CPUC Wrestles with Time Variant Rates

By Published On: August 30, 2012

The California Public Utilities Commission wants to shape time-variant rates to encourage ratepayers to conserve and reduce peak demand and environmental impacts while at the same time keeping a lid on utility bills. The effort comes in this era of “smart” meters and higher levels of more-expensive alternative energy. The newly-launched commission order instituting rulemaking seeks to incorporate into rates a changing energy system that includes higher levels of local, distributed renewable resources, a surge in electric vehicles plugging into the grid, and higher use of demand response to shift loads away from times of high usage. Also complicating the effort are attempts to incorporate into rate designs more accurate real-time power prices with the universal installation of smart meters, as well as protect ratepayer privacy put at risk with the spread of wireless energy information. “If you get the prices right you promote the state’s goals,” Frank Wolak, Stanford University’s Energy and Sustainable Development program director, said during an Aug. 27 CPUC workshop. Regulators are allowed to transition residential ratepayers to fluctuating power prices beginning next year under SB 690. There was no agreement that developing the proper price signal to reflect the state’s various goals--including providing subsidies for low-income households and solar installations--is the crux of the issue. “Customers don’t operate like Swiss watches,” said Bill Marcus, a consultant representing ratepayer advocates. He rejected looking solely at prices. The commission launched the underlying rulemaking with the aim of ensuring for the “foreseeable future that rates are both equitable and affordable while meeting the commission’s rate and policy objectives for the residential sector,” in a world of evolving policies as well as technologies that track and manage consumer energy use. Creating “consistent policies across [investor-owned utilities], developing a schedule for the IOUs, and addressing other over-arching policies, including a consistent educational program, appear to be needed to support a move to time-variant and dynamic pricing, whether voluntary or default,” states the CPUC’s June 21 order. An initial matter in reaching a workable policy on rate redesign that reflects the real costs of fluctuating daily and seasonal energy prices is the “Goldilocks” issue of not having it be too big or too small, but just right as far as incorporating state policy goals that include greater use of energy efficiency and lesser use of fossil-fueled power. Also at issue is how best to address utility cost recovery as a surge in intermittent renewable resources is expected to reshape the traditional energy peak as the state approaches its 33 percent renewables standard. The workshop focused on shaping what questions to ask in the upcoming Order to Institute Investigation. That includes how much to coordinate with other rate setting hearings, including the upcoming utility general rate cases. Low-income advocates raised concerns that energy technologies be affordable and compatible. “We want to avoid having to buy your way into success,” said Stephanie Chen, Greenlining Institute senior legal counsel. A number of speakers noted concerns about the lack of agreed-upon definitions of key concepts, as well as a dearth of underlying public data. Among the terms urged to be defined are: -“Peak demand” and how many hours it includes a year; -“Cost recovery” and the applicable time frame: hourly, monthly or annually; and -“Marginal costs”--long- or short-term. The commission expects to issue a proposed decision next month.

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