New California proposal: Use less electricity, pay more

Crew lead Luis A. Hernandez from Luminalt works on racks on a roof for solar panels on a Twin Peaks home in San Francisco, Calif., on Thursday, December 4, 2014. San Francisco may soon pass a program that will give city homeowners and businesses a creative way to finance the installation of solar panels as well as water and energy efficient projects. less Crew lead Luis A. Hernandez from Luminalt works on racks on a roof for solar panels on a Twin Peaks home in San Francisco, Calif., on Thursday, December 4, 2014. San Francisco may soon pass a program that will ... more Photo: Liz Hafalia, The Chronicle Photo: Liz Hafalia, The Chronicle Image 1 of / 8 Caption Close New California proposal: Use less electricity, pay more 1 / 8 Back to Gallery

In the next four years, Californians who use the least electricity may see their utility bills go up — while those who use the most get a break.

State energy regulators on Tuesday proposed major changes to the way residents pay for electricity in the biggest overhaul of utility rates since California’s energy crisis more than a decade ago.

The state’s big, investor-owned utility companies currently charge different prices for electricity based on four “tiers” of usage as a way to encourage conservation. The proposal issued Tuesday by two administrative law judges at the California Public Utilities Commission would cut that number to two tiers by 2019, with only a 20 percent difference between the prices charged for each. Right now, PG&E’s top residential tier charges twice as much for electricity as the bottom tier.

The changes may seem counter to the state’s long-standing push for energy efficiency. But, according to the commission’s staff, the most efficient California households currently pay less for electricity than the utilities spend supplying it to them. They are, in effect, subsidized by households in the higher tiers.

“The status quo is a form of subsidy,” said Scott Murtishaw, energy adviser to commission President Michael Picker.

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The proposed changes go further than just cutting the number of tiers.

Starting this summer, customers would have to pay a minimum bill of $10, with low-income households paying at least $5 per month. The utilities could later change that minimum bill to a fixed monthly charge for all users, with the commission’s approval.

And for most customers, electricity rates would vary by the time of day, starting in 2019. Power would probably cost the most when usage peaks in the late afternoon, with cheaper prices at night — another way of encouraging conservation.

The changes would apply to the state’s big, investor-owned utility companies, not the municipal utilities that serve such cities as Sacramento and Los Angeles. All of the changes require the approval of the five-member utilities commission to take effect. A vote could come as early as May 21.

PG&E backs idea

Pacific Gas and Electric Co. on Tuesday did not offer a forecast of how the changes would affect a typical residential bill. But the utility agreed with the idea of shifting some costs among customers.

“Too many residential customers and their families pay too much while others pay too little based on the cost of providing service,” said spokesman Greg Snapper. “There’s no question that California’s electric rates are outdated and too complicated. We will continue to work with the CPUC as it reaches a final decision.”

Years in the making, the proposal comes in response to a 2013 state law that authorized the commission to fundamentally rethink utility rates. But a similar proposal from the commission early last year prompted a fierce lobbying fight among the utilities, consumer advocates and solar companies worried that the changes could hurt their fast-growing industry.

Consumer groups view time-of-use rates with suspicion. Some utility customers, they say, need to use electricity even at peak times of day. That’s particularly true in California’s hot inland areas, where air conditioning during the summer isn’t a luxury.

“Many customers who may be especially vulnerable to heat — senior citizens — may be home during the day,” said Mindy Spatt, spokeswoman for The Utility Reform Network.

Cutting the number of tiers from four to two also raises concerns among consumer groups and environmentalists, who consider the existing tier system a powerful incentive for conservation. The proposed changes, they say, would punish people who are doing exactly what the state wants — using less energy. Cutting energy bills for the biggest users, they say, also could make solar power less attractive.

Opposition view

“The commission basically handed the utilities exactly what they have been lobbying for,” said Evan Gillespie, director for the Sierra Club’s My Generation campaign that encourages the use of renewable power. “It jacks up bills for low-income customers, lets energy hogs off the hook, and will slow the transition to clean energy.”

But Murtishaw said the changes would, in some ways, represent a return to the way electricity was priced before the state’s energy crisis of 2000 and 2001. At the start of the crisis, utilities had two tiers of usage, roughly 15 percent apart. That expanded to five tiers in the aftermath of the crisis. And since legislators had frozen rates for the bottom two tiers during the emergency, rate increases started hitting the upper tiers instead, widening the price gap between those using the most and those using the least.

“The decision would shift the tiers and the collection of revenue back to a level that’s more in line with historical norms,” Murtishaw said. “So are we giving some huge gift to high users? If you look only at the last few years, you’d say yes. But if you look over a longer time frame, we started piling on the costs to the high users in the late 2000s.”

Under the proposal, Pacific Gas and Electric Co. would cut the number of tiers to three next year, then two in 2018. And in each year through 2019, the difference between the top and bottom tiers would shrink.

David R. Baker is a San Francisco Chronicle staff writer. E-mail: dbaker@sfchronicle.com Twitter: @DavidBakerSF