Residential electricity rates

By CMTA Staff

Capitol Update, June 13, 2013

CMTA supports a bill, AB 327 (Henry Perea, D-Fresno), that would eliminate the rate restrictions adopted during the energy crisis and would provide the California Public Utilities Commission (CPUC) the flexibility to implement what they determine to be the appropriate course of action on rate design and approve rate structure modifications.

While AB 327 is being proposed because of problems with the tiered residential rates, manufacturers have a stake in rate design for every class of customer.  The potential for cost-shifting is ever-present. 

Restrictions in current law have created serious distortions in residential rates. Electric investor-owned utilities are required to maintain a tiered rate structure under which some customers are charged for their usage at levels far below the cost of service, while others are charged far above. This creates a situation where some customers are providing substantial subsidies – essentially paying for their own electric service, and part of the electric service of their neighbors. Before the energy crisis, the highest tiered rate was only 20 percent higher than the lowest tiered rate. Today, the highest tiered rate is between two to three times higher than the actual cost of service. Without legislative action, these existing rate restrictions and the rapidly diverging level of rates between lower and upper-tier usage will continue to rise.

AB 327 will allow the CPUC to consider rate reform recommendations from all parties and then begin to implement a fair and stable transition plan to sustainable and equitable rate design models. The bill requires the CPUC to report to the Legislature its findings and recommendations by January 31, 2014.

The bill has passed the Assembly and awaits its policy hearing in the Senate Energy, Utilities and Communications Committee.

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