At last week’s agenda meeting, the California Public Utilities Commission approved a plan to transition the state’s residential customer electricity rates to a more effective and cost-based structure. The PUC said that the decision marks the culmination of a three-year long examination of proposed rate reforms for the three major investor-owned utilities in California, a critical first step in the process of optimizing use of this installed advance metering infrastructure and new energy efficiency technologies. This change will allow for more accurate allocation of costs and for energy rates to more fairly reflect the cost of service. The PUC expects that the time-of-use rates will reduce overall electricity costs for all customers in the long-term.
“Rate reform is necessary to move us into a future where consumers have the tools they need to manage their own energy use, and can install new, clean technologies such as storage and renewables,” said PUC President Picker in a Press Release issued July 3, 2015. “The world has changed since 2001, when rates were frozen by the Legislature. Over time, with the lower tier rates being frozen, the five-tiered rate structure departed increasingly from any cost basis and imposed ever greater inequities on large-family households that were pushed into higher tiers in hot climate zones. Our decision helps align rates with the actual cost of service. It also builds a more nimble rate structure to allow us to add more and more renewables to the grid, and to encourage customers to use energy when we have excess renewables and to cut back during peak periods.”
Highlights of the new Electricity Rate Design Structure include Time of Use rates; Tier Flattening Glidepath and New Rate Structure; Fixed Charges/Minimum Bill; and Customer Education and Outreach.
Tier Flattening Glidepath and New Rate Structure The rate structure moves from four to two tiers with a 25% differential by January 1, 2019, and with a Super User Electric (SUE) surcharge introduced in 2017. The SUE surcharge will apply to usage over 400% of baseline starting in 2017. The SUE surcharge is set at a moderate amount in 2017 and will increase to 219% of the Tier 1 rate by 2019. The decision also approves a glidepath to a California Alternate Rates for Energy (CARE) average discount of 30-35% in 2020 (low income customers that are enrolled in the CARE program receive a discount on their electric and natural gas bills). The decision does not adopt specific rates; instead, it adopts a set of rate structures that all of the utilities must follow.
Fixed Charges/Minimum Bill The proposals of the utilities for a fixed charge that each customer would pay every month was rejected in its current form. Any further consideration of fixed charges cannot happen before 2018, and TOU rates must be implemented before a fixed charge will be considered. The utilities must implement a minimum bill beginning in 2015 of $10 for non- CARE customers and $5 for CARE customers.
Customer Education and Outreach The utilities must institute a special outreach program to educate lower tier customers on no-cost and low-cost conservation measures. They must begin the process of improving rate comparison tools and educational materials so that all customers can more readily understand their energy bills. The PUC will hold an annual conference to discuss and evaluate utility summaries of rate impacts on consumers and the effectiveness of consumer protections and marketing, education, and outreach.
The 2015 rate changes proposed by Pacific Gas and Electric Company, Southern California Edison Company, and San Diego Gas and Electric Company were approved as set forth in the PUC’s decision. The decision includes an extensive calendar of events including, among other things, the following. Within 60 days of the decision’s date, the companies must collectively organize and host a workshop to formalize the procedure for quarterly progress reports and future semi-annual Progress on Residential Rate Reform workshops. In addition, each of the companies must file:
- Within 60 days of the decision’s date, a Tier-1 Advice letter setting new residential rates adopted for 2015 with an effective date no later than November 1, 2015; and
- Within 60 days of the decision’s date, a Tier-2 Advice Letter setting the glidepath for future tier consolidation and implementation of the Super User Electric Surcharge.
- No later than October 16, 2015, a Tier-2 Advice Letter setting the outreach and education plan for implementing the Super User Electric Surcharge.
- No later than January 1, 2018, a residential rate design window application proposing default TOU rate for residential customers.
A third phase of this proceeding is opened to (i) examine specific legal issues related to default TOU rates; (ii) determine what information and supporting documentation should be included in the Residential RDW application in order for parties, the PUC and the public to evaluate the proposed rate changes; (iii) consider the restructuring of the CARE rate under AB 327; and (iv) consider how the Family Electric Rate Assistance program could be modified to help large households conserve.
The 337-page proposal voted on at the 7/3/15 Agenda is available at: http://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M153/K024/153024891.PDF. (The final Decision has not been posted at the time of this writing. Rulemaking 12-06-013)