ORIGINAL REPORTING: The Conundrum Of Controlling Rates With Rising Costs
California's dilemma: How to control skyrocketing electric rates while building the grid of the future; New ideas include income-based rates, publicly-funded infrastructure, utility entrepreneurship, and customer-funded wildfire insurance.
Herman K. Trabish, April 26, 2021 (Utility Dive)
Editor’s note: This is a California challenge now but policies and extreme weather events will soon bring it to most states.
California Public Utilities Commission (CPUC) President Marybel Batjer says the state will not let skyrocketing electricity rates threaten reliability or the state's policy goals. But affordability is a growing concern as California works toward a "future grid" and a dynamic new power system to meet the climate crisis and related extreme weather events, stakeholders and CPUC Staff maintain. Rates rising far faster than inflation are straining the budgets of vulnerable customers and new approaches that protect policy goals and customer bills are urgently needed, they agree.
Protecting ratepayers as California transitions to distributed energy resources (DER) and economy-wide electrification "will require aggressive actions," according to a report released by CPUC Staff in February.
At a day-long CPUC hearing, California utilities proposed cutting wildfire costs and raising revenues outside rates. Stakeholders proposed shifting the costs of supporting DER and electric vehicles (EV) out of rates to other sources of revenues. Others proposed breakthrough rate designs that could make managing costs more equitable. Staff report finds rising rates
The upward pressure on rates could force unwelcome choices on policymakers, especially to protect low to moderate income (LMI) customers, according to the Staff report.
Driven by clean energy and electrification mandates as well as utility investments in system modernization, residential rates across California have risen faster than inflation since 2013, Staff found. And due to Net Energy Metering (NEM) and other DER incentives, impacts have been worse for LMI customers, it said.
By 2030, Pacific Gas and Electric (PG&E) residential rates will be 40% higher than if they had followed inflation, Staff projected. Southern California Edison (SCE) rates will be 20% higher and San Diego Gas and Electric (SDG&E) rates will be 70% higher. LMI customers are "like canaries in a coal mine," said Jennifer Dowdell, an energy policy analyst for customer advocacy group The Utility Reform Network (TURN). "Rates are growing so much faster than wages that even the middle class may soon need rate relief." The rise in rates is impacted by other factors, Staff reported… click here for more