CPUC Launches Residential Power Rate Review

By Published On: June 22, 2012

California regulators launched a sweeping review of the residential power rate structure June 21. The big picture redesign could increase rates for the “untouchable” baseline rate class and ratchet other classes too as regulators continue to increase costs, but have not focused on apportioning those costs to different social groups. “It’s time to question our sacred cows,” said commission president Mike Peevey. “Whether they should be slaughtered, I’m not sure, but they do need some prodding and poking.” Peevey suggested that the current rate structure actually may be preventing technical innovations that could advance commission objectives, like energy efficiency and peak load reduction. Commissioner Mike Florio--who represented ratepayers for The Utility Reform Network before being appointed to the CPUC--agreed with Peevey. Florio, who noted he had a lot to do with setting up the current rate structure, pledged to approach the inquiry with “an open mind.” Commissioner Tim Simon voiced concern that under the current five-tier rate structure, residents in hot inland areas are shouldering more of the fixed costs than appropriate, because fixed costs largely are apportioned based on the amount of power consumed. The Order Instituting Rulemaking addresses cross-subsidies that may be growing with the advent of new energy efficient and solar technologies. The move by the California Public Utilities Commission was prompted by legislation [SB 695] enacted in 2009 that allows time variant rates--currently banned--to be put in place beginning in 2013. However, it’s unlikely that residential customers will see immediate changes with the New Year, since the commission’s initial goal is only to define the scope of its review by November. The action portends major changes in a state that has seen virtually no restructuring of residential electricity rates--including any move to time variant pricing to damp down peak demand and reduce overall system costs--since the state’s 2000-01 blackouts. At the same time, the commission’s order notes that residents adopting new technologies--like electric vehicles that can require utilities to beef up transformers and lines in residential neighborhoods--may be adding or shifting fixed costs to others. It further notes, for instance, that solar homes and those designed for maximum energy efficiency use less power from the grid, cutting their inhabitants’ contribution to fixed costs. Simon suggested that the rapid advance of such technologies means the commission will have to consider establishing a “fixed charge” or “surcharge” to cover fixed costs, rather than allowing technology adopters to shift those costs to others. Commissioner Catherine Sandoval cautioned about blanket application of time variant rates. She said it could be unfair to desert dwellers, particularly those on low incomes who have little choice but to run air conditioning systems where temperatures can routinely reach 120 degrees. The rulemaking, though not yet carefully focused, is likely to examine instituting time variant pricing, critical peak pricing, reapportioning fixed costs, and restructuring the state’s California Alternate Rates for Energy program, which subsidizes low-income customers. Peevey and other commissioners indicated the CPUC remains committed to protecting low-income customers from high electricity costs. However, he suggested that the current one-size fits all approach may need to be refined in a way that subsidies vary based on particular needs. The commission’s timetable is to issue questions for comment in August and hold a prehearing conference in fall before issuing a scoping memorandum for the rulemaking sometime in November. In other action, despite concern over increased fire danger the CPUC approved San Diego Gas & Electric’s $285 million “ECO” substation. The project is set to interconnect with the Sunrise transmission line, a $1.88 billion project that officially went on line June 18. The SDG&E substation project “will enable the Tule Wind Project and other wind projects to interconnect to the California Independent System Operator controlled transmission grid,” according to the commission.

Share this story

Not a member yet?

Subscribe Now