Regulators Broaden Look at Residential Time-Variant Rates

By Published On: April 6, 2012

Regulators at the California Public Utilities Commission are taking a broad look at how to restructure residential power service rates in coming years--with an eye toward incentivizing energy efficiency and shifting usage away from peak demand times. The move aims, at least in part, to fulfill commission promises about “smart” meters made in 2006. The assessment comes after a delay in considering a Pacific Gas & Electric proposal in 2010 to gradually roll out rebates for residential customers who trimmed their energy usage on peak demand days. In a March 30 filing in that proceeding with the commission, PG&E attorney Shirley Woo wrote that if regulators want “residential customers to accept time-varying pricing and to participate in demand response” any restructuring of rates must be “fair, understandable and stable” and include an “opt-in” provision. Woo suggested that the utility’s 4 million residential customers should have a “menu” of rate plans to choose from, rather than face a one-size-fits-all approach. She further urged regulators to proceed carefully and to allow time for the utility to educate its customers on rate revisions. In the proceeding--which the commission broadened to consider options besides peak time rebates in February--regulators are examining how to phase in time-variant rates between 2012 and 2020. By sending a price signal, time-variant rates are supposed to encourage energy savings on hot days when demand for power soars and the grid operator must turn on more and more power plants to assure an adequate power supply. Dispatching peaker plants raises the cost of operating the grid and boosts harmful emissions. Division of Ratepayer Advocates staff counsel Gregory Heiden suggested March 30 that the commission introduce optional time-of-use and critical peak pricing rates this year and roll-out a default peak time rebate rate in the 2013-14 period, while keeping time-of-use and critical peak pricing optional. In 2015, time-of-use rates would take effect as an across-the-board default rate for residential customers. Such a gradual phase-in of time-variant rates is needed to provide time for both customer education and enhancement of energy efficiency programs, according to Heiden. Under the plan, those not happy with the default rates would have the opportunity to opt-out and stick with today’s tiered rate structure, which would remain in place as a fall back. Customers who use 130 percent or less of today’s residential baseline usage allowance would be exempt from time-variant pricing. So would low-income customers who get rate breaks under the California Alternate Rates for Energy program, noted Woo. The commission is weighing rate restructuring with its eye trained on the end of the year, when a legal ban on time-variant pricing begins to expire. Lawmakers banned time-variant pricing until then under SB 695, which they enacted in 2009 amid concern about how variable rates could affect consumers. When the commission approved PG&E digital meter installation in 2006, it delayed time-of-use rates for four years, but expected great rewards. “PG&E’s customers will reap benefits from this history making decision. [Meters] will empower customers to make informed, intelligent choices about their electrical usage. Through price signals built into time varying rates, customers will know when to turn up the thermostat on their air conditioner, or not run large appliances,” wrote commission president Mike Peevey in the 2006 decision. “PG&E’s [meter] project is yet another example of our collective efforts to further the goals we set in the Energy Action Plan. At full deployment of [meters], PG&E estimates a demand reduction of 448 megawatts, or about one power plant.” The commission plans evidentiary hearings on the issue beginning April 23 and hopes to issue a proposed decision in August with a final decision by Sept. 27.

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