State Utility Regulators Pitch Electricity Affordability Criteria, Ponder Blue Sky Proposals

Regulatory affordability criteria to help control the state’s skyrocketing electricity rates were the starting point of a Feb. 28 California Public Utilities Commission conference. California regulators must act because “there are people that have to choose between utility services and groceries,” said Abigail Solis, Manager of Sustainable Energy Solutions for Self-Help Enterprises. Regulators must “remove barriers to rate assistance programs and address affordability before there are catastrophic effects on vulnerable communities,” she added. “All households should have zero emissions and affordable energy through a combination of bill-payment assistance and investments, with the role of assistance declining over time,” said Arjun Makhijani, President, Institute for Energy and Environmental Research, and Energy Expert for the Just Solutions Collective. The CPUC proposed six “Evaluation Criteria” that include regulatory actions on affordability, equity, environmental and social justice, and utility revenue requirements and rates, CPUC Regulatory Analyst for Electric Rates Jack Chang of told the conference. They also consider impacts on state and local economics and the feasibility of regulatory or statutory reforms. Affordability can be addressed with “active” regulation of rates with equity concerns, California Energy Commission’s Commissioner Andrew McAllister said. Cost-based approaches can restructure rates while also protecting vulnerable customers and optimizing opportunities in economy-wide electrification, he added. The cost of generating and delivering energy has fallen with wind and solar costs, but electricity rates are rising with costs for wildfires, legacy assets, and public purpose programs. Rate affordability is important because many households face “a double burden of expensive service and a low ability to pay for it,” according to the CPUC’s April 2021 Affordability Report . The conference was held to comply with the commission’s Docket R.18-07-006 order. But the bulk of the day was spent on reforms to improve affordability, especially through equitably restructured rates that alleviate the energy cost burdens in fixed charges. The Fixed Charge Challenge California electricity rates include two broad categories of charges, a component for the cost of energy delivered and another for the fixed costs of covering delivery infrastructure. The fixed cost is the crux of the affordability issue, most conference participants agreed. It was reasonable when it included only infrastructure and administrative costs, but in recent years costs have been added for wildfire mitigations and rebuilding, for previously mandated above-market generation procurements, and for other policy goals like equity. There was unanimity among conference participants representing diverse interests that reforms to fixed charges are needed to achieve state climate and clean energy goals. The state’s affordability and climate goals can be achieved by preventing high electricity rates that discourage building and transportation electrification and make renewables-generated electricity cheaper than fossil fuels for heating and driving, both East Bay Community Energy VP of Public Policy and Deputy General Counsel Melissa Brandt and San Diego Gas and Electric Senior VP of Customer Services and External Affairs Scott Crider agreed. Fund the costs of programs aimed at public purposes with state tax revenues instead of through electricity rates, they said. Eliminating the CARE program from rates would save ratepayers $2.7 billion dollars per year. It would not solve the affordability problem completely, but it would alleviate some rate pressure , Brandt said. Some utility revenue requirements collected through rates can be shifted to taxpayers, agreed Natural Resources Defense Council Climate and Clean Energy Program Senior Scientist Mohit Chhabra. Revenue needs can also be reduced through refinancing utility debt with low interest securitized loans or by shifting shareholder returns to policy program funding, he added. Protecting affordability is linked to the success of electrification, and the resulting kWh sales would help pay for fixed costs without rate increases, he added. But a third, more equitable way to address the fixed cost burden is a rate with three income-based fixed costs, he said. California electricity rates impose a “cost burden on lower-income households that is substantial” and can be addressed with income-based fixed charges that are “as progressive as the sales tax,” agreed UC Berkeley Energy Institute at Haas Faculty Director Meredith Fowlie. Reallocating rate components was also proposed by Regulatory Assistance Project Associate Mark LeBel, but all the rate design reforms would require legislative and/or regulatory action, Fowlie, Chhabra, and Lebel agreed. And the income-based reforms would introduce income verification and other bureaucratic complexities, their proponents added. The CPUC proposed criteria focus on affordability proposals’ impacts on vulnerable communities’ pollution and carbon emissions, on their access to clean energy, water, infrastructure, regulatory decision-making, consumer protections, and economic opportunities. The revenue requirement and cost and rate impacts criteria emphasize reform proposals’ quantifiable limitations on costs to ratepayers, according to Chang. The economics criterion evaluates reform proposals’ impacts on ratepayers’ income, and the feasibility criterion will consider each reform proposal’s legislative, statutory, regulatory, or political viability. “Percentage of income payment plans” protect customers from rate increases more effectively than the current California Alternative Rates for Energy and Family Electric Rate Assistance programs, Makhijani said. Customers also should have the full benefits of energy efficiency, renewable energy, electrification, and demand response opportunities” to reduce their energy cost burden. A number of proposals would increase affordability by altering utility rates. Calling Out Utilities Fixed charge reforms to utility rates were welcomed by Southern California Edison Director of Pricing Strategy and Rates Robert Thomas and Pacific Gas & Electric Senior VP of Regulatory and External Affairs Robert Kenney. But some conference participants said what is needed are reforms of utility spending. A relatively simple new regulatory requirement imposed on utility spending proposals could lead to significant affordability reforms, Jennifer Dowdell, Senior Policy Expert for ratepayer advocacy group The Utility Reform Network told the conference. Utilities’ General Rate Case spending plans should include an alternative plan that limits spending to the inflation rate , she added. “It is not a cap on utility spending, it is a context,” Dowdell said. It is to give regulators “a better record” and allow comparing in review what a utility’s proposals accomplished with what inflation-constrained spending would have, she said. But more immediate changes are needed to “contain utility costs,” insisted California Solar and Storage Association Policy Director Brad Heavner. Recent spending proposals have used load forecasts “biased above recorded sales, leading to overinvestment,” and plans that fail to “treat local resources as grid resources” or “recognize that microgrids are cheaper than undergrounding.” The 2018 Affordability Rulemaking which ordered Monday’s conference requires a CPUC Staff evaluation of the conference’s proposed rate reforms by early 2023. They will be the basis of a CPUC report on affordability to Gov. Gavin Newsom, CPUC Commissioner Darcie Houck told the conference.

Over 11K Stories!

| Independently Powered Energy News

State Utility Regulators Pitch Electricity Affordability Criteria, Ponder Blue Sky Proposals

Herman Trabish

Related Posts

Gas & Electricity Costs Rise More, High Heat, Fires and Tight Supplies Likely

FERC Backs Gas Projects; One Decreasing, the Other Increasing Climate Pollution

SoCalGas Seeks 21% Revenue Increase

EV Startup Banks on Super Computer to Out Compete Tesla