Last Friday, the California Public Utilities Commission (CPUC) voted unanimously to approve a new proposal that overhauls how most Californians pay for power. The proposal affects all residential customers of Pacific Gas & Electric, Southern California Edison, and San Diego Gas & Electric (about 75% of the state).
The vote was the culmination of three years of debate and analysis at both the Commission and the state legislature. The Sierra Club actively advocated throughout the process for meaningfully tiered rates to incentivize conservation, and opposed the regressive fixed charges desired by the utilities that would raise rates for most residential customers and make it more difficult for California to reach its efficiency and climate change goals.
The decision, a last-minute compromise released two days before the vote, was a mixed bag. There’s some stuff in here to celebrate and a few areas of serious concern to monitor and address as California pursues more aggressive climate goals.
The Good: The Commission rejected utility requests for a fixed charge, opting instead for a minimum bill. As my colleague Alison Seel has written, minimum bills are better than fixed charges at encouraging conservation and investments in energy efficiency. During comments before the vote, Commissioner Peterman argued that the utilities “failed to meet their burden to justify a monthly charge to cover fixed costs.” Unfortunately, the Commission didn’t take fixed charges off the table entirely: the utilities can propose them again in 2019 or 2020, and the debate will start all over. Still, the world will be a much different place in 2020, after rooftop solar and storage costs decline even further, so it’s hard to say much now about what will make sense then. So, let’s celebrate the fact that, for now, the most controversial element of this proposal is off the table.
The Bad: The Commission adopted a more regressive way of charging people for electricity that collapses the four tiers we have today into two tiers by 2019. Under the new decision most people will have two-tiered rates, where electricity consumed in the second tier costs 25% more than the first. (The exception is people affected by the “super use” surcharge, described more below.) This will be a big change from today’s four-tiered rates, where the top tier costs over twice as much as the first, and prices are kept low for people who use little electricity. The Sierra Club opposed this virtually flat, two-tiered pricing structure because we believe it will discourage conservation among very high electricity users -- those customers more likely to waste energy and most able to cut back. Governor Brown’s drive to increase building efficiency by 50% by 2030 is made harder by this vote, and the Commission’s decision means that we now need even more aggressive programs to offset the dampening this new policy will have on customer behavior.
The Ugly: As the proceeding reached the finish line, the Commission’s commitment to good public process broke down. Stakeholders spent nearly three years working on this proceeding. In 2013, there was a lengthy detour into the legislature where the omnibus energy bill AB 327 was heatedly debated and a compromise hashed out. After the legislative session wrapped up in September 2013, advocates moved back to the CPUC, where stakeholders spent the last 20 months working on the proposal. By June, there were two proposals on the table that all the parties understood and had commented on.
That’s when things went sideways. First, the Commission moved the vote to July 3, a federal holiday. The meeting was held in a room without video conferencing. There was no video recording of the vote, so folks who didn’t want to spend their July 3 at the Commission talking about residential electric rate design policy had to join by audio conference. This all had the impact of making it pretty hard to track what was happening. The real doozy in all of this, however, was when the Commission dropped a new, overhauled proposal less than 48 hours before the vote. The altered proposal had hundreds, if not thousands, of redlined edits and some substantive changes to the proposal. Every stakeholder, from ratepayer groups to the Sierra Club and everyone else, went in Friday unsure of what exactly was being voted on. After three years of hard work, that’s unacceptable.
The Unknown: The Commission adopted a “super-user electric surcharge” (or SUE), targeting customers who use more than 400% of the baseline allowance. The proposal had been pushed by the Center for Accessible Technology and apparently championed by Commissioner Sandoval over the last few weeks. Functionally, the charge acts as a third tier for very high energy users, and will equal more than twice (219%) of the Tier One price. The question is whether or not a cutoff set at 400% above baseline is the appropriate threshold -- we just don’t know. According to the Commission, this will affect approximately 10% of Southern California Edison Customers and just 4% of residential electricity use. That struck us as a bit insufficient to have a meaningful impact and offset the damage done by the severe tier collapse.
This area is one where a better process would have been helpful. With more time, stakeholders could have reviewed the proposal, modelled the impact to clean energy, and provided feedback on where to most effectively set the baseline.
On the balance there’s good and bad here on the policy front, but all of it was really clouded by brutal public process down the stretch. This is no way for a public agency to do business. Stakeholders spent three years working on this. It’s unacceptable that the final proposal was given no time for public comment or stakeholder review. For an agency under such intense scrutiny for cutting backroom deals, this is yet another example that undermines transparency. California deserves better.