9. Suburban's Low-Income Rate Assistance Program Settlement
The Suburban and DRA settlement provides that low income residential customers who meet the requirements for the California Alternate Rates for Energy (CARE) program will receive a $6.50 monthly credit to the service charge. The Joint Consumers oppose the monthly credit and propose a 15% reduction on the total bill. Decisions in the last five years addressing LIRAs have adopted both service charge discounts (San Gabriel Valley Water Company, D.05-05-015; Apple Valley Ranchos Water Company, D.05-12-060; Park, D.06-10-036; Cal-Am, D.06-11-050, D.06-11-052, D.07-08-030; Valencia Water Company, D.06-11-051; and CalWater, D.06-11-05330) and percentage discounts on the total bill (Golden State Water Company, D.02-01-034; and San Jose Water Company, D.04-08-054). Most recent decisions have adopted service charge discounts.
The parties illustrate the impact of flat service charge and total bill percentage discounts as follows:
· A $6.50 discount at usage of 20 Ccf/month results in a bill decrease that is $1.07 greater than a 15% discount
· A $6.50 discount at usage of 30 Ccf/month results in a bill decrease that is $1.67 less than a 15% discount
The parties acknowledge that $1.07 and $1.67 are not major differences in the two discounts. The greater benefits of the flat service charge discount at lower usage and the total bill percentage discount at higher usage also are not dramatic. The settling parties chose the impact of the discount at 20 Ccf, because setting the first tier breakpoint at 20 Ccf was done in part to accommodate the needs of larger households.
Suburban and DRA rejected a total bill percentage discount as inconsistent with the conservation rate design settlement's conservation proposal. Adopting a 15% discount could offset increased charges for higher consumption. The dual goals of Pub. Util. Code § 739.8, considering rate relief to assist low-income customers and providing incentives and capabilities to achieve water conservation goals, were considered in proposing a flat rate discount.31 Suburban also had concerns that total bill percentage discounts are more costly to implement.
The Joint Consumers point out that affordability is the key to fashioning a LIRA program. They criticize the settlement for placing conservation goals ahead of affordability. They prefer that service charges be lowered for all customers to promote conservation, not just low-income customers. A flat discount to the service charge disadvantages large households with higher usage whereas a percentage discount on the total bill is equitable for all households, regardless of size. Joint Consumers assert a percentage discount is most consistent with § 739.8(b).32
CWA supports the settlement, because it asserts there is no evidence that a total bill percentage discount is more effective than a flat service charge discount in addressing conservation or affordability issues. CalAm supports a flat service charge discount, because it asserts that a total bill percentage discount coupled with a tiered rate thwarts conservation. If the percent reduction is the same, there may be an incentive to disregard conservation measures. CalAm concurs that flat service charge discounts are easier and less costly to administer. With a total bill percentage discount, the discount could be applied to the bill before or after surcharges, surcredits, and taxes. CalAm proposes that Phase 2 of this proceeding consider alternative methods of rate relief, including a higher value flat service charge discount dependent on the number of people living in the household.
DRA and Suburban negotiated the LIRA and conservation rate design settlements at the same time, factoring low-income households' needs into both agreements. Therefore, Suburban and DRA's LIRA proposal cannot be assessed independent of the adopted conservation rate design. Regardless of the merits of the flat and percentage discounts, and each has merits, the Suburban and DRA LIRA flat service charge discount was set in conjunction with a conservation rate design that would achieve greater savings at the first tier breakpoint, average consumption, than at higher usage levels. A percentage total bill discount potentially would blunt the pricing signals associated with that rate design.
Since the conservation rate design is a trial program, there is an opportunity to assess the impact of a $6.50 discount on large households in the context of monitoring that program. The Joint Consumers and Suburban have proposed a comprehensive outreach, education and monitoring program that will assist in measuring the impact of the Suburban LIRA on low-income customers. Further, we will consider the impact of conservation rate designs on LIRAs and higher discounts on service charges for larger households in Phase 2 of this proceeding.
The Suburban LIRA settlement proposes a LIRA consistent with those adopted for other utilities and with the adopted conservation rates for Suburban. The settlement meets the policy objectives of § 739.8. Thus, we find the LIRA settlement reasonable in light of the record, consistent with law, and in the public interest.
30 Both San Gabriel Valley Water Company and CalWater's low-income programs include a 50% discount to the service charge.
31 Pub. Util. Code § 739.8 provides in part: "(b) The commission shall consider and may implement programs to provide rate relief for low-income ratepayers.
(c) The commission shall consider and may implement programs to assist low-income ratepayers in order to provide appropriate incentives and capabilities to achieve water conservation goals."
32 We have previously found that a service charge discount meets the policy objectives of § 739.8. (San Gabriel Valley Water Company, D.05-05-015, 2005 Cal. PUC LEXIS 167 *6.)
