the Deaf and Disabled Telecommunication Program (DDTP), is proposed to transition "on budget" in 2002-03. These programs account for roughly $1.1 billion of the CPUC's total expenditures in the budget year, which is roughly 90 percent of the commission's total support. These programs are now subject to appropriations in the budget act. In addition, the CPUC's funding also includes the proceeds from a new natural gas surcharge for natural gas public purpose programs. These funds are continuously appropriated and not subject to budget act appropriation.

Universal Service Telephone Programs

Background

The CPUC currently administers five universal service telephone programs that seek to expand access to basic telephone services. It does so by subsidizing the cost of service for certain people (such as low-income persons and persons living in remote areas) through surcharges on all telephone users' monthly bills. These programs include:

• Universal Lifeline Telephone Service. Program subsidizes basic telephone service for low-income persons.
• California High Cost Fund-A. Program subsidizes basic telephone service provided by 17 small local telephone companies servicing high-cost, predominantly rural areas in the state.
• California High Cost Fund-B. Program subsidizes basic service in high-cost areas of the service territories of four large local telephone companies, including Pacific Bell, Verizon California, Inc., Roseville Telephone Company, and Citizens Telcommunications of California.
• California Teleconnect Fund. Program subsidizes telephone service for various entities, including schools, libraries, community-based organizations, and city- and county-owned hospitals and clinics.
• Public Payphone Programs. Program regulates payphones and provides public payphones and hearing impaired phones in places where phones are needed.

In addition to the above programs, the DDTP program will be administered by the CPUC in the budget year. This program provides a variety of services for hearing-impaired and disabled persons. With the enactment of Chapter 677, the CPUC annually approves a budget for each of these programs that is subject to appropriation in the budget act.

Reporting Requirements Needed for Public Payphone Programs

We recommend approval of the 13 two-year limited-term positions for the support of three public payphone programs. However, we further recommend the adoption of supplemental report language that directs the California Public Utilities Commission to report on the workload and effectiveness of these programs by December 1, 2003. This will enable the Legislature to determine the number of permanent positions that will eventually be needed to administer these programs.

Background. The CPUC administers three public payphone programs that are funded through utility customer bills. These programs include: (1) the Public Policy Payphone Program, which places public pay phones in areas that would otherwise not be served; (2) the Payphone Service Providers Enforcement Program, that ensures payphones are in acceptable working order and charging approved rates; and (3) the Telecommunications Devices for the Deaf Interim Placement Committee, which ensures that the hearing impaired have access to communications devices in public places. All three of these programs will be administered by the CPUC's Consumer Services Division under the guidance of the Payphone Service Provider Committee, which is an advisory board created by Chapter 677. Prior to this program being under the control and direction of the CPUC, 15 non-civil-service positions were involved in administering these programs.

Budget Proposal. The 2002-03 budget proposes about $750,000 for 13 new two-year limited-term positions to support the three public payphone programs described above. Since these are new programs under the CPUC administration, there is little workload data available to justify these positions and the effectiveness of these programs in meeting their goals. Nevertheless, we recommend approval of the 13 positions on a two-year limited-term basis. We further recommend that the Legislature adopt supplemental report language directing the commission to provide information that justifies its staffing needs for the public payphone programs. This information would assist the Legislature's consideration of permanent positions for these programs in the 2004-05 budget. Without the information identified in the language below, the Legislature will not be in a position to determine the effectiveness of these programs or the level of ongoing support needed to administer them. We recommend the following supplemental report language in Item 8660-001-0491:

On or before December 1, 2003, the California Public Utilities Commission shall submit, to the Chairs of the Joint Legislative Budget Committee and the fiscal committees of both houses of the Legislature, a report that justifies its staffing needs for its public payphone programs based on actual workload data. In addition to the staffing levels of each program, this report should include the following information:

1. Public Policy Payphone Program. The number of applications received for new public policy payphones, the number of public policy payphones placed in California, the location of the public policy payphones, and the number of hours spent on each application and payphone placement case.

2. Payphone Service Providers Enforcement. The number of payphones inspected, the percentage of total phones inspected, the number of payphones not in compliance, the number of payphones disconnected, and the number of hours spent on each inspection and compliance case.

3. Telecommunications Devices for the Deaf Interim Placement Committee. The number of phones placed, the number of applications/requests for the placement of these phones, and the number of hours spent on each phone placement case.