Southern California Edison could hike electricity rates

If you don't use much electricity, get ready to start paying more. If you use a lot of electricity, get ready to start paying less.

That's the gist of a proposed decision released last week by officials at the California Public Utilities Commission, who largely endorsed a utility industry proposal to fundamentally reshape how Californians pay for electricity. Critics say the new electricity rates, backed by Southern California Edison, would limit the incentive to save energy and discourage consumers from going solar.

Under the current rules, homes served by Southern California Edison pay higher prices for higher electricity use. That would still be true under the new rules, but the pricing differences wouldn't be nearly as stark, with costs rising for those who use the least and falling for those who use the most. The new rules would also mandate a minimum bill for all residential consumers, set at $5 for some low-income customers and $10 for everyone else.

The public utilities commission could approve the changes which would impact consumers served by Southern California Edison, Pacific Gas & Electric and San Diego Gas & Electric as soon as May 21, although a final decision is likely to be delayed. The minimum bills would take effect immediately, while the larger rate restructuring would be phased in over the next four years.

Consumer advocates and environmental groups have slammed the proposed decision, saying it would reduce the economic incentive for excessive energy users to cut back. They also say the new rules would unfairly punish people who don't use much energy, while benefiting those who use a lot.

The proposed decision "gives the utility essentially everything that they've asked for," said Evan Gillespie, western region deputy director of the Sierra Club's Beyond Coal Campaign.

"The proposal is deeply regressive," Gillespie said. "Most Californians are going to see their bills go up, and at the same time, the incentive to reduce your energy and go solar is also going to go down."

Utilities have framed the proposed changes as a matter of fairness, arguing that above-average energy users are currently subsidizing below-average energy users. High-end users, the thinking goes, are paying more than their fair share to maintain the electric grid, while low-end users are paying less than their fair share.

Officials with the public utilities commission endorsed that argument, writing in their proposed decision that current prices are unfair to those who use the most electricity. While the new rate structure could somewhat discourage conservation and solar adoption, they acknowledged, the current rates create "economic inefficiencies" and could lead to a "wasteful allocation of resources."

"This change will allow for the more accurate allocation of costs and for energy rates to more fairly reflect the cost of service," commission officials wrote.

Citing the proposed decision's economic language, Matthew Freedman a staff attorney with The Utility Reform Network, a ratepayer advocacy group called the document "a manifesto."

"There's a religious belief in economy theory here," he said. "This is a proposed decision that has a lot of emotion there in between the lines, and a lot of ideology."

Southern California Edison's residential customers currently pay for electricity in four tiers, with rates rising as energy users cross the threshold into each successive tier. Since last summer, rates have been set at 14.9 cents per kilowatt-hour for Tier 1; 19.3 cents per kilowatt-hour for Tier 2; 27.9 cents per kilowatt-hour for Tier 3; and 31.9 cents per kilowatt-hour for Tier 4.

Under the proposed changes, the number of tiers would gradually be reduced from four to two from 2015 to 2019. By 2019, electricity use in the higher tier would cost just 20 percent more than electricity use in the lower tier, as opposed to the 114 percent difference between the higher and lowest tiers now. It's not yet clear what the cost for each of the two tiers would be.

The elimination of the pricey third and fourth tiers will mean there's less incentive for high-end electricity consumers to invest in solar power and energy-efficiency measures, consumer advocates and environmental groups say. It could also mean those consumers will have less incentive to save energy in general.

"None of it is good. It's bad for solar, bad for energy efficiency, no doubt about that," said Brad Heavner, policy director for the California Solar Energy Industries Association, a trade group. "It could have been worse, but probably not a whole lot worse."

Utilities commission representatives have downplayed the seriousness of those concerns.

Scott Murtishaw, an energy adviser to commission President Michael Picker, said recent studies have shown that tiered rates don't necessarily lead to more conservation than other rate structures. He also argued that high upper-tier rates have had "unintended consequences," including punishing low-income households that use a lot of electricity because so many people are squeezed under one roof.

Even The Utility Reform Network, Murtishaw noted, supported a decrease from four tiers to three tiers.

"Virtually everyone agrees that four tiers, with this huge gap between the lower and upper tiers, is undesirable," he said. "What was contentious was how much reform. The general direction of reform was universally acknowledged."

Southern California Edison also called attention to the current structure's alleged unintended consequences, saying in a statement that high upper-tier rates have led to summer bill spikes during heat waves.

"Many of these customers are low-to-moderate income families with children or seniors on a fixed income," Edison said in a statement.

Critics, meanwhile, say the proposed changes would make rooftop solar systems less attractive to high-end electricity users, who are often in the best position to afford solar. Rooftop solar systems could take two to four years longer to pay for themselves under the proposed changes, according to the California Solar Energy Industries Association.

The changes could also come as a shock to current solar customers, who would see their savings diminished by the new electricity rates.

"The savings estimates that were provided to those customers by the solar companies were based on the assumption that the current tier structure would continue forever," Friedman said.

The outlook for rooftop solar could get even worse in three or four years, when the public utilities commission could add $10 fixed charges to most monthly electricity bills. Low-income customers enrolled in the California Alternate Rates for Energy program would see a $5 fixed monthly charge.

Edison and other utilities had pushed regulators to approve the controversial fixed charges immediately. While commission officials endorsed the idea of fixed charges, they chose to put them off a few years, opting instead for the minimum bills for now.

The minimum bills aren't likely to affect many consumers, because so few people have bills under $10 to begin with, but the fixed charges would have wide-ranging impacts on electricity consumers. Utilities say they're necessary to ensure that all customers including solar customers pay their fair share to maintain the grid, but critics liken them to a regressive tax that would harm low-income households and slow the growth of rooftop solar.

The five members of the California Public Utilities Commission will need to vote on the proposed changes. Commission President Michael Picker presumably supports the proposed decision, which his staff was involved in drafting, but it's not yet clear how the other commissioners will vote.

"It's California versus the IOUs," Gillespie said, referring to the investor-owned utilities. "I hope that the commission can see through the arguments that the utilities made. We'll see."

Sammy Roth covers energy for The Desert Sun. He can be reached at sammy.roth@desertsun.com, (760) 778-4622 and @Sammy_Roth.

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