Designing electricity rates represents one of the single most important roles that utility regulators have in guiding if and how customers are able to participate in our new clean energy system. These rates determine how much a customer can save by installing solar on their home or business, by conserving energy at certain times of day, or by making other important energy management investments. The California Public Utilities Commission (CPUC) is in the middle of a critical set of revisions to time-of-use (TOU) rates for the state’s three big utilities, and a recent proposal for San Diego Gas & Electric (SDG&E) customers is raising alarm bells.
Under TOU rates, the price a customer is charged for electricity depends on the time of day. TOU rates, if designed well, can help create a more efficient, participatory clean energy system by sending accurate price signals to customers to use less power when it’s more scarce on the system, and use more when power is cheaper and more abundant. On Aug. 10, the CPUC is getting ready to issue a decision that will effect major changes to TOU peak periods for customers of SDG&E. Rate cases for PG&E and SCE will consider similar questions in the near future.
Now and for the last 30 years, SDG&E’s TOU peak period has been 11 am to 6 pm, which corresponds well with the time of maximum solar output. The peak period is certainly going to shift to later. That’s because the middle of the day, which used to be the most expensive time to provide power, is now increasingly supplied with solar and other renewable energy. However, to get rate design right, it is vital that the Commission use the right method to determine the time of highest total system cost.
Fortunately, in January 2017, the CPUC adopted strong overarching guidelines for how to set TOU periods that require including generation, transmission and distribution costs. While the highest generation costs are moving into the evening, transmission and distribution costs are still forecast to remain highest earlier, in summer afternoons, when total system usage peaks. Thus, including the full range of costs will tend to keep peak time of use periods earlier in the day.
In the SDG&E rate case, CPUC issued a proposed decision that largely followed the Commission’s TOU methodology. Then, the CPUC suddenly issued a change earlier this week that said although its previous proposal was consistent with the facts, the peak period should be 4-9 pm instead. No analysis was offered in the revised proposal to show that such a late peak period is consistent with the TOU guidelines already adopted in January.
The latest proposal is damaging to solar economics in San Diego. Worse, however, adopting this hasty change would set a bad precedent for critical TOU conversations that are happening statewide. It introduces new uncertainty for customers and industry participants statewide who expect the Commission to follow a thoughtful, participatory process in making such critical decisions. And if this same unfounded methodology is advanced in the larger territories of PG&E and SCE, it would have an even greater negative impact on the economics of customer investment in valuable solar power due to lower overall rates.
This kind of regulatory about-face undermines California’s clean energy and climate leadership. We encourage CPUC to slow down, rethink this proposal and use its already-approved methodology to determine TOU periods in this and future rate cases.