California may adopt time-of-use electric rates

OREANDA-NEWS. April 24, 2015. California utility regulators are considering overhauling how most residential customers pay for power by switching to rates that change based on what time of day electricity is consumed.

Two administrative laws judges at the California Public Utilities Commission proposed the switch to time-of-use rates this week in the culmination of a three-year review of rate reforms for the state's largest investor-owned utilities: Pacific Gas & Electric, San Diego Gas & Electric and Southern California Edison. Commission members will have to endorse the changes before they advance.

The proposed changes, which also include a plan to eventually start charging customers \\$10/month to cover the basic costs of service, will prove controversial. The proposed changes have drawn scorn from advocates of rooftop solar because of potential increases in costs for those customers.

The three California utilities now employ a four-tier rate structure in which customers using the most electricity pay an average of \\$0.34/kWh, more than double the \\$0.14/kWh average rate for residential consumers that consume the least electricity.

Making time-of-use rates the default option for residential customers could produce long-term savings by creating an incentive to shift electricity use away from times of high demand, the judges said in their proposed decision on 21 April. State utilities regulators already use time-of-use rates as the default for industrial and commercial customers, but it has been less of an option for residential customers until the widespread adoption of smart meters that track real-time usage. California ratepayer advocates project time-of-use rates would result in 2,400MW of peak load reduction.

The judges said time-of-use rates could make the state's load curve more manageable. It could smooth out the state's "duck curve" load shape, in which load drops at mid-day when solar output is high but rises steeply during the evening peak as solar output drops.

The proposed decision would also cut in half the number of tiers, switching to a two-tier system with a 20pc price differential. The judges said this would keep an incentive to conserve power but be more equitable to customers, as high-use customers are now essentially subsidizing low-use customers.

Among the most controversial aspects of the proposed rate reforms will likely be starting to require customers to pay fixed monthly charge of \\$10/month. The judges said this approach was reasonable because the existing system meant vacation homes owners and net energy metering customers often pay little or nothing toward the fixed costs of maintaining the grid.

The fixed charge will be offset in part by lower overall rates, but the judges recognized that most customers could initially likely perceive the charge as a rate hike. To avoid this perception, the judges decided to delay the fixed charges and instead adopt a minimum bill approach of \\$10/month for most customers.