Utilities on the trail to tiers

An administrative law judge for the California Public Utilities Commission has issued a proposed decision on a push by utility companies, including San Diego Gas & Electric, for a rate hike for lower-tier customers. If the proposal passes, heavy electricity users will get a discount that environmental groups decry as "a handout to utilities."

In brief, the utilities seek a new base charge of $10 to all customers' bills. To offset the extra revenue, they plan to drop charges for higher "tiers" of energy use, which cause electricity to creep up in price as consumers use an amount beyond their "baseline" allotment. SDG&E currently has four billing tiers, with the baseline and second tier (capped at 130 percent of baseline use) currently frozen under state law, a result of the fallout from the profit-driven energy crisis of the early 2000s.

Heavy energy users have argued that the tiered rate system is unfair because it penalizes customers with large homes or families, as well as those who live inland, where the lack of a temperate coastal climate causes them to rely more on heat and air conditioning, which drive up the bills.

Opponents of the new structure say that inland customers already receive a higher baseline due to regional differences. Those paying attention also say the utilities' proposal effectively burdens those who've invested in energy-saving technology and solar systems and those who conserve energy either out of green-mindedness or a low income; they will be subsidizing the wealthy and people who choose not to conserve.

Still, costs are high across the board — SDG&E's average rate of 21.1 cents per kilowatt hour of electricity used is well above the 17.5 and 17.6 cents charged respectively by Pacific Gas & Electric and Southern California Edison, the state's other two investor-owned utilities.

Under its proposal, SDG&E seeks to raise rates on Tier 1 consumers by 20.9 percent by the end of 2015, from 15.4 to 20.8 cents, while giving a 14.1 percent discount to users in the higher Tier 4 bracket, with Tiers 1 and 2 being combined in 2016 along with 3 and 4 to shrink to a two-tier system as early as this year.

The amount of power consumption covered under baseline allowances is also set to shrink in coming years, though constant users would be pushed into a less-costly (but still more expensive) rate tier.

Should the utility ever decide it has a decreased need for revenues, the commission document states, additional discounts would be offered to customers in the higher tier.

Within the decision, several unattributed quotes are listed from public hearings on the new rate proposal. The only two that appear to have come from the San Diego region were also from the only speakers cited in favor of the new policy:

“Under the current rate structure, thousands of low-income seniors, particularly those here in East County, are subsidizing some of SDG&E’s wealthiest customers who are fortunate enough to live in La Jolla and some of the other beach communities. I feel that the current structure is for the rates is unfair [sic]. It assumes that if you are in Tier 1, you are not — you’re poor. Many of the people that are in Tier 1 live closer to the coast. Therefore, they don’t have the electrical rates for air conditioning and services that we do out on the East County. The truth is if you live in Tier 1, you probably live close to the ocean or do not need the air conditioning. I live in Ramona. And I am in Tier 3 and Tier 4. No matter how hard we conserve and try, we cannot get out of Tier 3 and Tier 4.”

“The most important action to be taken is consolidation and narrowing (flattening) of the tiers," writes Karen V. Clopton, chief administrative law judge for the commission in a proposal released on April 21. "Because of the implementation of the rate freeze…users in the lower tiers pay significantly below the cost of generation, while users in the higher tiers pay significantly above cost. These prices are so far from cost that immediate change is necessary."

With that, Clopton advises utilities to continue with their plans to flatten rate tiers, implement the new base charge as early as this summer, and embark on a customer-outreach program to notify ratepayers still unaware of "no-cost and low-cost conservation measures" or how to read their utility bills.

"This decision might as well have been written on utility stationery," says Evan Gillespie, an energy expert with the Sierra Club. "The Commission basically handed the utilities exactly what they have been lobbying for…. It jacks up bills for low-income customers, lets energy hogs off the hook, and will slow the transition to clean energy. Meeting our climate goals just got harder."

No rate decisions have been finalized, and another pre-hearing conference is scheduled for June, when the matter will be discussed further.