Time-of-use rates that better reflect real-time energy costs could become the default method for pricing electricity use in California homes come 2018. California Public Utilities Commission president Mike Peevey outlined the rate proposal in his scoping memo released last week on utility rate reform following passage of AB 327. That law removes legislative restrictions on rates enacted during the 2000-01 energy crisis and directs the commission to decrease the number of rate tiers and price differentials. There have been complaints about rate inequities for years. Peevey asked investor-owned utilities to propose how they plan to transition away from flat rates, where the price is always the same—day and night—to fluctuating rates. He also proposed a gradual transition to fluctuating time-of-use rates to allow for education and outreach to utility customers so they understand the implication of powering up electricity consuming appliances and devices at times of high energy use. The rate proposal partly reflects the comprehensive analysis by the commission’s Energy Division staff on rate reform. The report calls for default dynamic pricing in four years, but allows for opt-outs. Staff recommends that the opt-out include only two rate tiers. Peevey declined to fully endorse the Energy Division’s report, noting it was being incorporated as part of the evidentiary record and not as a policy recommendation. The scoping memo by Peevey highlights some of his own and staff-recommended rate principles, including that: * Rates be structured in a manner to increase conservation and energy efficiency and reduce peak demand; * Rates be based on marginal costs; * The two lowest tiers be unfrozen; * Rates include greenhouse gas costs; * Utility bills for low-income customers and those dependent on electricity-powered medical devices be affordable; and, * Rates be stable, and transparent, and customer choice alive and well.