Monday, February 8, 2010

PG&E customers feel sticker shock from rising rates

If a household's power use rises above that allowance, a higher rate applies for every kWh over the threshold. Prices rise incrementally as the amount of power used crosses into each additional tier.
PG&E's baseline rate is comparable to -- even a little less than -- baseline rates charged by Southern California Edison, another investor-owned company, or the Los Angeles Department of Water and Power, the municipal utility that serves much of metropolitan L.A.
In the Valley, PG&E's charge for 1,000 kWh -- about what the U.S. Department of Energy says an "average" home uses in a month -- is about $177 in Stockton and $168 in Fresno. Southern California Edison charges about $161 for the same amount of power in Bakersfield. In Pasadena, served by LADWP, the cost is about $135.
Elsewhere in the Southwest, the cost for 1,000 kWh is about $98 in Tucson, Ariz., and $129 in Las Vegas.
But customers with larger homes to cool, or swimming-pool pumps to run, can easily find themselves reaching into PG&E's three higher-rate tiers, where the price per kWh can be 12% to 38% higher than Edison's.
"Tiered rates are designed to reward conservation," said Mindy Spatt, a spokeswoman for The Utility Reform Network, or TURN, a consumer advocacy group.
But because the baseline and lower tiers are protected from dramatic rate increases, "when you look at how much higher PG&E's tiers are, all of the rate hikes have gone to the top tiers," Spatt said.
At its highest residential tier, PG&E charges 47.39 cents for a kilowatt-hour.
That's more than Southern California Edison, where the top rate is 34.25 cents; San Diego Gas & Electric, with a top tier of 20.2 cents; or the Sacramento Municipal Utility District, where the highest rate is 17.02 cents.
The differences are even more striking when compared to the highest rates charged in other southwestern states: 15.21 cents in Albuquerque, N.M., 12.1 cents in Las Vegas, Nev., or 11.47 cents in Austin, Texas.
There are plenty of factors that play into the rates, said PG&E spokesman David Eisenhauer. And when it makes its case to the California Public Utilities Commission for approval of its rates, the utility is entitled to recover its costs of doing business: fuel to generate the electricity, sending the juice out over transmission lines, maintaining wires and poles -- and a "fair return" for the company's shareholders.
"It's the pipes, poles and wires, and the cost of the actual commodity itself," Eisenhauer said. "We apply to the PUC and tell them how much money we need to run our business, and once that's determined, we distribute that based on the rate structure approved by the commission."
But such costs aren't unique to PG&E. Other utilities have to buy electricity or the fuel to produce it, and they have to maintain their distribution lines and other infrastructure, too. So why is PG&E's top tier so much higher than anyone else's?
Eisenhauer's explanation: PG&E's baseline allowances are higher than other California utilities.
How do electricity rates stack up?

View How do electricity rates stack up? in a larger map
"That results in more customers at a protected level," he said -- and it means increases can only be distributed among the upper levels.
In its last general rate increase in 2007, PG&E opted to design its rates to load the increases more heavily on the top two tiers, Eisenhauer said, while other utilities chose to spread the increases more evenly.
Feeling the sting
Spatt offers a different explanation for the rate discrepancy: PG&E's billion-dollar bottom line.
In its most recent financial statement, the utility's parent company, PG&E Corp., reported total profits of about $957 million through the first nine months of 2009.
"I don't know if it's greed or if it's overreaching. ... Maybe it's because they have a guaranteed rate of return," Spatt said. "But it's an extremely top-heavy utility with exorbitant salaries and huge lobbying and marketing expenses."
Amid the jumble of baselines, rate tiers, cost factors and profit margins, there's no precise answer to what it all means to an "average" power bill.
The U.S. Department of Energy estimates a typical American household will use about 11,000 kWh of electricity in a year, or about 916 kWh in a month. But that doesn't take into account geographical differences or seasonal swings in demand.
And other variables affect a home's energy use and its power bill -- the size of the home, whether there's a swimming pool or spa, the age and efficiency of appliances, and how vigilant the residents are about conservation.
But Spatt isn't convinced that any of those variables justify what PG&E charges at its top tiers -- or the extra $1.7 billion the would be generated in three years by a rate increase the utility is seeking from the PUC.
"TURN is going to review every single word of that document, and we're going to challenge everything we think is unnecessary, that is padding, that is overreaching," she said. "Ultimately, the problem is that PG&E keeps raising the rates, and the PUC keeps letting them do it."


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