This document summarizes a presentation given to the Kern Taxpayers Association about electric rate proceedings and unsustainable residential rates. It shows that without reform, the highest tiers of residential electricity rates will continue increasing far above the cost of service. It discusses PG&E's past efforts to reduce the highest tiers, which met with some success but were limited by legislative restrictions. Key upcoming CPUC cases and newly introduced legislation could further reduce the highest tiers and return more ratemaking authority to the CPUC.

1. Rate Proceedings Related to Electric
Rates and Rate Design
Dennis Keane
Presentation to Kern Taxpayers Association
February 21, 2013

2. Without Reform – Residential Rates Are Unsustainable
60.00
Tier 5 (> 301% of Baseline)
Tier 4 (201 - 300% of Baseline)
54.0
Tier 3 (131 - 200% of Baseline)
Tier 2 (101 - 130% of Baseline)
Rate Revolt
in Central Valley 49.8
50.00 Baseline (Tier 1)
CARE Tier 3 50.0
CARE Tier 2
42.5 CPUC
CARE Tier 1
Reform
Average Residential Cost to Provide Service
40.00
Energy 34.0
Crisis
30.00
Cost
30.0
W
of
h
k
¢
)
(
/
Service
Current
Rates 19.6
20.00
17.3
15.0
13.2
10.00
0.00
2
9
1
3
9
1
4
9
1
5
9
1
6
9
1
7
9
1
8
9
1
9
1
0
2
1
0
2
0
2
3
0
2
4
0
2
5
0
2
6
0
2
7
0
2
8
0
2
9
0
2
1
0
2
1
0
2
1
0
2
3
1
0
2
4
1
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5
1
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1
0
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8
1
0
2
9
1
0
2
0
2
1
0
2
0
2
2

3. Steep Tiers Lead to High Bill Volatility
Kern County Custom er
Mild Sum m er Month Extrem e Sum m er Month
Rate Usage Charges Usage Charges
($/kWh) (kWh) ($) (kWh) ($)
Energy Charges
Tier 1 $0.13230 567 $75 567 $75
Tier 2 $0.15040 171 $26 171 $26
Tier 3 $0.30025 397 $119 397 $119
Tier 4 $0.34025 567 $193 567 $193
Tier 5 $0.34025 298 $101 1,298 $442
Total 2,000 $514 3,000 $854
– Usage increases 50 percent from mild to extreme
weather month (e.g., from June to July)
– But bill increases 66 percent
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4. PG&E’s Past Efforts to Reduce High Upper-Tier Rates
– In its 2011 GRC PG&E proposed:
• Lower baseline quantities;
• Collapse non-CARE Tiers 3 and 4 rates into a single Tier 3 rate;
• Introduce CARE Tier 3 rate; and
• Introduce customer charges for non-CARE and CARE
– Kern Tax intervened in support of PG&E’s proposals
– CPUC decision in May 2011 adopted many (though not all) of PG&E’s proposals
• Approved lower baseline quantities and CARE Tier 3 rate
• Reduced Tier 3 vs. 4 rate differential from 11 to 4 cents/kWh
• Rejected customer charge, primarily on legal grounds
– PG&E, SCE and Kern Tax appealed this decision, but appeal was rejected
• Result: Top-tier rate reduced from 40 to 34 cents/kWh
– In its pending 2012 RDW PG&E is proposing:
• Further reduction in baseline quantities
• Would reduce Tier 3 and 4 rates by 2 to 3 cents/kWh
4

5. Key CPUC Cases Relevant to Residential Rates
• Residential Rates Order Instituting Rulemaking (R.12-06-013)
– Begun in June 2012
– So far, workshops and comments
– Rate proposals to be filed in May 2013
– Decision scheduled for September 2013
• PG&E’s 2014 GRC Phase II
– Will be filed in April 2013
– Will include proposals to further reduce upper-tier rates
– However, absent removal of legislative restrictions, CPUC
has only very limited ability to fix the problem
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6. Key Legislation Relevant to Residential Rates
• Assembly Bill 327
– Rate Payer Equity Act
– Introduced last week by Assembly Member Perea (Fresno)
• AB 327 repeals restrictions on residential rates implemented by
the legislature in AB 1X (2001) and SB 695 (2009)
– Returns rate-making authority to the CPUC that it had prior
to the energy crisis
– Codifies rate-making principles from CPUC’s OIR
– Mandates CPUC report to legislature by end of January 2014
• Committee hearing anticipated in April
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7. Thank you.
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