Regulator Ratchets Back Rate Restructure to Status Quo

By Published On: January 30, 2014

While investor-owned utilities propose compressing the rate structure into fewer layers, California Public Utilities Commission president Mike Peevey advised them to keep four consumer rate tiers. “Instead, changes should be limited to increases in the lower tiers commensurate with projected increases in the overall revenue requirement allocated to the residential class, plus no more than a few percentage points, if necessary, to keep the upper tiers within a range that will avoid the potential for significant bill volatility and rate shock in the summer,” Peevey noted in a Jan. 24 memo. Utilities have proposed eliminating some tiers to simplify the rate structure. Utilities say rates would decrease for large consumers and rise slightly for smaller customers under a compressed tier structure (Current, Dec. 2, 2013). Both Pacific Gas & Electric and Southern California Edison plan to merge their two middle tiers—2 and 3—creating a three-tier configuration. San Diego Gas & Electric plans a two-tier structure.   Utilities contend that fewer layers are more equitable for all ratepayers and help eliminate cross-subsidies. “These proposals warrant special scrutiny because of the potentially large rate impacts to all residential customers,” the Office of Ratepayer Advocates noted in a Jan. 7 filing. “The IOUs have not presented the bill impacts of their proposals in consistent ways. PG&E provided a revenue neutral bill impact analysis, which did not include revenue requirements increases. On the other hand, Edison and SDG&E included revenue requirements changes that could occur by summer 2014.” Advocates estimated Dec. 23, 2013, that rates in Tier 1 (up to baseline) for PG&E and San Diego Gas & Electric customers would increase by 14 percent and 16 percent, respectively if the utilities’ proposals are approved. Edison rates would “result in substantial bill increases,” noted ORA. PG&E would apply between a 10-20 percent increase, Edison over 10 percent, and SDG&E 15 percent in the lowest tier. For low-income customers under the CARE (California Alternate Rates for Energy) plan, PG&E consumers could see a 15 percent or more increase. Edison bills would go up 10 percent or more for most CARE customers. SDG&E’s impact was not itemized by Advocates. Peevey’s “scoping” memo noted that there should be no “major adjustments” to low-income and medical baseline programs.

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