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Published on March 25th, 2010 | by Susan Kraemer

19

PG&E's New Flatter Rate Proposal Could Slow Rooftop Solar Development in California



People in California’s hinterlands pay a very high price for electricity. They use three times more power than the average; trying to stay cool, and  they now pay more than four times the base rate for it. They think that’s not fair, and PG&E agrees with them. PG&E is applying for a rate change to reduce the top tier rate, and spread the cost of that higher energy use amongst the rest of their ratepayers.

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But it’s no secret in solar circles that one reason for the boom in California solar has been those high rates paid by the most profligate energy consumers in the state. A “front-of-the-bay” Bay Area counterpart who (by not needing air conditioning or a swimming pool) pays about $100 for an average of just 550 kilowatt hours a month.

But someone with a swimming pool and air conditioning, in back of the Berkeley Hills, in the stifling cities of Concord, Walnut Creek, Pleasanton and Livermore – that see summer temperatures routinely over 95 degrees Fahrenheit – can easily spend up to $400 a month for 1,500 kilowatt hours a month of electricity.

They want to reduce that amount to only three times the base rate of 11 cents a kilowatt hour – to 30 cents a kilowatt hour, dropping almost 20 cents. Instead of the current five tiers, based on usage, PG&E proposes a switch to three tiers.

The rate for the bottom two tiers would remain the same, but many customers who are now in those two tiers would be placed in a higher tier (with the reduction from five to two tiers) and, as a result, pay a higher rate. Overall, PG&E would not make more money on the change. The high energy users would drop about $100 off their monthly bills, and the rest of us would pay $10 more a month to make up the difference.

But, if PG&E lowers the steepest rates of the inland residents, that will lower the pricing incentive that they have to switch to cleaner solar power.

Currently solar is cheaper than PG&E right away for those who have those high bills.  So it has been easy for many local solar companies to compete with PG&E  – part of the reason that California’s green jobs have grown three times as fast as jobs in the moribund regular economy.

Non-utility solar now supplies more than 2.5% of state utility’s peak demand for power on the grid and that cap has been lifted to allow up to 5%. But without that high bill incentive, less solar power would be put on the rooftops of inland residents.

Removing the incentive from homeowners would just return the pressure to PG&E to add more dirty gas powered electricity, with the danger that more natural gas electricity brings to California’s water supply, our health, and future climate.

In the long run, keeping that rate inequity is better for all Californians.

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About the Author

writes at CleanTechnica, CSP-Today, PV-Insider , SmartGridUpdate, and GreenProphet. She has also been published at Ecoseed, NRDC OnEarth, MatterNetwork, Celsius, EnergyNow, and Scientific American. As a former serial entrepreneur in product design, Susan brings an innovator's perspective on inventing a carbon-constrained civilization: If necessity is the mother of invention, solving climate change is the mother of all necessities! As a lover of history and sci-fi, she enjoys chronicling the strange future we are creating in these interesting times.    Follow Susan on Twitter @dotcommodity.



  • J Wood

    I’m tired of single women living in San Diego writing our energy policies. It’s written for single people, living in San Diego, LA Area, If I live alone I get to use a ton of energy, I don’t have to conserve at all. It’s a very unfair system, it says a family of 4 each person gets to use 1/4 of what a person living alone gets to use. How is this fair? How is this conserving anything. It further allows me to use much more energy in the summer, cause in San Diego & LA they blow their AC’s all the time. In the winter since San Diego/LA has mild winters they don’t care so much that the limit is cut way back. A very biased system. And solar? I had solar 35 years ago, I paid to have it installed, never recouped the outlay before we moved. And today the Solar company’s want a fortune that no one has just to have it installed. Our entire environmental system has been run by idiots for decades. I guess whoever reads this is part of the problem….

  • pjd

    and it is exactly right that this move by PG&E is about keeping market share by removing economic incentive to buy solar residential power production, and it is right that this means PG&E is attempting to cause more air pollution in the future with this rate change and PG&E should be forced to offer a $5000 solar installation rebate to customers that are currently in the 4th and 5th tier as an encouragement to the continuation of the trend to move to solar

  • http://www.ascoss.com automation

    Climate change is a global problem, and yet each one of us has the power to make a difference. Even small changes in our daily behaviour can help prevent greenhouse gas emissions without affecting our quality of life. In fact, they can help save us money!

    • http://cleantechnica.com/author/susan Susan Kraemer

      Small changes…yes, and BIG changes can save MORE money, and MORE greenhouse gases.

  • Bruce Karney

    The rates that PG&E is proposing are pretty similar to San Diego Gas and Electric’s current rates. Residential solar is selling like hotcakes in San Diego. In fact, the Tier 6 rebates are gone there, while Tier 6 rebates will be around for another few weeks in PG&E territory.

    The northern part of the state isn’t quite as sunny as San Diego County, but there’s still a strong economic reason to go solar if your marginal price for grid power is $.30. By proposing to reduce baseline quantities by about 9%, PG&E’s proposal would result in more families having SOME financial incentive to go solar, but would dramatically reduce the number with a HUGE incentive to do so.

    • http://cleantechnica.com/author/susan Susan Kraemer

      Good point:

      “PG&E’s proposal would result in more families having SOME financial incentive to go solar, but would dramatically reduce the number with a HUGE incentive to do so.”

  • gus

    Nobody is saying that heavy users should pay the same as light users. Even a completely flat rate would charge people proportional to usage. The problem is that the tiered system has become extreme. Production costs for electricity keep increasing but moderate users have seen no increase whereas heavy users are paying for all of it. Is that a good thing? The average user is getting a huge subsidy and no longer even covers the cost of the electricity that they use. As high end customers go solar and average users use their political power to avoid paying the real costs, the burden will continue to be shouldered by a shrinking customer base.

    Eventually things get so out of whack that the system becomes an obstacle to choice. Two families sharing the one home pay 4x the electricity cost of two families in two homes. Self employed and working at home – forget about it when your work and home costs get grouped together and you pay double the usage at double the rate. My family’s electricity costs skyrocketed out of proportion to our additional usage when we had kids and my wife started spending the days with them at home.

    Finally, thinking about an electric vehicle? At $.50/kwH the fuel alone is more expensive than gas. Of course, PG&E could make exceptions for all these things but I’d prefer not to turn my electricity provider into the IRS.

    • http://cleantechnica.com/author/susan Susan Kraemer

      Regarding an EV: I agree, do not add one if you keep PG&E’s tiered rates! The highest tiers will mean close to $0.50 cents a kwh to charge.

      However, that math looks much better, if you supply it with solar (that amounts to about $0.12 – $0.25 per kilowatt hour) to charge it. A solar powered EV would be cheaper than a gasoline car to run.

  • Nami

    What a one-two punch. Not only do moderate users have to pay more for their electricity, but there’ll be greater pressure to use dirty power (v. clean solar)? This doesn’t seem to align with the direction our country has to take to reach a sustainable clean energy economy.

    Going solar is a great way for homeowners to take control of their electricity costs and help the environment at the same time. I hope this proposal remains just that – a proposal!

  • Bill Woods

    “People in California’s hinterlands pay a very high price for electricity. … and they now pay four times the base rate for it. …

    They want to reduce that amount to only three times the base rate of 11 cents a kilowatt hour – to 30 cents a kilowatt hour, dropping almost 20 cents.”

    One of these numbers is wrong; a cut from 4x to 3x 11¢/kW·h is only 11 cents.

    • http://cleantechnica.com/author/susan Susan Kraemer

      Meant “more than” 4 times, thanks, will fix. Top is between 44 cents and 50 cents.

  • http://ecdfan.blogspot.com ECD Fan

    Well, peak demand is something different. Peak demand in CA is about 50-60 gigawatts. 1GW-rated installations of PV solar generate 800MW AC or less at peak, based on the 20-yr hourly data at http://rredc.nrel.gov/solar/calculators/PVWATTS/version1/US/California/ (note though that the PV’s peak hour does not coincide with the grid peak hour). Now we are talking about something like 1.6%, but things gets complicated as one really has to look on a second-by-second basis to calculate the true percentages. You are welcome to provide any references with actual data in them.

    The fact that DSIRE (N.C. Solar Center and the Interstate Renewable Energy Council) say something, doesn’t make it necessarily true.

    [No ECD, DSIRE is actually the Database of State Incentives for Renewables & Efficiency. (Not the North Carolina something something)

    It is from the US Department of Energy. As such it is a reliable source of data.]

  • http://ecdfan.blogspot.com ECD Fan

    Susan, did you check your facts? Or are we using Al Gore’s math again?

    EIA tells us that CA’s net electricity generation was 205 million MWh in 2009. PV Solar cumulative installation in CA is about 1GW. 1GW in CA generates about 1.3 million MWh. 1.3 divided by 205 is 0.6%, not 2.5%!

    http://www.eia.doe.gov/cneaf/electricity/epm/table1_6_b.html

    Why do you say then that “homeowners’ solar now supplies more than 2.5% of the power on the grid?”

    • http://cleantechnica.com/author/susan Susan Kraemer

      No, ECD: Per DSIRE – The “homeowners” (non-utility) solar limit has just been lifted to allow up to 5% (link) of utilities’ peak demand as keeping that cap at only up to the 2.5% as originally legislated was in danger of slowing solar installations.

      “AB 510 essentially doubles the number of people able to go solar in California. Before today, the number of Californians able to take advantage of this net metering program was capped at 2.5 percent of a utility’s load. So, as soon as a utility got 2.5 percent of its electricity from net metered solar customers, it was no longer obligated to sign new net metering contracts. Now that cap stands at five percent”. (link)

      But I agree that some of that DSIRE category of net metering-eligible entities is business-installed solar, (and not to supply a utility like under the SDE distributed solar plan).

      But since businesses have very low rates for the same kwh as homeowners, this price pressure for hot regions falls only really on homeowners.

      I don’t know the rates for large businesses, but I found when estimating solar that a small business with A1 rates might only pay 10 cents a kwh, even with 2,000 kwh a month bill – hardly an incentive to add solar instead.

      In most regions a homeowner with usage that high would pay over $500 a month.

  • S Davis

    Baseline/tiered energy levels based on regional conditions (set by the CPUC) are merely a subsidy for those that live in hot inland areas on the backs of those who live in cooler coastal climes. If the tiers were uniform, then living inland would cost a lot more, and rightly so. By reducing the cost of living inland, growth in these areas is encouraged. If tiers were flat across the utility’s service area, the cost of living increase would encourage people to live where it truly is cheaper, and more efficient for all of us.

    This is my experience in SCE’s service area, where, last I knew, Indio, CA (middle of the desert) is their highest baseline area in the summertime, somewhere around 2000kwh vs. my ~500kwh (FOUR times higher!?), 12 miles from the coast. People have a choice in where they live. We shouldn’t have to subsidize their choice. Flatter rates = bogus to me.

  • http://guntherportfolio.com/ Ed Gunther

    Hey, I am paying that base PG&E rate and I’m careful with power consumption. Let go of my tier rate! I thought PG&E has plans to move to Time Of Use rates anyway?

    • http://cleantechnica.com/author/susan Susan Kraemer

      Heh.

  • http://islandinthenet.com Khürt

    We had a similar assinine flat rate pricing for water in my town. Home owner living in 1600 square foot townhomes were paying them same fixed monthly rate as homes 4000 sq ft homes with large lawns and backyard pools. Voters took care of that problem quickly.

    • http://cleantechnica.com/author/susan Susan Kraemer

      Well, I see your point. But this wouldn’t be one flat rate. It is just a bit… flattER. There is a larger number of “base rate” kilowatt hours allowed for hotter areas.

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