Affordability

Important Update: CPUC Adopts Progressive Framework to Assess Affordability of Utility Services (CPUC Press Release)  (issued on July 16, 2020) 

Water, energy, and telecommunications services should be affordable. On July 12, 2018, the California Public Utilities Commission (CPUC) issued an Order Instituting Rulemaking (R.18-07-006) to assess the impacts on affordability of individual CPUC proceedings and utility rate requests.

Specifically, the goals of this proceeding are to:

1. Develop a framework and principles to identify and define affordability criteria for all utility services under CPUC jurisdiction; and
2. Develop the methodologies, data sources, and processes necessary to comprehensively assess the impacts on affordability of individual CPUC proceedings and utility rate requests.

Within the scope: Issues determined to be within the scope of the proceeding include:

1. Identification and definition of affordability criteria for CPUC - jurisdictional utility services.
2. Methods and processes for assessing affordability impacts across Commission proceedings and utility services.
3. Other issues relating to the CPUC's consideration of the affordability of utility services.

Outside of the scope: Issues determined to be outside the scope include:

1. Affordability issues related to customer classes other than residential customers.
2. Evaluation of the effectiveness of existing affordability programs or creation of new customer programs to assess affordability.
3. New approaches to disconnections and reconnections.
4. Pacific Gas and Electric Company's Essential Use Study D.18-08-013 issued in PG&E's General Rate Case (GRC).

 

Background

Californians rely on utility services, including electricity, gas, water, and telecommunications for health, safety, and full participation in society.  The CPUC's commitment to ensuring these services remain affordable and accessible to Californians is articulated in Strategic Directive (SD) 04 on Rates and Affordability and SD 05 regarding Universal Access.

Although the CPUC has regularly considered issues of affordability in a variety of forums, it currently lacks a working definition of what is meant by "affordable," as well as a framework to consistently and comprehensively analyze affordability issues across individual proceedings and utility services.

Part of the challenge in defining and measuring "affordability" is determining the appropriate scale and targeted threshold.  For example, energy burden, the percent of income spend on energy, is one of the simplest metrics used to evaluate affordability.  However, an evaluation of energy burden will yield different results if conducted on a statewide vs. regional level, as results may have different meanings to different geographic populations.  A second challenge in defining affordability is that it is relative to factors that often evolve over time, including utility service rates, customer demand, and other socioeconomic elements.  Some of which are under the purview of the CPUC, but many are not.  Utility rates are effected by infrastructure procurements, commodity costs, reliability and safety requirements, and other operating costs.  Demand for services is effected by geography, climate, household size, and conservation practices.  The ability to pay for utility services often derives from complex socioeconomic factors, such as household income and housing expenditures.

Despite these challenges, the CPUC has developed various affordability metrics that are used to support the decision-making process of many proceedings.  These metrics can be categorized into three classes:

• Rate impact metrics: These are the most common metrics used by the CPUC to assess affordability of services, and are generally used as part of the general rate case (GRC) process. System Average Rates (SAR) serve as a high-level example of a rate impact metric, but GRCs typically go into more detail to estimate the rate impact for various customer segments.
• Household-level metrics: These metrics assess the financial impact of utility service on an individual household. Perhaps the most common of these household metrics is the energy burden - the ratio of the cost of the service to the household income. Another household metric that is increasingly discussed is a residual income metric, which is a measure of the income that is left over after paying utility bills.
• Market-level metrics: Market-level metrics assess the affordability impact to a particular population. The affordability impact of programmatic and tariff design changes fall into this category.

Each of these affordability categories addresses some specific issues, such as setting rates for customer classes, determining strategies to mitigate expenses for low income communities, or evaluating the effectiveness and reach of programs. However, these categories are limited in their scope, and do not necessarily address the challenges related to geographical and socioeconomic factors.  The goal of this Rulemaking is to develop a range of metrics that can provide a comprehensive assessment of residential customers' ability to afford essential utility services.

 

Workshops & Proposals

Revised Staff Proposal (issued on January 27, 2020)

Workpapers

 

February 27, 2020  

10:00 a.m. - 12:00 noon

Webinar on the Revised Staff Proposal  

Agenda

Webinar Presentation 

Webinar Recording (password is AR20webinar)

 

August 26, 2019

10:00 a.m. - 4:00 p.m

Workshop #2

CPUC Auditorium

505 Van Ness Ave., San Francisco, CA  94102

Event Details

Agenda

Staff Proposal

Staff Presentation

Webcast Recording 

 

January 22, 2019

9:00 a.m. - 4:40 p.m.

Workshop #1

CPUC Auditorium

505 Van Ness Ave., San Francisco, CA 94102

Agenda

Panel Presentations

Webcast Recording

 

Proceeding Timeline

Event	Date
OIR Issued	July 12, 2018
Scoping Memo and Ruling	November 19, 2018
Workshop #1	January 22, 2019
Staff Proposal	August 20, 2019
Workshop #2	August 26, 2019
Comments on Staff Proposal	September 10, 2019
Reply Comments on Staff Proposal	September 20, 2019
Amended Scoping Memo and Ruling	November 8, 2019
Revised Staff Proposal	January 27, 2020
Comments on Revised Staff Proposal	February 21, 2020
Webinar on Affordability Ratio	February 27, 2020
Reply Comments on Revised Staff Proposal	March 6, 2020
Proposed Decision	June 4, 2020
Second Amended Scoping Memo and Ruling	June 9, 2020
CPUC Decision	July 22, 2020

 

Affordability Rulemaking (R.18-07-006) Related Links

• Affordability OIR (July 12, 2018)
• Assigned Commissioner's Scoping Memo and Ruling (November 19, 2018)
• Assigned Commissioner's Amended Scoping Memo and Ruling (November 8, 2019)
• Assigned Commissioner's Second Amended Scoping Memo and Ruling (June 9, 2020)
• Decision Adopting Metrics and Methodologies (July 22, 2020)
• Census of affordability references

 

Other Related Links

• Disconnections and Reconnections (R.18-07-005)
• Low income rate assistance programs for Class A water utilities Rulemaking (R.17-06-024)
• Investor-owned utilities' residential rate reform rulemaking (R.12-06-013)
• PG&E Essential Use Study (D.18-08-013) Issued in PG&E's General Rate Case (GRC Phase II) 

 For inquiries related to the Affordability Rulemaking (R18-07-006), please direct them to Jefferson Hancock JHO@cpuc.ca.gov.