4. Allocation of SBX1 5 CARE Funds to the SMJU

Section 5(a)(2) of SBX1 5 appropriates $100 million to "increase and supplement CARE discounts" and "increase enrollment in the CARE program." By D.01-05-033, we allocated $15 million of that funding to PG&E, SDG&E, SCE and SoCal to augment current CARE outreach efforts. We directed that the remaining $85 million be allocated to the utilities to cover the increased costs of CARE rate subsidies, on an "as needed" basis, noting that the Legislature directed that these funds be used to "supplement, but not replace, surcharge-generated revenues."⁵ As part of the workshop process, we directed Energy Division to obtain information from the SMJU to assess whether or not a portion of the $85 million should be used to supplement their funding for CARE outreach and rate discounts, as appropriate.⁶

In its workshop report, Energy Division compiled data to illustrate the relative sizes of the SMJU CARE customer population, program participation and potential impacts of changes in CARE program eligibility guidelines and discount rate. That information is presented in Tables 3 and 4 below. The Commission is currently considering whether to apply (1) the increase in the CARE rate discount from 15% to 20% and (2) the change in income eligibility levels for CARE from 150% to 175% of the federal poverty guidelines to the SMJU, as it has recently done for PG&E, SCE, SoCal and SDG&E.⁷

Table 3

SMJU CARE POPULATION

Utility	# of Residential Customers	% of Customers on CARE	# of Customers on CARE	# of Customers Eligible @ 150%	Current CARE Penetration Rate	# of Customers Eligible @ 175%	% Increase in Eligible Customers @ 175%
Alpine	461	0%	0	0	0%	N/A	N/A
Avista	2,755	22%	606	2,408	25%	2,544	6%
Bear Valley	7,794	11%	872	1,871	47%	2,338	25%
Mountain	150	0%	0	0	0%	N/A	N/A
PacifiCorp	32,000	6%	1,973	10,880	18%	14,744	36%
Sierra	39,000	3%	1,106	1,980	56%	2,277	15%
Southwest	121,000	12%	14,736	27,502	54%	31,557	15%
North			181	1,511	12%	2,317	53%
South			14,555	25,991	56%	29,240	13%
West Coast	559	3%	14	60	23%	68	13%

Notes:

(1) Mountain Utilities currently does not have a CARE program, Alpine has a CARE program but currently doesn't have any participating customers.

(2) Energy Division did not review amounts presented by the utilities for accuracy.

(3) Sierra Pacific' service territory contains about 50% vacation/rental homes resulting in a statistical impact on penetration rate data.

Table 4

SMJU CARE PROGRAM PARTICIPATION AND PROJECTED PARTICIPATION

Utility	Authorized CARE Collection	CARE 2000 Expense	Estimated Increase for 150% FPG @ 95% Penetration @ 15% Discount	Estimated Increase for 175% FPG @ Current Penetration @ 15% Discount	Estimated Increase for 175% FPG @ 95% Penetration @ 15% Discount	Estimated Increase for 175% FPG @ Current Penetration @ 20% Discount
Alpine	$0	$0	$0	$0	$0	$0
Avista	$66,000	$45,025	$84,000	$3,300	$193,000	$4,400
Bear Valley	$77,643	$77,643	$80,617	$19,419	$120,190	$25,892
Mountain	$0	$0	$0	$0	$0	$0
PacifiCorp	$180,000	$180,000	$982,800	$464,040	N/A	$618,720
Sierra Pacific	$120,000	$107,000	$74,977	$37,575	$112,552	$50,100
Southwest Gas	$678,000	$898,146	$648,375	$146,400	$993,000	$195,200
West Coast	$6,000	$1,356	N/A	$6,800	N/A	$9,067

Notes:

(1) PacifiCorp's Income Eligibility Guidelines are currently at 130% of Federal Poverty Guidelines. $982,800 is the figure available from PacifiCorp to go to 95% penetration at 130% FPG. We do not have estimates for 150% or 175% FPG at 95% penetration levels.

(2) Sierra estimates that 50% of its residential customers' homes are vacation or rental properties

(3) Avista indicates that a substantial portion of its residential customer's homes may be vacation or rentals

(4) Avista indicates that the Commission authorized a rate increase in March so CARE costs for 2001 are estimated to be $66,000

4.1 Expanded CARE Outreach

Avista, PacifiCorp, Sierra Pacific, Bear Valley and Southwest Gas submitted proposals for expanding CARE outreach and associated increased administration activities, using SBX1 5 CARE funding. These utilities also request SBX1 5 funding to cover the additional subsidy costs associated with increased program penetration. For reasons discussed above, Alpine, Mountain Utilities and West Coast Gas did not submit proposals.

We have reviewed the proposals submitted for CARE outreach funding and associated administration. We concur with Energy Division that the levels proposed by these utilities are appropriate in light of the overall CARE program size and eligible population. Accordingly, we authorize a total of $400,000 to augment SMJU budgets for outreach and associated administrative costs out of the remaining $85 million in SBX1 5 CARE funds. Our adopted allocation is presented in Table 5 below.

Table 5

Adopted Allocation of SBX1 5 CARE Funding
for SMJU CARE Outreach

UTILITY	CARE Outreach Requests
Avista	$20,000
PacifiCorp	$85,000
Sierra Pacific	$40,000
Bear Valley	$80,000
Southwest Gas	$175,000
TOTALS	$400,000

As we discussed in D.01-05-033, these funds should not be used for mass media campaigns, with the exception of the non-English radio and print ad outreach authorized below. Rather, the SMJU should expand targeted outreach efforts through coordination with LIHEAP providers in their service territories, as appropriate, and undertake other efforts to reach vulnerable households, including outreach to senior centers, independent living centers, welfare departments, and migrant and seasonable farm workers. Consistent with our direction in D.01-05-033 and the mass media limitation contained in Section 5(a)(C) of SBX1 5, SMJU may use up to 10% of the CARE outreach funding authorized today to fund non-English radio and print advertising for CARE outreach.

4.2 SBX1 5 Funding For CARE Subsidies

As indicated in Table 4, Avista, PacifiCorp, Sierra Pacific, Bear Valley, Southwest Gas and West Coast Gas will experience funding shortfalls with increased CARE program penetration, particularly if the discount level and income guidelines adopted for PG&E, SCE, SoCal and SDG&E are extended to them. For example, Avista is projected to experience an increase in CARE subsidy costs of $4,400 per year if these guidelines are adopted without any change in its current 25% CARE penetration level. With expanded outreach and increased program penetration, costs could increase many times that amount, with or without changes in income eligibility or the discount level. Accordingly, these utilities request that we allocate some of the SBX1 5 CARE funding to supplement the funds they currently collect in rates for this purpose.

There was lengthy discussion at the workshops on how the remaining SBX1 5 CARE funds should be allocated to the utilities, including to PG&E, SCE, SDG&E and SoCal. However, few specifics emerged with respect to the amount that should be set aside to augment subsidy funding for the SMJU programs. Instead, there was considerable debate over whether or not SBX1 5 funds should be allocated based on some form of an incentive plan to reward those utilities who are the most successful in their outreach efforts. Those advocating such a plan propose that the Commission hold back a portion of SBX1 5 CARE funding and establish June 1, 2001 program statistics to use as a baseline. After a certain period (every quarter or annually), the Commission would review and verify actual enrollments. The held back funds would then be allocated to the utilities based on a predetermined formula, which could include the relative level of undercollections, new enrollments, or other factors. There could also be minimum performance levels to achieve (e.g., 50% penetration level) before any SBX1 5 funding would be allocated to the utility.

Those opposing this approach argue that holding back SBX1 5 funding as some form of incentive payment would work at cross purposes with the intended purpose of the funds. They view the SBX1 5 funds as a vehicle for keeping rates down for non-participating customers as CARE subsidy costs increase during rapid deployment. In their view, using these funds as a form of incentive payment would inappropriately penalize non-participating ratepayers.

We agree with Energy Division that the CARE funds should be dispersed without delay. Mechanisms to provide incentives to utilities in implementing CARE or LIEE programs are more appropriately considered in our shareholder incentive proceedings, rather than in the context of how to equitably distribute SBX1 5 funding to offset increased costs to non-participants. Traditionally, the utilities are authorized to recover CARE rate discount ("subsidy") costs, whatever those turn out to be, on an as needed basis. We reiterated this policy in D.01-05-033 when we directed that "the remaining $85 million appropriated by SBX1 5 for CARE shall be allocated to the utilities to cover the increased costs of CARE rate subsidies on an `as needed' basis."⁸ Holding back a portion of the SBX1 5 funds under the incentive plan advocated by some workshop participants is inconsistent with this longstanding policy and would penalize non-participating ratepayers.

Moreover, the incentive proposals discussed during workshops lack a reasonable basis for determining how much of the funds "held back" would be disbursed over time, and to which utilities. For example, one of the proposals would distribute SBX1 5 funds over time based on the ratio of a particular utility's undercollections relative to total undercollections. Another proposed formula would use the ratio of new CARE enrollments within a utility's service territory relative to total new enrollments in the program.⁹ Under either approach, the nonparticipants of a large utility with a relatively large population of eligible, but unenrolled customers, would have the clear advantage over those residing in smaller jurisdictions, in areas where low-income customers are harder to reach, or in service territories that have relatively high CARE penetration rates as of June 1, 2001. In addition, the verification requirements of such an incentive approach could be complicated and costly. None of the proponents of this approach considered these implementation issues, or attempted to quantify the cost versus benefits of this plan.

As indicated in Table 4 above, the SMJU will experience CARE subsidy cost increases that exceed current rate collections during rapid deployment. The same is true for the larger utilities. As indicated in Table 6, the shortfall between projected CARE costs and revenues collected from the surcharge for PG&E, SCE, SoCal and SDG&E at current penetration levels will be approximately $116 million based on the utilities' current estimates. This shortfall will increase with the implementation of rapid deployment activities we adopted in D.01-05-033.

Table 6

Projected Shortfall in CARE Collections
for PG&E, SDG&E, SCE and SoCal
(in thousands of dollars)

	Penetration Rate March, 2001 (@ 150% FPG)	Current 2001 CARE Budget	Collection Needed 175% FPG Current Partic. 15% Discount	Collection Needed 175% FPG 95% Penetration 15% Discount	Collection Needed 175 FPG Current Partic. 20% Discount	Estimated Shortfall at Current Partic.	Collection Needed 175% FPG 95% Penetration 20% Discount	Estimated Shortfall at 95% Penetration
PG&E	47%	$41,566	$46,519	$93,087	$62,025	$20,459	$124,116	$82,550
SDG&E	65%	$12,159	$14,448	$24,236	$19,264	$7,105	$32,315	$20,156
EDISON	69%	$48,960	$70,130	$96,552	$93,507	$44,547	$128,736	$79,776
SoCal Gas	67%	$27,507	$53,753	$74,391	$71,671	$44,164	$99,188	$71,681
Total		$130,192	$184,850	$288,266	$246,467	$116,275	$384,355	$254,163

The purpose of the SBX1 5 CARE funding is to supplement surcharge collections so that non-participating ratepayers in the utilities' service territories share equitably in the available "buffer" against rising subsidy costs and resulting shortfalls in rate collections. Clearly, based on the data presented in this proceeding, the shortfall between collections and needed CARE rate subsidies far exceeds the remaining $84.6 million available in SBX1 5 funding. In fact, many of the utilities will experience this shortfall in a matter of months. Therefore, our task today is to adopt a reasonable method for allocating a portion of this limited SBX1 5 CARE funding to the SMJU and, ultimately, to allocate the remaining funds among the larger utilities.

Workshop participants discussed some general approaches for allocating SBX1 5 funding among all of the utilities that would not involve hold backs or an incentive approach. Some suggested using the 30/30/25/25 "standard allocation formula" adopted in Resolution E-3585 for allocating costs among PG&E, SCE, SoCal and SDG&E, respectively. Although parties also suggested that this formula be adjusted to include the SMJU, no specific methods to make such adjustments were proposed during workshops. Workshop participants also suggested various factors to consider in allocating the SBX1 5 funds, including estimates of expected enrollments, funding shortfalls, subsidy increases from new enrollments and the amounts needed to fund the one-time credit for gas CARE customers, as directed in Assembly Bill (AB) 1X 3.

In its workshop report, Energy Division developed a formula for allocating the $84.6 million in SBX1 5 CARE funding among the utilities, including the SMJU, based on factors that reflect the relative size of the CARE program. Specifically, Energy Division compiled data on 1) CARE budgets authorized for 2001; 2) CARE expenditures for program year 2000; 3) the number of customers currently on CARE; 4) the number of residential customers, and 5) the number of customers eligible at the 150% income guidelines. Taking the ratios of each utility's share of totals for these data, Energy Division developed a formula that allocates a portion of the $84,600,000 to the SMJU. In this way, the funds would be allocated based on a combination of factors that reflect the relative size of the SMJU CARE program from a variety of perspectives. We find Energy Division's approach to be reasonable. Accordingly, we set aside $1,178,368 of SBX1 5 funds to augment CARE subsidy costs for the SMJU, allocated as follows:

Avista	$ 35,247
Bear Valley	$ 48,707
PacifiCorp	$ 175,933
Sierra Pacific	$ 97,499
Southwest Gas	$ 818,905
West Coast Gas	$ 2,077
Total	$ 1,178,368

As discussed in Section 3, Alpine and Mountain Utilities should further consider offering CARE to customers, and West Coast Gas should consider expanding CARE outreach during rapid deployment. Accordingly, we set aside an additional $5,000 in SBX1 5 CARE funds for this purpose, pending our review and consideration of Energy Division's recommendations.