Regulators overhauled the state’s system for pricing electricity for millions of Californians on Friday in a move that they said will simplify the structure and bring rates closer in line with costs. Many customers who use the least amount of energy will probably see rate increases, but regulators said the system will be more fair.
The Public Utilities Commission voted 5-0 to approve the most significant restructuring of electricity pricing since the Legislature froze rates for many customers during the 2001 energy crisis.
The decision affects electricity customers of Pacific Gas and Electric Co., Southern California Edison and San Diego Gas & Electric Co. Although it will affect Yolo County and wide swaths of Northern California, it won’t affect the Sacramento Municipal Utility District or Roseville’s city-owned utility.
Michael Picker, president of the PUC, said the new structure could generate increases of about $5 a month for as many as 40 percent of three big utilities’ ratepayers, “but we really don’t know … . It’s a real grab bag as to how this is going to play out.”
Picker said the commission didn’t approve new rates Friday. Rather, it adopted a general structure, to be phased in over four years, with the exact details to be fleshed out by the PUC after hearing proposals from the big three investor-owned utilities.
“This is just a set of design changes,” Picker said in an interview. “(The utilities) will have to file stuff with us.”
The biggest change will be a flattening of rate tiers, which will narrow the price gap between the heaviest users and those who consume the least electricity. The result will likely be rate hikes for many of the lowest users.
The PUC’s reasoning? The Legislature froze rates in 2001 for the lowest-tier users, and since then costs have risen to the point that some of those users are paying below their actual cost. In that same time, prices have risen considerably for many customers who use more electricity. That “imposed ever greater inequities on large-family households that were pushed into higher tiers in hot climate zones,” the PUC said.
Some consumer advocates quickly criticized the new structure. The Utility Reform Network, a San Francisco advocacy group, said it will “give energy hogs a break at the expense of customers who conserve.” TURN said it will likely ask the commission to reconsider the plan.
Picker, though, said the plan makes sense. Under the new structure, customers “probably will share the costs more fairly,” Picker said.
He added that the state is creating a “super user electric surcharge” for those who continue to consume the heaviest volumes of power. The surcharge, which will begin in 2017, is expected to affect the top 2 percent to 10 percent of all users.
Another big change is the implementation of “time of use” rates. That means customers will pay more during peak demand hours, such as late afternoons and early evenings. Picker said such a system will dovetail better with California’s increasing reliance on renewable energy sources, such as solar, which generally can’t produce as much electricity during those hours.
The idea is to give customers incentives to “avoid using electricity from 3 p.m. to 9 o’clock,” Picker said. The “time of use” structure is similar to a system already in place at SMUD, said Picker, who was a SMUD board member from 2012 until last year.
Friday’s vote was one of the most significant for the PUC since Gov. Jerry Brown designated Picker as president of the commission in December. He replaced Michael Peevey, who was roundly criticized for holding back-channel communications with PG&E officials during the investigation of a natural gas line explosion that killed eight people in San Bruno in 2010.
Picker, who was chief of staff to the late Sacramento Mayor Joe Serna, had been an energy adviser to Brown before becoming a PUC member early last year.