Utility Residential Rates – How Do They Work?

You may know that the more you use, the more you pay, but there’s more to learn about how you are charged for your electricity use. 

The utility makes a proposal and the CPUC approves rates after a lengthy review of utility costs and with full public input.  Rates include costs to provide electricity generation, transmission, and distribution services and a fair rate of return to the utilities.  The rate structure is divided into tiers with a baseline as the basic allocation.  Baseline is your energy allowance for basic needs and is billed at the lowest rate.  It is determined by the average usage of energy consumed by every household and by the climate zones and seasons where your house is located.   As an example, the buckets below illustrate Pacific Gas and Electric Company’s tiered-rate structure.

Pacific Gas and Electric Company:

0-100%	101% - 130%	131%-200%	over 200% of baseline

To save energy, be aware of your kWh usage and understand that the more energy you use, the more you pay.

Like a full bucket, there is a limit to the kWh you get in each tier. When you use more than what is available in the first “bucket”, you move to the next “bucket”, which has a higher cost per kWh.

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What is Smart Grid, and Why Do You Need it?

California’s aging electric grid has been operating in much the same way for more than 100 years.

The existing grid is increasingly costly to maintain and is not able to meet the future demands that will be placed upon it. In addition, the design of the grid does not take into effect the technological advances of the past century.

Creating a smarter grid will result in a safer, more reliable, efficient, affordable, and interoperable system. 

Among the many benefits consumers will see from a Smart Grid is the availability of more information and tools to manage their energy usage.  Consumers will have greater control over their utility bills through the availability of real-time information about rates and usage, which will allow customers to decide when and how much energy to use.

For example, in a hot summer month a consumer’s utility bill may be more than $800.  In the near future, by installing an in-home display device a customer could monitor their electricity usage and costs in real-time (similar to the price and quantity displays on a gas pump), allowing them to adjust their usage instantaneously in response to changes in prices or signals from their utility by delaying the use of a high-energy appliance or shutting them off.  This could be done manually or automatically by pre-programming the device or appliance. Customers will decide when and how to use their electricity before they get a bill that is beyond their monthly budget.

The CPUC has set out a framework and an overall vision for a Smart Grid in California that requires the state’s investor-owned utilities to begin the transformation of the electric grid into a safer, more reliable, efficient, affordable, and interoperable system. This deliberate and strategic planning for a Smart Grid will ensure that California utility customers realize the tremendous benefits of a Smart Grid.

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CPUC Continues Measures to Address Residential Energy Utility Disconnections

The CPUC has approved several measures to reduce the number of residential energy customer service disconnections as part of its ongoing efforts to identify cost-effective ways to help consumers keep the lights on.

As the economic crisis in California continues, it was necessary for the CPUC to take immediate action before winter 2010-2011 to help reduce natural gas and electric disconnections.

The CPUC continued the requirement that all Pacific Gas and Electric Company (PG&E), Southern California Edison, San Diego Gas and Electric Company (SDG&E), and Southern California Gas Company (SoCalGas) customer service representatives must inform any customer that owes an arrearage on a utility bill that puts the customer at risk for disconnection that the customer has a right to arrange a bill payment plan extending for a minimum of three months the period in which to repay the arrearage.

Other measures approved include:

• California Alternate Rates for Energy (CARE) and Family Electric Rate Assistance (FERA) customers are not required to pay additional reestablishment of credit deposits with a utility for either slow-payment/no-payment of bills or following a disconnection.
• Medical baseline or life support customers will not be disconnected without an in-person visit from a utility representative.
• SDG&E and SoCalGas must develop an automatic payment plan that allows new customers or reconnecting customers a payment option that is in lieu of a cash deposit for credit.
• PG&E and Edison must continue to offer their non-cash credit deposit options to all new customers and those required to post a reestablishment of credit deposit following a disconnection.
• PG&E, SDG&E, and Edison can collect from customers a reestablishment of credit deposit following a disconnection based on twice the average monthly bill, rather than twice the maximum monthly bill.
• SoCalGas and SDG&E must waive reestablishment of credit deposits for late payment of bills. PG&E and Edison must continue their practice of not collecting credit deposits for late payment of bills.

These measures are part of a proceeding the CPUC opened in order to address arrearage management and shutoff prevention for residential energy customers.

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CPUC Addresses Regulatory Authority to Create Vibrant Market for Electric Vehicle Charging

The CPUC has concluded that companies that sell electric vehicle charging services to the public will not be regulated as “public utilities” pursuant to the Public Utilities Code.

The CPUC is evaluating alternative-fueled vehicle policies to ensure California’s investor-owned electric utilities are prepared for the projected statewide growth of plug-in hybrid electric vehicles throughout California, per Senate Bill 626 (Kehoe, Chapter 355, Statutes of 2009).

The CPUC’s actions provided clarity regarding the CPUC’s regulatory role in the market for electric vehicle charging services. The CPUC determined that the sale of electric vehicle charging services to the public does not make a corporation or person a public utility solely because of that sale, ownership, or operation. The CPUC also identified ways in which it can exercise its regulatory authority to ensure that electric vehicle charging occurs in a manner that is consistent with the capabilities of the electric grid.

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CPUC Report Shows Continued Success of Solar Program

Three years into the state’s 10-year solar program, California is already 42 percent of the way towards its general market program goal. This figure includes both projects already installed and those currently holding reservations for incentives and in the process of being installed.

In January 2007, California launched an unprecedented $3.3 billion ratepayer-funded effort that aims to install 3,000 megawatts (MW) of new solar over the next decade and to transform the market for solar energy by reducing the cost of solar. The CPUC portion of the solar effort is known as the California Solar Initiative (CSI) Program. The CSI portion, the country’s largest solar program, has a $2.2 billion budget and a goal of 1,940 MW of solar capacity by the end of 2016. In addition to the MW goals, the program is also designed to emphasize performance, both for solar systems and the solar industry, by lowering costs and increasing efficiency.

In its CSI Annual Program Assessment Report to the Legislature, the CPUC said that California has over 600 MW of solar connected to the electric grid at nearly 65,000 customer sites. Of the 598 MW of capacity installed in investor-owned utility territories, 342 MW were installed under the CSI Program at 31,000 sites, as well as 256 MW installed through other programs. The non-CSI Program solar capacity was installed under other solar programs, including the California Energy Commission’s New Solar Homes Program and the CPUC’s Self-Generation Incentive Program and the Emerging Renewables Program.

Other program highlights from the report include:

• Demand is increasing. The CSI Program received a record of nearly 300 MW of new CSI project applications since January 2010 - more than any other six-month period since the start of the program.
• The program had over 134 MW of new projects applying in April 2010, the highest month on record for new solar applications.
• For every dollar spent on incentives by the state, there has been another $2.62 invested in solar technology in California from other sources.
• Program data shows a decline in the average cost of solar systems. The inflation adjusted cost trends show that prices have declined since January 2007 from $10.04/watt to $8.49/watt for systems under 10 kW.
• The CSI Program has reduced incentive levels several times since 2007 in response to program demand. Incentives started at $2.50/watt across the state, and now they are as low as $0.65/watt.

The CSI program is part of the Go Solar California campaign, which has three distinct programs, each with a portion of the statewide budget and solar installation goals:

1) The CPUC’s CSI Program provides incentives to customers of Pacific Gas and Electric Company, Southern California Edison, and San Diego Gas and Electric Company. These three utilities represent about 75-80 percent of homes and existing and new commercial, industrial, government, non-profit, and agricultural properties. The CSI program includes several program components: a solar photovoltaic rebate program; two solar programs targeted at affordable housing (one for single family and the other for multifamily affordable housing); and a research, development and demonstration program. Additionally, in May 2010, the CPUC launched its newest CSI program component, the CSI-Thermal Program, which provides incentives for solar water heating systems.

2) The New Solar Homes Partnership, managed by the California Energy Commission, provides incentives for the installation of solar PV on new residential construction. The budget is $400 million over 10 years, with a goal of 360 MW.

3) The Publicly Owned Utilities program requires each municipal utility to offer a solar PV incentive program, an aggregate commitment of $784 million over 10 years, toward a goal of 700 MW.

Since its inception in 2007, the CSI has consistently seen robust levels of demand for solar rebates.

Weekly program demand data, including new rebate applications, installed systems, and system costs can be found at: www.CaliforniaSolarStatistics.ca.gov.

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