PG&E has asked state regulators for approval to begin reforming its system of residential electric rates to tie them more closely to actual costs. This proposal, if accepted, would take effect in time to help many customers with high summer bills.
Among other changes, PG&E’s proposal would lower the top two rates paid by customers by an average of about $0.05 per kilowatt-hour, helping to reduce bill shocks that arise from prolonged heat waves when customers need to run air conditioners long into the evening hours. (See chart below.)
The proposal also would reduce the number of different rate “tiers” that most residential customers now pay, depending on their level of usage each month, from four to three.
PG&E’s proposal would not affect the utility’s revenues or profits. Instead, it responds to widespread customer dissatisfaction throughout California with the complex and inequitable system of residential electric rates that developed as a result of state law passed at the time of the state’s energy crisis in 2001.
Rates for low-usage customers were frozen for several years, while higher-usage customers had to pay ever-steeper rates to pay for maintaining and modernizing the electric system. PG&E and other electric utilities, along with the California Public Utilities Commission, won authority to start fixing those rate inequities with passage of Assembly Bill 327 this summer, supported by a broad coalition of consumer and community groups.
“Customers want fairer, simpler rates, and this proposal takes an important step in that direction,” said Tom Bottorff, PG&E’s senior vice president for regulatory affairs. “Our goal is to continue working with regulators and consumer groups to reform rates next year and beyond, phasing in changes to smooth the transition for customers.”
In general, the proposal would make rates more closely reflect the actual cost of service. Average rates would come down for higher-usage customers who today pay top rates that are roughly double the cost of serving them. Average rates would increase modestly for low-usage customers who now pay well below the actual cost of service. Rates also would increase slightly under the California Alternate Rates for Energy (CARE) program — but income-eligible customers would still benefit from discounts averaging 43 percent, up from 15 percent in 2000.
PG&E plans at a future date to propose additional reforms for 2015 and beyond to provide further relief for customers who now pay rates well above what it costs to serve them.