SDG&E's Residential Rate Reform Proposal Seeks Fairness For All

SDG&E Proposal Could Reduce Upper-Tier Rates by 30 Percent; State Public Participation Hearings Kick-off in San Diego

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Sep 16, 2014, 05:14 ET

SAN DIEGO, Sept. 16, 2014 /PRNewswire/ -- Starting today, San Diego Gas & Electric (SDG&E) customers will have the chance to speak out about proposed changes in electric rates in the first of 16 public participation hearings on the issue scheduled throughout California over the next several weeks. Representatives of the California Public Utilities Commission (CPUC) are hosting the hearings and will consider all of the public input as part of the ongoing regulatory process before making a decision.

SDG&E, and the state's other investor-owned electric utilities, filed rate reform proposals earlier this year to implement the goals of Assembly Bill 327, the Ratepayer Equity Act, which became law in January. The measure allows the CPUC to make changes to the current outdated rate structure, including lifting restrictions on rates for lower-use customers, which is a leftover from the energy crisis.

"Many of our customers are being negatively impacted because they use more energy based on the geographic area in which they live in or the size of their families," said Caroline Winn, SDG&E's vice president – customer services. "Our goal is to 'level the playing field' and to move rates for all customers closer to what it actually costs the utility to provide electric service."

The CPUC has given the utilities a road map for rate design changes that is guided by core principles, including spreading costs fairly across all customers, making rates easier to understand while also continuing to encourage conservation. Earlier this summer, regulators took an important first step to narrow the gap between the highest and lowest rates paid by California's utility customers. Longer-term rate reform will help to ensure that all customers share more equally in supporting ongoing enhancements to the power network that everyone uses and depends on to meet their energy needs.

SDG&E's long-term rate reform proposal includes the following key elements:

Introduction of a monthly service fee: All our customers are connected to the electric grid whether they generate the power they use or get their power from SDG&E or some other provider. This fee covers the cost to be connected to the electric grid, such as the electric meter, the wire from your house to the utility pole that allows you to receive electricity from SDG&E's system, and the people and technology that figure out your bill every month. The fee, as mandated by AB 327, would be phased in gradually, starting at $5 next year and increasing to the approved cap of $10 by 2018. (For low-income customers, the fee would be half of those proposed amounts.)
- Important to note: This is not an add-on or incremental charge. The cost-per-kilowatt-hour of electricity in the upper tier would be reduced to offset the fee. SDG&E's revenues and profit will not change.
Reduction in the number of rate tiers: Today, residential electric rates have four tiers, with the cost increasing as a customer uses more electricity. Because rates for lower-use customers were essentially frozen for more than a decade, the difference in the cost-per-kilowatt-hour between the lowest and highest tiers has skyrocketed. SDG&E's proposal would reduce the number of tiers to two and shrink the current difference between the tiers from 136 percent today to 20 percent by 2018, while continuing to encourage conservation.
Compliance with the legislative low-income discount cap: The proposal would continue to protect the most vulnerable customers, but proposes a gradual reduction in the California Alternative Rates for Energy (CARE) discount to the legislatively mandated range of 30-35 percent by 2018.

State legislation essentially froze rates for lower-use customers during the energy crisis to protect them in an unstable energy market; however, their rates stayed the same for a decade with only slight increases in just the last couple of years. As a result, hundreds of thousands of customers today are paying approximately $350 million more a year than they should be for the significant growth in technology and infrastructure over the past decade including improvements to the power network, more renewable energy, and compliance with environmental mandates.

"Unfortunately, below-cost rates have undermined the incentive to conserve, while punishing others who use more electricity with rates that are significantly higher than the cost to serve them," said Winn.

If the CPUC approves SDG&E's proposal, lower-tier rates are expected to see a moderate increase of 8 percent on average, while higher-use rates are expected to get immediate relief with a decrease of as much as 30 percent.

SDG&E is a regulated public utility that provides safe and reliable energy service to 3.4 million consumers through 1.4 million electric meters and 861,000 natural gas meters in San Diego and southern Orange counties. The utility's area spans 4,100 square miles. SDG&E is committed to creating ways to help customers save energy and money every day. SDG&E is a subsidiary of Sempra Energy (NYSE: SRE), a Fortune 500 energy services holding company based in San Diego. Connect with SDG&E's Customer Contact Center at 800-411-7343, on Twitter (@SDGE) and Facebook.

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SOURCE San Diego Gas & Electric (SDG&E)