Posted on October 7, 2013

New Rate Law is a Victory for California’s Electric Customers

By Jonathan Marshall

It’s not often you see a bill pass the California State Assembly 74-1 with backing from the state’s biggest electric utilities (including PG&E), their traditional critics (including The Utility Reform Network), major labor unions, several dozen community groups and local governments, solar companies, taxpayer groups and a wide variety of business advocates. Not even motherhood and apple pie can count on such broad support these days.

What brought them all together was the need to fix California’s broken and outmoded system of residential electric rates, including those that apply to growing sources of clean customer generation like rooftop solar. Their remedy was Assembly Bill 327, authored by Fresno State Assemblyman Henry T. Perea. Governor Jerry Brown signed the bill into law today (Oct. 7). 2013.

Electrical Transmission Lines at sunset

The new law "will help make California's system of electric rates fairer, simpler and more equitable," said PG&E President Chris Johns. (Photo courtesy of Theodore Scott .)

“This bill is about keeping electric rates affordable for all Californians while promoting renewable energy growth,” said Perea. “I would like to thank Governor Jerry Brown for signing AB 327, as well as for his leadership on the issue.”

PG&E President Chris Johns called AB 327 a “victory” for California’s electric customers.

“By making it possible to bring high rates back into line with costs, the law will help make California’s system of electric rates fairer, simpler and more equitable.” Johns said.

Perea introduced the bill to cure a problem that has festered since the state’s energy crisis of 2000-2001, when the Legislature capped residential electric rates for the two lowest “tiers” of usage and for low-income customers in the California Alternate Rates for Energy (CARE) program.

Over time, in order to pay for the rising cost of grid modernization, service expansion, and renewable energy, uncapped higher-tier rates soared for customers using average to above-average amounts of electricity. Today, some PG&E customers pay about 2.6 times more for each extra kilowatt-hour of electricity than other customers, even though the cost to serve them is roughly the same. Hundreds of thousands of low-to-moderate income customers today pay such punitive rates, effectively subsidizing other customers.

AB327 authorizes the CPUC to reduce the number of rate tiers and significantly lower top-tier rates. This reform will benefit customers throughout PG&E’s service area, from the coast to the Central Valley, by bringing rates more closely into line with the actual cost of service.

The law guarantees low-income CARE customers a rate discount of 30 to 35 percent. It also allows the CPUC to further moderate rates in exchange for a small customer charge of up to $10 a month to cover fixed costs (unrelated to energy use), such as billing and grid access. (CARE customers would pay no more than $5.) Many of California’s municipal utilities already have such charges.

As negotiations over the bill progressed in the Legislature, its scope expanded to address concerns of the state’s residential solar industry about the looming suspension of rules for paying new solar customers for the power they export to the grid. The law directs the CPUC to support sustainable growth of customer-sited renewable generation facilities, including rooftop solar, by creating new rates, to take effect in 2017, that compensate them for their generation without unfairly shifting costs onto other customers.

Although AB327 takes a critical first step toward enacting needed reforms, it is only the end of the beginning, to quote Winston Churchill. The action on rate reform moves next to the CPUC, where supporters of the new law will inevitably spar over implementation. Still, they all agree that the time is ripe for the Commission’s transparent, expert consideration of ways to better serve California’s energy consumers.

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"PG&E" refers to Pacific Gas and Electric Company, a subsidiary of PG&E Corporation.
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