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PG&E proposal to change rate structure irks customers

Higher users to pay less, lower users to pay more

By: Ashley Gebb |

A Pacific Gas & Electric proposal to change its rate structure spurred vocal opposition from residents this week, as they expressed concerns about shifting costs to lower-income customers.

During a public hearing by the Public Utilities Commission at the Holiday Inn on Thursday, a dozen citizens addressed an administrative law judge taking comment on electric utility residential rate proposals. The judge emphasized the hearing was not about an increase in revenue for PG&E but adjustments in rates.

“Simply put, electric rates in California today are outdated and too complicated,” PG&E spokesman Paul Moreno told this newspaper. “Many residential customers either pay too much or too little.”

Most California residential customers pay tiered rates, where the first units of electricity used have a lower price. As more electricity is used during the month, customers cross into a higher usage tier.

Higher tiers have higher prices, and lower tier rates, which were frozen in 2001, only began to increase in 2010 in relation to electricity prices. As a result, when the cost of electricity goes up, there is little change in price for low-use customers who are not paying the actual cost of their energy and are being subsidized by higher users, Moreno said.

Assembly Bill 327 gives the California Public Utilities Commission the ability to lift the cap on lower-tier rates with a plan to gradually phase in changes. It also gradually reduces California Alternate Rates for Energy discounts from 44 percent to 35 percent, allows “time-of-use” rates that vary electricity rates based on peak usage times, and a fixed customer charge of $10 for non-CARE and $5 for CARE customers to reduce charges through tiered rates.

PG&E’s proposal is to flatten the rate tiers, dropping from four to three in 2015 and to two in 2018. It would also reduce the top-to-bottom tier difference from 22.3 cents to 3.5 cents by 2018.

To ensure the same total revenue amount is collected, high-usage customers could see their bills go down and low-usage customers may see their bills go up.

For instance, Moreno said, a household using 1,400 kilowatt hours per month currently has a $351 electricity bill that would drop to $274.56 under this proposal. Someone using 1,000 kwh per month with a $221 bill currently would see their bill drop to $194.

A household using 600 kw per month with a $101 bill would sustain an increase to $113, while a household using 300 kWh per month with a bill of $42.84 rises to $66.26.

Moreno could not provide details on Chico customers’ average usage.

Statewide, more than 1 million of PG&E’s customers, about one in five, pay more than $500 a year above the average residential rate, he said. Many of those live in the Central Valley, with hot summers and higher air conditioning usage, as well as families with many members, people who are retired and those who work from home — all of which drive up electricity usage.

“For many of those residents, there is potential for their bills to go down,” he said.

Moreno confirmed CARE customers, about 25 percent of residential users, will sustain increases. But, he noted, at 35 percent it will still be more than double the historical average, after moving from 15 percent in 2001 to 44 percent now.

“It still recognizes that there are some customers who need that additional financial assistance and it’s still available,” he said.

Julian Zener of Chico noted there is good discrepancy between the four tiers — a principal of rate design that encourages efficiency and conservation. To collapse the tiers incentivizes heavy use and places a burden on lower users, he said.

“It also seems to have social inequity, in that currently the low-usage households are probably low-usage because of low-income,” he said. “Their prices are going to go up, and in general high-usage households have more generous income and they will be subsidized. That doesn’t seem to be fair.”

Grace Marvin told the commission she has invested time and money to cut her family’s energy use, from improving seals around windows and doors to installing solar panels. And yet, subsequent bills told her she would be charged more because PG&E was receiving less revenue.

“It seemed like a slap in the face to do that,” she said, questioning motivation for conservation.

Less than 1 percent of households would see an average monthly bill increase of more than $10 if the proposal is approved, Moreno said.

Juanita Sumner, with the Chico Taxpayers Association, said if PG&E eliminates incentives, she doesn’t see a reason to get up at 5 a.m. to do laundry or run her dishwasher, or turn off her computer before she leaves the house.

“I am not going to be punished for conserving energy,” Sumner said.

A decision by the Public Utilities Commission is expected next year.

Contact reporter Ashley Gebb at 896-7768.

1,400 kWh/month use — $351 bill drops to $274.56

1,000 kWh/month use — $221 bill drops to $194

600 kWh/month use — $101 bill rises to $113

300 kWh/month use — $42.84 bill rises to $66.26