What’s to be done about energy rates?

Re­form is needed. But the PUC’s pre­ferred pro­posal, backed by the big util­i­ties, is a bad op­tion.

Los Angeles Times - - OPINION - N the crazy days

Iof Cal­i­for­nia’s 2001 elec­tric­ity cri­sis — rolling black­outs! En­ron! mar­ket ma­nip­u­la­tion! — the Leg­is­la­ture wisely im­posed strict rules on how the state’s in­vestor- owned util­i­ties priced energy.

The idea was to pro­tect residential ratepay­ers, es­pe­cially those with low in­comes, from the volatil­ity of the elec­tric­ity mar­ket while en­sur­ing some rev­enue sta­bil­ity for the util­i­ties. The re­sult was the ex­pan­sion of rate tiers from two to five, with higher rates for the top tiers and a freeze on rates for the low­est tiers — pe­nal­iz­ing peo­ple who used the most elec­tric­ity and re­ward­ing those who used the least.

That was fine in the af­ter­math of a cri­sis, but it is not work­ing so well 14 years on. The rate freeze meant that the bur­den on power guz­zlers kept go­ing up while the rate for sip­pers stayed the same, cre­at­ing a rate struc­ture that’s se­ri­ously out of whack. Also, the rules pro­hibit manda­tory pric­ing schemes that set dif­fer­ent rates at dif­fer­ent times of the day, which are use­ful for en­cour­ag­ing non- peak use.

The Cal­i­for­nia Public Util­i­ties Com­mis­sion is poised to adopt new residential rates, with the in­ten­tion of mak­ing them more fair, less com­pli­cated and com­pat­i­ble with new and ex­ist­ing tech­nol­ogy. Hooray for that — if it’s done in a way that doesn’t shift the bur­den too much or dis­cour­age Cal­i­for­ni­ans from sav­ing kilowatts.

How­ever, only one of the two rate re­form pro­pos­als be­fore the com­mis­sion would do that — and it’s not the orig­i­nal plan worked out by two ad­min­is­tra­tive law judges and sup­ported by the big three util­i­ties. About 75% of Cal­i­for­nia’s power comes from South­ern Cal­i­for­nia Edi­son, Pa­cific Gas & Elec­tric and San Diego Gas & Elec­tric. Edi­son alone serves about 4.3 mil­lion res­i­dences. The big util­i­ties like this op­tion be­cause they say it bet­ter re­flects the true cost of power de­liv­ery. ( The pro­posed changes do not ap­ply to city- owned util­i­ties, such as the Los An­ge­les Depart­ment of Wa­ter and Power.)

The orig­i­nal pro­posal would re­duce the rate tiers to two and slash the price dif­fer­en­tial be­tween them. It would also, start­ing as soon as 2019, add a fixed fee to ev­ery bill re­gard­less of how much power was con­sumed ($ 10 for most peo­ple; $ 5 for qual­i­fy­ing low- in­come ratepay­ers), shift­ing costs even more. The big util­i­ties say this would mean that peo­ple who con­sume lit­tle or no power — such as those who’ve in­stalled rooftop so­lar pan­els on their houses — would nev­er­the­less pay their fair share to con­nect to the grid.

But the re­sult would be a sig­nif­i­cant re­duc­tion in monthly bills for the peo­ple who use the most elec­tric­ity, paid for by a hefty in­crease charged to the peo­ple who use less — a hike of as much as hun­dreds of dol­lars more a year.

That’s crazy at a time when the state is scram­bling to re­duce green­house gas emis­sions. Such an ex­treme shift of costs from big users to smaller users sends a mes­sage to Cal­i­for­ni­ans that it’s OK to ease up on the con­ser­va­tion thing. It is not.

The com­mis­sion should in­stead adopt the al­ter­nate rate re­form pro­posal by PUC mem­ber Mike Flo­rio. It is sup­ported by the state’s Of­fice of Ratepayer Ad­vo­cate, much of the state’s so­lar in­dus­try, other green energy ad­vo­cates and en­vi­ron­men­tal groups, be­cause it would shift costs less steeply and at a slower pace, thus re­tain­ing the con­ser­va­tion im­per­a­tive.

This pro­posal would cut the tiers and cost dif­fer­ence be­tween the rates too, but less dra­mat­i­cally. It would also al­low util­i­ties to charge $ 10 per month to those ratepay­ers who don’t use any power at all to en­sure that they’re pay­ing to con­nect to the grid.

It’s worth not­ing that both op­tions would make it eas­ier for util­i­ties to be­gin charg­ing “time of use” rates in the next few years, which would give con­sumers more con­trol over their bills and work well with the new “smart” me­ters. Time- based pric­ing makes the cost of power more ex­pen­sive dur­ing peak us­age times and cheaper dur­ing off­peak times, al­low­ing ratepay­ers to make smart de­ci­sions about when to charge their elec­tric car or what time of day to run the clothes dryer.

The PUC can make a “smart” choice too, by adopt­ing the rate re­form pro­posal that moves to­ward fair­ness but not so quickly or harm­fully that it jeop­ar­dizes con­ser­va­tion ef­forts.

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