What can be done to keep California’s utility bills from getting even higher?
Feb 28, 2022
What can be done to keep California’s utility bills from getting even higher?
The California Public Utilities Commission is holding a two-day discussion on what can be done to slow rising utility bills. (Associated Press )
California Public Utilities Commission listens to a range of suggestions, including removing the cost of state-mandated programs — such as fire-mitigation fees— from electric rates and instead financing those costs through the state’s general fund.
FEB. 28, 2022 7:38 PM PT
As rising power bills leave many Californians howling — with San Diego Gas & Electric customers paying the highest rates — the regulatory agency that approves what the state’s three big investor-owned utilities can charge opened a two-day workshop Monday to discuss what can be done to keep prices from climbing even higher.
The California Public Utilities Commission, known as the CPUC, heard from a range of voices that included consumer and trade groups, energy analysts, environmental organizations, academics, and the power companies themselves during the virtual meeting opening day.
CPUC commissioners, as well as representatives from the California Energy Commission, the state legislature and the California Air Resources Board listened in and asked follow-up questions.
“The commission must carefully consider whether and what ratepayers can withstand regarding further rate increases,” said CPUC commissioner Darcie Houck. “We need to explore innovative methods to help curb increases and to protect the most vulnerable Californians … We have many challenges ahead of us this year and affordability needs to be at the top of that list, along with safety and reliability.”
The hearing comes as California ratepayers have experienced sharp increases in their utility bills this winter.
The class average for residential SDG&E electricity customers rose 7.8 percent from December to January. And compared to January 2020, average SDG&E residential customers with natural gas hookups saw their costs jump 24.6 percent when the new year began.
According to the U.S. Bureau of Labor Statistics, the San Diego region in January had the highest average electricity price in the country, at 41.9 cents per kilowatt-hour.
“I’m concerned about rate shocks,” said Assemblymember Eduardo Garcia, D-Coachella and chair of the Utilities and Energy Committee.
Last May, the CPUC issued a 153-page white paper that predicted residential rates going up an average of 4.7 percent per year through 2030 for customers in the SDG&E service territory, 3.7 percent each year for PG&E and 3.5 percent a year for Southern California Edison.
Melissa Brandt, a vice president at East Bay Community Energy, a community choice aggregation program that serves about 1.5 million customers in Alameda County, proposed funding what’s called “public purpose programs” through state tax revenue instead of electric utility rates.
Public purpose programs include energy efficiency plans and programs such as California Alternate Rates for Energy (CARE) and Family Electric Rate Assistance Program (FERA) that provide low-income customers discounts on their monthly utility bills.
Brandt estimated that the cost of public purpose programs across the state comes to $2.7 billion a year. “Our lower-income customers who are not CARE- or FERA-eligible are paying just as much as customers who have much higher incomes,” Brandt said.
Scott Crider, SDG&E’s senior vice president of customer services and external affairs, called for lawmakers in Sacramento to “immediately pass legislation to remove the cost of state-mandated public purpose programs from electric rates and instead finance those important programs through the state’s general fund.”
Making the switch, Crider said, can remove $350 million in annual costs and reduce the system average rate by about 6 percent. That would translate to a savings of about $90 a year on bills for an average SDG&E customer.
Another big driver in electric rates is the cost that utilities spend on wildfire mitigation programs. SDG&E, for example, touts spending $3 billion in ratepayer funds since the deadly Witch, Guejito and Rice wildfires ripped through the San Diego area in 2007.
Michael Wara, director of the Climate and Energy Policy Program at the Woods Institute for the Environment of Stanford, suggested charging more for customers who live in the areas prone to wildfires than for customers who do not. “It could at least reduce the impacts to some degree of the costs of utility wildfire (programs), particularly on low-income residents that do not live in a high-risk area and that’s the set of people I’m most concerned about,” Wara said.
California is wrestling with keeping pace with its aggressive climate goals while making sure the electric grid is reliable and affordable. The state has promised to derive 100 percent of its electricity from carbon-free sources by 2045 or sooner. Two years ago, Gov. Gavin Newsom announced that by 2035 no new cars and trucks with internal combustion engines will be sold in California.
Catherine Yap of the California Large Energy Consumers Association, a trade group representing industrial electric customers, said rates have “been blasting off like a rocket” in the last three years. She said utilities should not be in the business of constructing electric vehicle charging stations in places like apartment buildings because such projects are not in keeping with the natural monopoly role of power companies.
“There’s no reason the utilities should be involved in this,” Yap said. “The state? Absolutely, provide incentives, provide tax breaks … but this is not a public utility issue.”
Mark Toney, executive director at The Utility Reform Network, or TURN, a consumer group based in San Francisco, offered recommendations that included hiring an independent auditor and adopting an inflation cap on rate increases. Toney said the CPUC needs to hold a firmer line on approving projects pitched by the utilities.
“We are in a state of emergency when it comes to affordability,” Toney said. “Ratepayers depend on you for leadership, to make the hard decisions, to stand up and set limits on rate increases so they can continue to keep their lights on.”
The commission guarantees a “return on equity” to utility shareholders when power companies undertake or go forward on infrastructure projects. The return, or profit, generally hovers around 10 percent. A CPUC staffer on Monday brought up the issue of lowering the return on equity, to perhaps 7 percent.
Robert Kenney, senior vice president at Pacific Gas & Electric, said California utilities face higher financial risks than those in other states. “California does have a long history of being big and bold and innovative in energy policies,” Kenney said. “But those policies do come with risks, such as the California energy crisis of 2000 and investors recall that and take that into account when making decisions on where to place their capital.”
Monday’s session also addressed the impacts higher rates have on low-income customers and how to make sure those communities are not left behind in the clean-energy transition.
“These are some families that have to decide whether they’re going to turn on the heat when it’s 30 degrees outside; whether or not they’re going to turn on the air conditioner when it’s 110 degrees outside,” said Abigail Solis, manager of sustainable energy solutions for Self-Help Enterprises, a nonprofit based in the San Joaquin Valley. “Many families are choosing to be extremely uncomfortable every day in their homes because they cannot afford to pay the high rates of energy.”
The workshop wraps up Tuesday with a proposal on natural gas rates, a roundtable discussion on affordability issues and a public comment period.