Even a renegade utility company like PG&E can be reined in. TURN beats back PG&E’s proposal to add new monthly charges to every customers’ bill, keeping the tiered rates system that reward conservation in place.
PG&E’s electricity rates got their biggest overhaul in a decade Thursday with approval of a new system that will lower bills for households that use the most electricity while slightly raising them for everyone else.
But the California Public Utilities Commission rejected the two most controversial portions of a rate plan that PG&E first proposed more than a year ago: A $3 surcharge on every household’s bill, and an aggressive restructuring of electric rates for the heaviest users that environmental groups worried would undermine incentives to go solar.
In the end, the commission agreed to a more modest reduction for heavy users than PG&E sought. The new rates go into effect June 20.
"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 provides gas and electricity to 15 million customers from Eureka to Bakersfield, a 70,000-square-mile service territory that includes foggy coastal cities, where electricity use is typically low, and the often-scorching Central Valley, where usage spikes in the summer heat as households crank up their air conditioning.
Customers in hotter inland cities like Bakersfield have struggled for years with extraordinarily high electricity charges, and PG&E had said it wanted to offer them some relief. Monthly bills of $400 and more are not uncommon, and during heat waves some consumers got bills that exceeded their mortgage.
PG&E uses a complex electrical rate plan with four levels, or tiers, of billing, which vary both by region and by the season of the year. Tier 1, or baseline customers, use a minimum level of electricity. 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 what tier they’re in, 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 initially had sought to do away with Tier 4, but solar industry advocates and other environmental groups warned that would hurt California’s booming solar market and efforts to encourage energy conservation. 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 cut to 33.3 cents a kilowatt hour, a 15 percent decrease. 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 will raise the same amount of revenue for PG&E. While high-volume users of electricity will get a break on their bill, most other customers will see their bills rise slightly because of an adjustment that will shuffle more users into higher tiers.
Low-income customers who qualify for highly subsidized electricity rates through the CARE program will see a slight increase in their bills. Previously, CARE rates were capped at 9.6 cents a kilowatt hour; under the new plan, which goes into effect in November, the highest CARE rate is 12.5 cents a kilowatt hour.
Stephanie Chen, senior attorney with the Greenlining Institute, an advocacy group, said her organization will continue to push to make sure that rates are fair for low-income consumers.
"Millions of California families are struggling to keep the lights on and still afford food and rent, and these families need protection," Chen said. "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 PUC 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 alternative proposal by PUC President Michael Peevey that would have phased in the monthly charge over three years.
PG&E supported Peevey’s proposal, but TURN and others had made it clear that they would take the PUC to court if the monthly fee passed. In a dramatic development, Peevey stunned consumer advocates and 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. The final vote was 4-0.
Though the rejection of the service charge marked a defeat for PG&E, the utility claimed partial victory because it has long sought to narrow the gap between rates.
"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."