California Public Utilities Commission Sets New Electric Power Rate Structures

By  Bob and Ruby MacDonald

On July 3, the California Public Utilities Commission (CPUC) voted to change the electricity rate structure of utilities, such as PG&E, for the first time in 15 years. Approved was a partial compromise between elements of a proposal by Commissioner Michael Florio and some items that were favored by the other four commissioners, including President Michael Picker.

Changes in the Public Utilities code had been mandated by AB 327 (2013), which required the CPUC to eliminate the steep 4-tiered rate structure in which the rate for the highest usage was about three times as expensive as that of the lowest usage. That rate structure was created in 2000-2001 to reduce the incidence of blackouts and encourage conservation. With time, however, many in the lowest tier were paying less than cost, while those in the high tiers were paying much more. This structure had the environmentally beneficial effect of making it attractive for high users to install their own solar panels if they could afford them. However, it had the negative effect of imposing high costs on low income, large households living in temperature-challenged regions of the state. Rates of customers who earn twice the poverty level or less (CARE category) are discounted by law. Major revision of the rate structure by the CPUC had begun three years ago.

The following changes have been approved, most over a several year period: the number of tiers will decrease from 4 to 2 with only a 25% rate difference; a new “superuser” category of ratepayers will be assessed at about twice the baseline rate; a minimum bill of $10 will begin this year ($5 for CARE customers); CARE customers will receive a slightly larger discount; time-of-use rates will impose higher charges for peak demand periods (late afternoon to early evening); greater efforts by utilities in educating ratepayers in conservation and efficiency practices will be required, as mandated by AB 327.

These new guidelines will now be the framework for a new set of rates, which will increase for some, decrease for others, but the actual income of PG&E remains fixed by its costs and return to investors. As usual, all stakeholders had something to complain about. These rates will not apply to customers with solar panels, as their rate structure will be set later this year.

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