By Dana Hull
State regulators Thursday approved the most significant electricity rate changes for PG&E’s residential customers in a decade, effectively lowering rates for households that consume the most electricity while slightly raising them for everyone else.
The new rates, which have been under intense debate and discussion for more than a year, are expected to go into effect by the end of June.
While approving a break for heavy users, the California Public Utilities Commission rejected PG&E’s request to add a $3 per month service charge to every household’s bill over concerns that the fees would violate state law.
“It is a huge victory to defeat the customer service charge,” said Matt Freedman, staff attorney with the consumer advocacy group TURN, The Utility Reform Network. “But the change in electric rates is a big change that will benefit high usage customers.”
PG&E uses a complex electrical rate plan with four levels, or tiers, of billing. Tier 1, or “baseline” customers, use a minimum level of electricity when judged by regional and seasonal averages. Customers are then charged an increasingly higher rate as their electricity use rises above the baseline level through Tiers 2, 3 and 4. The more electricity you use, the higher the rate you pay — a system designed to reward energy conservation.
Consumers can find out how much electricity they use each month, and the charges for it, on page four of their monthly PG&E bill, under the area marked “Electric Account Detail.”
PG&E serves customers from Eureka to Bakersfield, a service territory that includes foggy coastal cities where electricity use is typically low to the often scorching Central Valley, where use is higher due to air conditioning. Baseline rates are adjusted for the various climate zones throughout PG&E’s territory, but customers in hotter inland cities like Bakersfield have struggled for years with extraordinarily high bills.
PG&E had sought to do away with Tier 4, a move that solar industry advocates warned would hurt California’s booming solar market. But the solar industry claimed victory Thursday because state regulators opted to maintain the four tiers.
Under the plan approved Thursday, the current rate for Tier 4, which is 40.4 cents a kilowatt hour, will be reduced to 33.3 cents a kilowatt hour. The change will give customers throughout PG&E’s service area who use a lot of electricity a welcome break on their bills.
About 11 percent of PG&E customers in Santa Clara County, and 12 percent of PG&E customers overall, regularly use enough electricity to end up in Tier 4.
The new rate plan is revenue neutral for PG&E. While high users of electricity will get a break on their bill, everyone else will see their rates rise slightly due to an adjustment to the way that baseline rates are calculated that will shuffle more users into the upper tiers.
Low income customers who qualify for highly subsidized electricity rates will see a slight increase in their bills. But because those customers typically use far less energy than affluent customers, the impact is not expected to be large.
Stephanie Chen, senior attorney with the Greenlining Institute, an advocacy group for low-income consumers, noted that regulators will be reviewing utilities’ low-income assistance programs in the coming months.
“Millions of California families are struggling to keep the lights on and still afford food and rent, and these families need protection,” said Chen. “We will be working closely with the commission, the utilities and other consumer advocates to ensure that these essential programs best serve the families that rely on them,”
The five members of the CPUC were expected Thursday to discuss two dueling proposals: one by the agency’s Administrative Law Judge, which rejected the idea of the monthly service charge, and an alternate proposal by CPUC President Michael Peevey, which phased in the monthly charge over three years.
PG&E had hoped that Peevey’s proposal would prevail, but TURN and others had made it clear that they would take the CPUC to court if the monthly fee passed. In a dramatic development that stunned consumer advocates, Peevey announced from the dais that he was withdrawing his proposal under advice from the agency’s general counsel.
Commissioner Michael Florio had to recuse himself from the vote because he argued against the service charge in his previous role as an attorney for TURN.
Though a defeat for PG&E, the utility claimed partial victory because it has long sought to narrow the gap between rates paid by customers.
“We’re pleased that the commission voted to narrow the difference between the upper and lower tiers,” said Tom Bottorff, PG&E’s senior vice president of regulatory relations. “It’s a significant and welcome change that will help many customers who have been struggling with high bills.”