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Authors from Three California Utilities on Rate Architecture

Excerpt from: “A Modern Rate Architecture for California’s Future,” by Margot Everett of PG&E, Cynthia Fang of SDG&E, and Andre Ramirez and Jude Schneider of SCE, November PUF

“Modern Rate Architecture is based on four key principles that are consistent with the goals of current rate policies.

Transparency is providing clearly defined and trackable costs, benefits, credits, subsidies and charges. Transparency allows customers to see the costs of programs and initiatives they are supporting and to make better-informed choices about the direct costs and benefits of technology, electricity consumption, and energy sources.

Increasing transparency provides a clear, sustainable path to assess fairness. Transparent rates will aid policymakers in assessing the effectiveness of programs and facilitate future decision-making. Transparent subsidies will also make it easier for the marketplace to determine the costs and benefits of taking some action or adopting a technology.

Equity is ensuring all customers pay for the cost of the utility services they receive and that all customers have equal incentives to change behavior or invest in technology. Where policy mandates provide subsidies that effect equity, such as those to improve affordability for low-income customers and customers in disadvantaged communities, or for the advancement of clean energy policy, these should be transparent.

Sustainability is establishing a framework that is forward-looking and malleable. It provides clear and accurate price signals that can accommodate new products, services and business models and will help California achieve its goals at a reasonable cost.

Sustainability looks at policy mandates that require investments to be collected over decades and ensures that all customers who benefit from these programs are paying for them. This means no customers pass costs that were incurred on their behalf to other customers (with an exception for the low-income and disadvantaged community subsidies discussed above, which are the result of an explicit societal commitment). It also will be a tool for California to directly implement, moderate and eventually eliminate programs and subsidies that have fulfilled their goals.

Access is ensuring all customers can take advantage of the opportunities that are part of the state’s clean energy future, including access to solar and storage technologies and to a competitive marketplace that customers or their providers can enter and exit.

Modern Rate Architecture based on these four principles will allow for the holistic creation of a rate structure that can not only respond to today’s markets but is also flexible enough to be adjusted in the future as technology evolves so that customers can benefit from even more choices. Applying these principles can enable ongoing appraisals of affordability in the context of the cost and benefits of various policies.”

See the complete article here.

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Steve Mitnick, Editor-in-Chief, Public Utilities Fortnightly, and President, Lines Up, Inc.
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