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Current electricity rate structure is outdated Alejandra Mier Y Teran | Fri, Jun 28 2013 12:29 PM

An extreme inequity exists on how electricity rates are set driven largely by where you live and whether you need air conditioning to cool your home. This disparity oftentimes unfairly impacts low-income, working families who contribute greatly to the success of South San Diego County’s economy.

While well intentioned, the electric rate system established after California’s energy crisis provides subsidies for people who use less electricity, while forcing those in the upper two tiers to shoulder the bulk of increased utility costs.

What if gasoline prices were set the same way electric rates are? Can you imagine if the next time you go to fill up your tank, you see that after the first 10 gallons, the cost goes from $4 to $8 a gallon for the next five gallons, and then jumps again to $10.50 for the last five gallons?

It might not sound fair, or logical, but that’s how we pay for our electricity today. 

Consider a family of four who uses 1,000 kilowatt-hours every month. They keep the same schedule, using the same appliances and electronics the same amount every week. Due to the skewed rate structure, they pay $35 for the first 250 kilowatt-hours of the month, but more than twice as much ($74) for the last 250.  That’s like paying more per gallon of gas based on the number of miles you drive.

This “reverse Costco model” started during the state’s energy crisis in 2001, when the wholesale cost of power spun out of control and San Diego Gas & Electric customers across San Diego County saw their utility bills skyrocket.  State lawmakers stepped in to protect low-income customers from the rate shock and to encourage conservation. They put in place a tiered rate structure in which the cost rises significantly per usage level as you use more electricity.

But, then, the lawmakers capped the cost for consumers in the lower tiers who use less energy.

So, for nearly a decade, all residential electric cost increases approved by the California Public Utilities Commission (CPUC) were shouldered by customers in the upper two tiers. Some might say – if you use more, you should pay more. But how much more is fair?

Rates for SDG&E’s tiers 1 and 2 have gone up only 15 percent since 2001, while tier 4 customers’ costs today are 168 percent higher. That makes a big difference for customers who rely on air conditioning to cool their homes, have large families that need more energy or can’t afford to make their homes more energy efficient.

The wheels are about to come off the energy bus in California unless the current outdated, inequitable rate system gets an overhaul. The only way to do that is to change state law.

State Assemblyman Henry Perea (D-Fresno) has introduced Assembly Bill 327, the Ratepayer Equity Act, which would return the CPUC to its historic ratemaking role and allow regulators, utilities, elected officials and other stakeholders to collaborate in developing a simple, sensible and sustainable rate structure.  The State Assembly voted in favor of the bill on May 23, and it will now go to the State Senate for a vote. 

Placing more authority with the CPUC will help ensure costs are distributed more evenly and fairly while maintaining critical CARE and Medical Baseline programs for those who need them. This is why I strongly support this bill and urge the California State Senate to vote in favor of it.

Mier y Teran is Executive Director of  Otay Mesa Chamber of Commerce.

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