New Electricity Rates Shift Costs from Big Users, Dim Solar Prospects

Monday, July 06, 2015

Welcome to Lexus Lanes on the energy superhighway.

OK. That’s hyperbole. New rules (pdf) from California’s Public Utilities Commission (PUC) last week, which affect 75% of the state’s residential electricity customers, do shift costs from heavy users further down the food chain, flirt with time-of-use charges (endangering granny’s air-conditioned studio apartment in the midday heat), back off from larger egalitarian solar support and essentially de-subsidize low-income consumers. 

But in the estimation of Sheryl Carter at the Natural Resources Defense Council it’s still a win because the rules “will help reinforce California's efforts to strengthen its ambitious climate and clean energy goals, improve its economic and public health, and help customer's pocketbooks while adding a mechanism that takes into account when you use electricity.”

California’s rate structure was due for a makeover. The last major changes were made about 15 years ago, after partial deregulation of energy markets in the state fostered market manipulation and brought on an electricity crisis that bankrupted Pacific Gas & Electric and nearly snagged Southern California Edison.

A rate structure was created that shielded the most vulnerable from skyrocketing electricity costs, much to the chagrin of utilities. That is not the only thing that chafes utilities. While solar power may seem like a boon in a state that has lost much of its nuclear and hydroelectric power and frowns on fossil fuels, it is a threat to the business model that supports the utility industry.

The nation is already struggling with an aged, vulnerable electrical infrastructure that hasn’t found a smooth way to integrate a shift to reusable energy sources. Solar is competition and the utilities want to make sure that even people who get all their electricity from panels pay to be part of the electrical grid.

The commission on Friday cut the four-tier graduated rate structure to two tiers, with 25% higher prices in the top one, according to the San Francisco Chronicle. That will lower the costs for a lot of big-time users who were paying a 50% higher rate, while adding to the costs of energy-efficient users. Not all high users get off easy. There is a surcharge on the highest consumers, who consume more than four times the average electricity as the bottom tier.

Most of the changes will be phased in by 2019, but a new, minimum $10 fee ($5 for low-income folks) that guarantees everyone pays something, even if the property is dormant or fully-powered by the sun, kicks in this year. The utilities wanted a flat $10 charge on everyone’s bill.

The state will also tip-toe into time-of-use (TOU) residential rates, which penalize users of electricity in midday, when the grid is under the most stress. This wasn’t possible until the widespread installation of smart meters. Many non-residential customers are already using TOU.

An alternative proposal, supported by environmental and consumer groups, would have established three tiers, escalating 33% at each level without a surcharge at the top. It was rejected by the commission. The alt advocates argued that flattened rates and fixed charges benefit higher users and encourage waste. The uncertainty among consumers about how these changes will affect their bills down the road could heavily impact commitments to solar now.

Mark Toney, executive director of The Utility Reform Network (TURN), said, “Changing the rate structure to devalue conservation flies in the face of our state’s commitment to renewable energy, efficiency and reduced emissions. . . . A redesign that provides huge windfalls to a few wealthy energy hogs while raising bills for everyone else is unacceptable to TURN, and should be unacceptable to everyone at the CPUC as well.”

–Ken Broder


To Learn More:

Utility Rate Decision in California Can Help Transition to Cleaner Electric System—Could Be Much Better (by Sheryl Carter, Natural Resources Defense Council)

California Overhaul of Power Bills Threatens Home Solar Growth (by Mark Chediak, Bloomberg)

State OKs Higher Electric Rates for Most Consumers (by Morgan Lee, San Diego Union Tribune)

PUC Approves Big Changes in State's Electricity Rate System (by George Avalos, Oakland Tribune)

California Electricity Rates to Undergo Biggest Change in 15 Years (by David R. Baker and Hamed Aleaziz, San Francisco Chronicle)

California Regulators Pass Higher Electricity Rates for Most Residents (by Janie Har, Associated Press)

Electricity Bills Set to Rise for Millions of Californians (by Lauren Sommer, KQED)

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