The California Public Utilities Commission unanimously approved Aug. 4 a decision shining light on rising utility bill pressures on struggling customers. It requires that the impacts of proposed individual utility electricity and gas rate hikes and cumulative energy rate increases be addressed.
For the first time, the CPUC is incorporating social justice metrics into utility rate proposals, making it the first utility regulatory body in the U.S. to do so, CPUC Commissioner Darcie Houck said at the Commission’s Thursday meeting.
She said for too long financially vulnerable Californians have to make choices on how to meet their basic needs and it’s only gotten worse for them.
The decision provides much more analysis of rate affordability and better tools to help customers understand rate increases, said Commissioner Cliff Rechtschaffen. It also provides transparency on the financial effects of rate changes.
These new metrics will apply to the CPUC’s review of utility general rate cases, energy efficiency and wildfire mitigation plans, and transportation electrification proceedings, as well as others. The new measurements also will apply to water utility proceedings at the CPUC.
“This is super exciting,” Jennifer Dowdell, senior policy analyst with The Utility Reform Network, said of the affordability metrics. The utilities must reveal how large a bite their bills take out of low-income and disadvantaged customer discretionary income. They are do so by geography and climate zone.
“You cannot understand the impact of what you don’t measure,” Dowdell said, adding the new tracking system puts to use tools the CPUC developed.
Rate increases of at least 1%
Utilities must incorporate the social justice metrics into their proposed rate applications that seek increases greater than 1% of current revenues. They must publicly inform the CPUC and Public Advocates Office of the proposed rate increases every quarter.
The metrics, approved in an earlier proceeding, will be reviewed after two years, with refinements made as needed, Houck said.
The CPUC has measured customer and community energy burdens by using the California Communities Environmental Health Screening, which ranks about 8,000 communities by level of vulnerability.
The debate has been over what additional variables to include in the metrics that seek to predict how utility bills affect customers working minimum wage jobs. One of the biggest issues has been what expenses to factor into their rent and other housing costs, which are subtracted from their income to determine how financially burdensome essential energy, water and communications services are.
Center stage are communities with households at the 20th percentile of the community’s income distribution that spend more than 15% of their available budget on essential levels of utility services, or more than 10% on gas or water service. But an increasing focus is on those whose income is in the 50th percentile, which is about $80,000 a year for a family of four. They do not reap low-income utility assistance and are increasingly squeezed by higher utility bills and other expenses, including taxes that are much more substantial for them than for those in low-income homes.
Households “have a wide variety of experiences that cannot be perfectly captured by depicting a single household,” the CPUC decision concludes.
The newly adopted decision also aligns the affordability metrics with the most recent version of the California Environmental Protection Agency’s designation of disadvantaged communities.
In the next phase of the proceeding, taxes for median income households will be included in household expenses, as called for by TURN.
The next phase of this proceeding will evaluate how the metrics can be used to assess the effectiveness of proposals to make energy rates more affordable.