Section 451 which requires that rates be “just and reasonable.” Section 382(b), as amended by AB 327, states that “electricity is a basic necessity” and that “all residents of the state should be able to afford essential electricity.” Section 382(b) directs the Commission to ensure that low-income ratepayers are not “jeopardized or overburdened by monthly energy expenditures.” Section 739 defines baseline quantity and, in Section 739(d)(1), requires that the Commission “establish an appropriate gradual differential between the rates for the respective blocks of usage.” Section 739.1, which was amended by AB 327, addresses the CARE program. Section 739.1(c) requires the average effective CARE discount to be between 30-35% “of the revenues that would have been produced for the same billed usage by nonCARE customers.” Section 739.9, which, pursuant to AB 327, replaced the prior Section 739.9, requires that any increases to electrical rates, including reductions in the CARE effective discount, “be reasonable and subject to a reasonable phase-in schedule relative to the rates and charges in effect prior to January 2014.” The Rate Design Principles Rate design proposals must attempt to balance the sometimes conflicting Rate Design Principles (RDP) developed in this proceeding to evaluate residential rate design options. The initial OIR set forth a preliminary list of principles for optimal rate design. (OIR at 20-21.) The OIR list echoed Commission decisions, such as D.08-07-045, and was similar to the “Bonbright principles.” After extensive input from the parties, including a workshop and written comments, the RDP were adopted by the Commission in the Phase 2 Decision: Low-income and medical baseline customers should have access to enough electricity to ensure basic needs (such as health and comfort) are met at an affordable cost; Rates should be based on marginal cost;
same price signals. UCAN provided the following chart, which concludes that a TOU rate meets the RDP better than a tiered rate. R.12-06-013 Rate Design Principles Tiered Rate TOU Rate 1. Low-income and medical baseline customers should have access to enough electricity to ensure basic needs (such as health and comfort) are met at an affordable cost. Y* Y* 2. Rates should be based on marginal cost. N** Y 3. Rates should be based on cost-causation principles. N*** Y 4 Rates should encourage conservation and energy efficiency. Y/N Y/Y 5. Rates should encourage reduction of both coincident and peak demand. N/N Y/[N] 6. Rates should be stable and understandable and provide customer choice. Y/N/N Y/Y 7. Rates should generally avoid cross-subsidies, unless the appropriately support explicit state policy goals. Y***** Y 8. Incentives should be explicit and transparent. Y* Y* 9. Rates should encourage economically efficient decision-making. N Y 10. Transitions to new rate structures should emphasize customer education and outreach that enhances customer understanding and acceptance of new rates, and minimizes and appropriately considers the bill impacts associated with such transitions. Y/Y/Y**** Y/Y/Y**** subsidies
Requirement for a Baseline Tier for Default Residential Rate The Commission is required to set a baseline quantity of electricity that represents the amount “necessary to supply a significant portion of the reasonable energy needs of the average residential customer.” The statute defines “baseline quantity” as “a quantity of electricity or gas allocated by the commission for residential customers based on from 50 to 60% of average residential consumption of these commodities. In establishing the baseline quantities, the commission shall take into account climatic and seasonal variations in consumption and the availability of gas service.” Section 739.9(c) requires that the Commission “require each electrical corporation to offer default rates to residential customers with at least two usage tiers.” The first tier shall include electricity usage of no less than the baseline quantity established pursuant to [Section 739(d)(1)]. There is a clear exception for Section 745(c) (default TOU) rates. Section 739(d)(1) requires the Commission to “require that every electrical and gas corporation file a schedule of rates and charges providing baseline rates. The baseline rates shall apply to the first or lowest block of an increasing block rate structure which shall be the baseline quantity. In establishing these rates, the commission shall avoid excessive rate increases of residential customers, and shall establish an appropriate gradual differential between the rates for the respective blocks of usage.” Parties raised several questions in connection with this requirement for a baseline tier. First, some parties suggest that a baseline tier is required for default TOU. The clear language of Section 739.9(c), however, has an exception for the TOU
associated with this coincident demand from all customers does not comply with principles of cost causation. All customers, to some extent, are causing the need for expanded infrastructure to cope with high levels of coincident demand. While SEIA does try to empirically connect high usage with high demand, therefore making their proposal more accommodating of cost causation, they offer little evidence of this relationship. IREC’s proposal is also not well-aligned with the principle of cost causation. High-usage customers are not solely responsible for the generation and marginal generation capacity costs of a utility (i.e., the construction of new energy facilities), and therefore they should not be required to shoulder the entire burden of such costs. A two-tier rate with 25% differential will encourage overall conservation while reducing bill volatility. Twenty five percent is an increase over the last tier differential approved by this Commission. It is aligned with the Commission’s principle for cost-based ratemaking and at the same time retains a price signal to customers that increased usage will result in increased price. Because low usage customers will pay closer to the cost of service, they may elect to conserve more. In addition, the flatter tier structure will result in fairer and more equitable pricing for all residential customers. Low usage customers will pay prices that are closer to the costs incurred to serve them. High usage customers will see a price decrease, but will still pay more than the cost of service. For low income customers, programs to protect against high bills continue to be available, such as the CARE, FERA and medical baseline programs, the Energy Savings Assistance (ESA) Program, and other programs for low-income customers that address non-energy burdens.
revenue requirement, there are many customers who will be structural winners on TOU rates. In fact, structural winners will have a positive experience on TOU, making for greater customer acceptance. PG&E intends to market first to high usage customers who are more likely than low-usage customers to benefit from the TOU structure. On the other hand, too many structural winners will mean an undercollection that needs to be recovered from somewhere. The following table illustrates the impact of a baseline credit. Table comparing Peak/Offpeak rates with and without a baseline credit TOU schedules with 1.6:1 peak to off-peak differential Off-Peak Summer up to 100% of Baseline Summer up to 100% of Baseline Off-Peak Summer over 100% of Baseline Peak Summer over 100% of Baseline Baseline credit of roughly 4 cents $0.194 $0.311 $0.233 $0.350 No baseline credit $0.210 $0.336 $0.210 $0.336 Revenue Shortfall A revenue shortfall occurs when the revenues collected from a group of customers is less than the revenue that was forecast. The revenue shortfall will be amortized and included in future rates to make up for the undercollection. A revenue shortfall between classes can result when, for example, residential customers as a whole use less power than predicted. Depending on the structure of the rate when implemented, the undercollected amount could then be recovered from just the residential class in future years, or it could be recovered from all customer classes. In this proceeding we are primarily concerned with revenue shortfalls between different groups of customers within the residential class. The opt-in
Phase 2 (see condition (i) above). Issues for these workshops include: Which fixed costs are appropriate to collect through a fixed charge. Ensuring that any fixed charge amount treats small and large customers fairly. Timing of including new or increased fixed charges in residential rates. Marketing, education and outreach for fixed charges. The decision on the proposed fixed charge calculation will apply to the specific utility, with respect to the actual amount of fixed costs identified, but the determination of which categories of costs the Commission determines should be permitted in a fixed charge should be considered precedential. The GRC Phase 2 applications for the other two IOUs should rely on the findings from the first decision. Any requested variations from the methodology approved for the first IOU shall be accompanied by material evidence demonstrating differences between the two IOUs’ systems. (iii) A decision in the IOU’s 2018 Residential RDW that approves a new fixed charge request from the IOU. The IOUs may not file a new request for a fixed charge prior to the Residential RDW. The Residential RDW applications will be consolidated. (iv) Default TOU is implemented. Provided that all four conditions have been met, a fixed charge can be implemented with an effective date at least one year after the start of default TOU. Generally A Fixed Monthly Charge May Be Reasonable for Fair Residential Rate Design Currently, fixed costs are included in volumetric rates. Two concerns have been raised with this approach. First, high use customers may be paying a
PG&E’s and SCE’s CARE rates currently have three tiers (as opposed to four tiers in their non-CARE rates) and both utilities provide a discount off the corresponding non-CARE volumetric rate for each tier. PG&E and SCE proposed to continue providing the CARE discount in the same manner but have proposed to redefine the CARE tier boundaries in 2015 in order to align them with non-CARE tiers (see table below). After 2015, both utilities propose to transition CARE rates to a two-tiered rate structure by 2018 on the same schedule that they have each proposed for non-CARE rates. PG&E and SCE’s Proposed Change to CARE Tier Definitions in 2015 (% of Baseline Quantity) Current CARE Tiers Proposed 2015 Care/non-CARE Tiers Tier 1 0-100% 0-100% Tier 2 100-130% 100-200% Tier 3 Over 130% Over 200% SDG&E’s current CARE rate is structured differently from the rate structures of the other two IOUs. SDG&E’s CARE volumetric rate is provided at a discount off the corresponding non-CARE rate for each tier (similar to PG&E and SCE), but, in addition to discounted volumetric rates, SDG&E’s CARE rate also includes a flat 20% discount off of energy charges. Unlike PG&E and SCE, SDG&E proposed to simplify its CARE rate structure by removing the discount from volumetric rates (with the exclusion of the exemption from DWR-BC, CSI and CARE charges) and providing it as a line-item discount off a bill calculated at standard rates, beginning in 2015. SDG&E argues that by providing the CARE discount as a line-item bill discount, “all tiers will receive a more equitable discount level and more accurate information regarding the costs associated with their electricity demand.”
Fadia Khoury SOUTHERN CALIFORNIA EDISON COMPANY EMAIL ONLY EMAIL ONLY CA 00000 fadia.khoury@sce.com For: Southern California Edison Company 505 Van Ness Avenue San Francisco CA 94102 3298 (415) 703-4142 nb4@cpuc.ca.gov Lynn Marshall Consultant CALIFORNIA ENERGY COMMISSION 1516 9TH STREET, MS-20 SACRAMENTO CA 95814 (916) 654-4767 Lynn.Marshall@Energy.Ca.Gov Patrick Saxton Advisor To Comm. Andrew Mcallister CALIFORNIA ENERGY COMMISSION 1516 NINTH ST., MS-37 SACRAMENTO CA 95814 (916) 651-0489 patrick.saxton@energy.ca.gov Jennifer Guzman Intern CALIFORNIA PUBLIC UTILITIES COMMISSION EMAIL ONLY EMAIL ONLY CA 00000 jennifer.guzman@cpuc.ca.gov Jessica T. Hecht Alj CALIFORNIA PUBLIC UTILITIES COMMISSION EMAIL ONLY EMAIL ONLY CA 00000 jhe@cpuc.ca.gov Matthew Tisdale CALIFORNIA PUBLIC UTILITIES COMMISSION EMAIL ONLY EMAIL ONLY CA 00000 (415) 703-5137 MWT@cpuc.ca.gov Patrick Doherty CALIFORNIA PUBLIC UTILITIES COMMISSION EMAIL NLY EMAIL ONLY CA 00000 (415) 703-5032 pd1@cpuc.ca.gov Shannon O'Rourke CALIFORNIA PUBLIC UTILITIES COMMISSION ENERGY EMAIL ONLY EMAIL ONLY CA 00000 Tim Drew CALIFORNIA PUBLIC UTILITIES COMMISSION EMAIL ONLY EMAIL ONLY CA 00000 tim.drew@cpuc.ca.gov Tory Francisco CALIFORNIA PUBLIC UTILITIES COMMISSION ENERGY DIVISION - RESIDENTIAL PROGRAMS EMAIL ONLY EMAIL ONLY CA 00000 (415) 703-2743 tnf@cpuc.ca.gov Whitney Richardson CALIFORNIA PUBLIC UTILITIES COMMISSION ENERGY DIVISION - RETAIL RATES EMAIL ONLY EMAIL ONLY CA 00000 (415) 703-2108 whitney.richardson@cpuc.ca.gov Zaida C. Amaya CALIFORNIA PUBLIC UTILITIES COMMISSION ENERGY DIVISION - RESIDENTIAL PROGRAMS EMAIL ONLY EMAIL ONLY CA 00000 (916) 928-4702 zaida.amaya@cpuc.ca.gov Noel Obiora Attorney CPUC EMAIL ONLY EMAIL ONLY CA 00000 (415) 355-5539 noel.obiora@cpuc.ca.gov Paul S. Phillips CPUC ENERGY DIV EMAIL ONLY EMAIL ONLY CA 00000 (415) 703-1786 Paul.Phillips@cpuc.ca.gov Scott Murtishaw CPUC - EXEC DIV EMAIL ONLY
Kevin Fallon SIR CAPITAL MANAGEMENT EMAIL ONLY EMAIL ONLY NY 00000 (212) 993-7104 kfallon@sirfunds.com Ruth Hupart SOLAR ELECTRIC POWER ASSOCIATION 1220 19TH STREET, NW, STE. 800 WASHINGTON DC 20036 (202) 559-2032 rhupart@solarelectricpower.org Sara Birmingham SOLAR ENERGY INDUSTRIES ASSOCIATION 3300 NE 157TH PLACE PORTLAND OR 97230 (415) 385-7240 sbirmingham@seia.org Andy Schwartz SOLARCITY 3055 CLEARVIEW WAY SAN MATEO CA 94402 (650) 963-3879 aschwartz@solarcity.com Damon Franz Director - Policy & Electricity Markets SOLARCITY EMAIL ONLY EMAIL ONLY CA 00000 (650) 339-6091 dfranz@solarcity.com Daniel Chia Dir. SOLARCITY 3055 CLEARVIEW WAY SAN MATEO CA 94402 (650) 332-0452 dchia@solarcity.com Marc Kolb SOLARCITY 444 DE HARO STREET, SUITE 100 SAN FRANCISCO CA 94107 (650) 477-7292 mkolb@solarcity.com Mary Hoffman SOLUTIONS FOR UTILITIES, INC. EMAIL ONLY EMAIL ONLY CA 00000 (760) 724-4420 maryhoffmanRE@gmail.com Case Administration SOUTHERN CALIFORNIA EDISON COMPANY 2244 WALNUT GROVE AVENUE, PO BOX 800 ROSEMEAD CA 91770 (626) 302-6906 case.admin@sce.com Russell Garwacki SOUTHERN CALIFORNIA EDISON COMPANY 2244 WALNUT GROVE AVE. ROSEMEAD CA 91770 russell.garwacki@sce.com Melissa P. Martin Senior Regulatory Counsel STATESIDE ASSOCIATES EMAIL ONLY EMAIL ONLY VA 00000 (703) 525-7057 X-237 mpf@stateside.com Adam Gerza SULLIVAN SOLAR POWER OF CALIFORNIA, INC. 169 11TH STREET SAN FRANCISCO CA 94103 (310) 210-2392 adam@sullivansolarpower.com Holly Gordon Vp, Legislative & Regulatory Affair SUNRUN INC. EMAIL ONLY EMAIL ONLY CA 00000 (415) 684-9837 holly@SunrunHome.com Walker Wright SUNRUN INC. EMAIL ONLY EMAIL ONLY CA 00000 (415) 684-9980 WWright@SunrunHome.com Walker Wright SUNRUN, INC. Morgan Lee U-T SAN DIEGO