IV. Low-Income Ratepayer Assistance Program

Although ORA and Valencia resolved all issues as reflected in the settlement agreement, the LIRA - Low-Income Ratepayer Assistance - proposal requires further consideration. Valencia proposed that qualifying low-income customers would receive a 50% reduction in the monthly service charge portion of their bill. ORA supported the proposal. However, as discussed below, we find that Valencia's proposal fails to meet our standards for such programs because Valencia has not shown that all, or even most, low income residents would be eligible for the discount.

Valencia proposed that the LIRA tariff would only apply to households that meet specific income guidelines used by California electricity and gas utilities for their low-income rate programs. Valencia estimated that approximately 1% (or 250) of its customers would qualify for the discount. Valencia proposed that all non-participating customers pay a surcharge of $0.06 per month to fund the program. Valencia further proposed that the estimated amounts would be compared to the actual revenue effects of the program and the over- or under-collection recorded in a memorandum account for amortization in its next general rate case.

We find the record on this issue to be insufficient to support adoption of this program at this time. We have a long history of supporting programs that result in reduced rates for low-income customers of California's public utilities. (See, e.g., Re Universal Service and Compliance with the Mandates of Assembly Bill 3643, 68 CPUC2d 524 (D.96-10-066).) Such support, however, is tempered by requirements that the programs be carefully constructed to meet clearly identified needs in an efficient and equitable manner. Valencia has not demonstrated that this low-income discount program will fairly reach all low-income persons in Valencia's service territory; moreover, the proposal suffers from other deficiencies.

First, the record on this issue is scant. Valencia's proposal consisted of a short description in its application and four paragraphs in its testimony, which focused on the memorandum account. Valencia did not include any description or assessment of the need for this program. Valencia's proposal can best be described as well intentioned but incomplete.

Second, the proposal departs significantly from our precedents regarding these programs. In D.02-01-034, we approved a lifeline rate proposal by Southern California Water Company that provided for a 15% reduction in all components of each eligible customer's water bill. We approved this proposal rather than ORA's alternative rate design that waived the entire monthly service charge. ORA contended that the overall 15% rate reduction was contrary to our conservation goals. ORA pointed to our decision for California-American Water Company's Monterey District,⁶ as supporting the concept of reducing monthly service charges rather than discounts on all volumes of service. We rejected this comparison, noting that the Monterey District had a "carefully developed, inverted block rate structure that ties higher consumption levels to higher rates. All residential customers, not merely the low-income subset, pay higher rates for higher usage." (D.02-01-034, 2002 Cal. PUC LEXIS 35, at page *1.) Although approving the lifeline rate, we noted that we did not adopt it as a model for low-income rate relief in all Commission-regulated water companies.

Also in D.02-01-034, we addressed the issue of mobile home parks that provide master-metered water service to their tenants. We concluded that otherwise eligible mobile home park residents should not be excluded from the benefits of the proposed low-income program.

Turning now to Valencia's proposal, we find several components to be at odds with D.02-01-034 and our standards for low-income programs. First, Valencia chose a rate design that focuses on reducing the service charge component of a customer's bill. This rate design focus is similar to that used in California-American's Monterey District. However, Valencia elected only a 50% reduction, rather than the 100% reduction in Monterey. Valencia did not explain this rate design choice. We note also that Valencia's volumetric rate for water is the same across all consumption levels. As noted above, Monterey has an extensive inverted block rate design where higher levels of use are charged higher rates.

Second, Valencia did not explain how low-income residents of multi-family housing, such as apartments, duplexes, and some condominiums, would be eligible for the LIRA discount. Multi-family housing tends to be more affordable. The record does not disclose the proportion of the low-income water users in Valencia's service territory residing in multi-family dwellings. These water users apparently would not be eligible for Valencia's proposed LIRA program. Thus, we are unable to conclude that the LIRA proposal would be equitably offered to low-income persons.

Third, Valencia's limitations on the applicability of the tariff would also exclude sub-metered customers in mobile home parks or multi-family dwellings. As in D.02-01-034, these customers should be eligible for the discount.

Fourth and finally, Valencia's proposal contains no means or timetable to assess or evaluate the effectiveness of the program and to implement any needed modifications.

In sum, we agree with and fully support the concept of rate relief for low-income customers. Such rate relief, however, must be accomplished through a well-thought-out and even-handed program with specific identification of need, consideration of alternative means to address that need, justification for the selected components of the program, and a plan to assess, evaluate, and modify the program as necessary. At this point, Valencia's proposal does not meet these standards. Until these standards are met, our best course is to keep water prices as low as possible for all customers. Therefore, on the facts presented, we are unable to find the LIRA program reasonable in light of the record or consistent with the law and our decisions applicable to such programs. However, we will order Valencia to present a revised low-income discount proposal.