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  • The CPUC Examines if Californians Should Pay for Electricity Differently

The CPUC is Examining if California Should Change the Way People Pay for Electricity.

Why is the CPUC looking at changing how we pay for electricity?

In 2013 the California State Legislature passed AB 327 which was signed into law by Governor Brown. This law directed the California Public Utilities Commission to examine the way customers pay for electricity, to determine if California’s utilities should move all their residential customers to Time-of-Use pricing and to examine the pricing structure for utility tiered rates to more accurately reflect the cost of providing service.

What might change?

  • One major change the CPUC is examining concerns the current rate structures for California’s utilities. For example, SDG&E has a 4 tiered rate, where the cost per kilowatt hour for Tier 4 is more than double Tier 1 rates. How many tiers SDG&E should have, and how much the price differential should be between those tiers is under consideration.
  • A second significant change being considered is the electric utilities (such as SDG&E) requests seeking CPUC approval to add a monthly service fee to customers’ electric bills. Revenue generated by this fee would be used to reduce the tiered electricity prices. This fee, if authorized, would cover the cost of connecting each user to the electric grid and to provide billing services. Customer service costs are currently being recovered through tiered electric rates. 
  • A third major change is that AB 327 allows the CPUC to consider adopting default Time-of-Use (TOU) pricing as early as 2018. Californians have historically paid for electricity through tiered rates where the higher tier users, the customers using the most electricity, are charged more per kilowatt hour than those who use less electricity.

With default TOU pricing the customer is charged more if energy used during “peak” times, generally during the afternoons, than if the electricity is used at off-peak times. Customers who can shift their use to non-peak times could save money (more on this below).

Should the CPUC authorize Time-of-Use pricing, AB 327 put in place a number of consumer protections to ease the transition, including customer bill protection and an opt-out tiered rate option:

  1. “Bill Protection” means that for the first year customers who are moved to TOU rates will not be charged more than what they would have been charged had they stayed on the tiered rate. This gives customers a year to change their electric usage habits to see if they would be able to save money with TOU pricing.
  1. People who would be charged more with TOU pricing or would prefer to be on tiered rates for any reason would have the ability to opt-out back into a tiered rate with no additional charge.

How could TOU pricing affect my energy bill?

TOU pricing will affect consumers’ energy bills differently depending on when they use electricity and how much flexibility they have to change when they use that energy. While TOU pricing has higher rates during “on peak” times, the cost to produce the electricity is lower during the rest of the day. Customers who can shift their use of major appliances such as washers, dryers, and dishwashers to the “off peak” period may be able to save themselves money.

For example, there are currently a number of TOU pricing options which are presently available to SDG&E customers. One such option is SDG&E’s EV TOU 2 which is designed for customers who have electric vehicles.  According to SDG&E's website the prices for this rate are:

(prices per kWh):

Time

Nov.-Apr (Winter)

May-October (Summer)

12 am - 5 am     (Super Off Peak)

$0.17

$0.16

5 am - 12 noon (Off Peak)

$0.19

$0.22

12 noon - 6 pm (On Peak)

$0.20

$0.49

6 pm - 12 am     (Off Peak)

$0.19

$0.22

For comparison SDG&E’s current summer tiered rates are listed below (prices per kWh rounded to the nearest .001):

Tier 1

Tier 2

Tier 3

Tier 4

$0.165

$0.189

$0.369

$0.389

If a consumer were able to conserve energy during the 12:00-6:00pm period they would have the opportunity to save money.

UCAN is supportive of the concept of TOU pricing but there are several things about SDG&E’s proposal we are concerned about. Most importantly we feel that SDG&E is not ready for full scale utility wide rollout of default TOU pricing and should complete a pilot of default TOU to better understand how customers will respond.

What happens next?

Over the last year UCAN has been actively participating in this proceeding. For over three weeks this November the CPUC held hearings on these issues, and UCAN’s executive Director Don Kelly presented UCAN’s expert testimony, and cross-examined experts from the other parties including SDG&E. In January UCAN and SDG&E (as well as other parties) will submit briefs on in this case, which will then be posted on our website.

The CPUC is expected to issue its ruling on these issues before summer 2015.

 

About UCAN

UCAN has represented the interests of San Diego County utility customers since 1983. UCAN focuses its efforts on the rates and services of San Diego Gas and Electric Company, telecommunications utilities and the City of San Diego Water Department.

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