CPUC Posts Two Peak-Pricing Proposals

By Published On: May 5, 2006

Two competing proposals to implement controversial peak pricing are vying for the California Public Utilities Commission’s votes. The plan is to tack very high prices onto peak electricity usage to dampen demand during the summer months. An administrative law judge’s proposed decision is intended to provide “bill protection” for large utility customers that would be subject to “critical” peak-pricing rates. Under this decision, utilities would allow large customers to voluntarily opt for critical peak pricing this summer. Then all large customers – including those who do not volunteer – would receive bill analyses at the end of the year showing what they would have paid under both time-of-use rates and critical-peak-pricing rates. This proposal puts off mandatory compliance until 2007, when all large customers would come under critical peak pricing. However, it would allow for opting out at the end of the warm season in favor of time-of-use rates. Critical pricing would kick in at times of surging use on hot days, for a maximum of 15 days a year. Time-of-use rates vary by the hour of the day, with power being more expensive during the afternoon than late at night. In a slightly different twist, an alternate decision offered by commissioner John Bohn would put in place critical peak pricing under settlement agreements between customer groups and the utilities reached earlier this year. Under those agreements, the pricing would be offered to large customers on an essentially voluntary basis beginning this summer in Pacific Gas & Electric territory and next year in Southern California Edison territory. In San Diego Gas & Electric territory, large customers would be placed under the tariff automatically, unless they said they preferred to remain under time-of-use rates. Energy policy makers have championed critical peak pricing as a strategy for reducing peak demand. The strategy dramatically increases the price of electricity during peak demand in a bid to get customers to shift their use of electricity to times when demand is lower. However, it is revenue neutral because electricity is commensurately discounted the rest of the time (Circuit, Dec. 10, 2004). The commission will take up how to put critical peak pricing in place at the state’s investor-owned utilities at its meeting May 11.

Share this story

Not a member yet?

Subscribe Now