California Electric Rates

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  • Slik Geek
    Senior Member
    • Dec 2006
    • 669
    • Lake County, Illinois
    • Ryobi BT-3000

    California Electric Rates

    In this thread: http://www.bt3central.com/showthread.php?t=44363
    Chris B detailed his California electric rates as follows:

    Originally posted by Chris_B
    FYI, rate (kWh) tiers here are:
    $0.115 - "baseline" (~400kWh/mo)
    $0.131 - 101-130% baseline
    $0.260 - 131-200% baseline
    $0.379 - 201-300% baseline <- We are here for marginal cost, at ~875 kWh/mo
    $0.441 - >300% baseline (i.e., >1,200 kWh/mo)

    Sorry, I just think the rates are ridiculous, but then there are a lot of things like that here...
    I agree with Chris.

    I checked my recent bill, and we used 876 kWh, just like Chris. Here in northern Illinois, the effective rate (without taxes) is about $0.104/kWhr. (The "raw" rate is $0.07395/kWhr, without the "distribution facilities charge", "transmission services charge", a current "rate relief credit" of $0.00261/kWhr, "environmental cost recovery adjustment" and "energy efficiency programs". Each of these are multiplied by one's power usage, and results in the previous effective rate that I indicated above).

    My questions to our California members are:

    Does the rate structure that Chris listed take into account the number of people in a household? Or are families penalized for having several users in a single residence which push the total electricity usage higher than a person living all alone would use?

    Are the higher rates effectively a tax, where the government takes the spread between the basic rate (which reflects the actual production cost) and the actual billed rate? Or does that windfall go into the utility's pocket?

    Inquiring minds want to know.
  • Tom Slick
    Veteran Member
    • May 2005
    • 2913
    • Paso Robles, Calif, USA.
    • sears BT3 clone

    #2
    This my bill if it helps answer your question

    Baseline Quantity 606 Kwh
    Baseline Usage 357 Kwh @ $0.11536
    Net Charges $41.18

    The net charges shown above include the following component(s).

    Generation $17.31
    Transmission 3.12
    Distribution 13.01
    Public Purpose Programs 2.10
    Nuclear Decommissioning 0.10
    DWR Bond Charge 1.75
    Ongoing CTC 2.97
    Energy Cost Recovery Amount 0.82
    Taxes and Other
    Energy Commission Tax $0.08

    TOTAL CHARGES $41.26
    Opportunity is missed by most people because it is dressed in overalls and looks like work. - Thomas Edison

    Comment

    • jackellis
      Veteran Member
      • Nov 2003
      • 2638
      • Tahoe City, CA, USA.
      • BT3100

      #3
      I'm so glad you asked . I know a tiny bit about the power business after working in it for 35 years .

      First, prices in Illinois are lower for a couple of reasons. Generally higher population density, much more coal and nuclear power, lower costs for doing business overall, lower charges for public benefit programs, much less emphasis on renewable energy. California has a number of policies that increase the cost of electricity. Regulators know it. There are some really interesting policy conflicts, some very strong lobbies and some uninformed legislators that help make things more confusing than you would possibly believe.

      Second, one of the peculiar policies in California is to have the price you pay increase as you use more. This is an offshoot of the 1970s movement to promote energy efficiency and conservation, and to limit development of power plants in California, especially nuclear plants. It's purposely designed that way to concurrently provide basic service to low income folks while also providing an incentive to limit energy use. So-called inverted block rates have become more common around the country, though perhaps not to the same degree as California.

      Third, governments tax utility service pretty heavily. In fact, utilities are probably the biggest taxpayers in every state - even more so than hedge fund managers. Those taxes get passed through, but they are not directly based on the tiers. Instead, they get baked into electricity prices based in part on forecasts of sales and revenues and in part based on usage (local taxes are imposed this way).

      Fourth, rates are set based on the cost of providing service plus an allowed return on equity capital (common stock owned by your retirement plan or mutual fund). It's pretty rich for a stable business that has little competition and little other business risk. Utilities rarely earn much less unless they are really incompetent (it has happened several times) or much more unless they can juice sales (pun intended), which happens only occasionally. There are no huge windfall profits in the electricity business. Utilities typically have to invest several times more cash each year in their business than they earn for shareholders.

      Finally, there's a special treat for those of us who use a higher-than-average amount of electricity in California courtesy of the legislature. Legislation passed just after 2000 essentially freezes the lower rate tiers and requires that any cost increases put into rates be loaded into the top tiers. If you're an energy hog, you pay through the nose. As a consumer, I hate this but from a policy perspective, it helps lower income folks by providing enough power to cook and read by at a discounted price and for that reason, I can't object quite as much, especially now.

      Now for an editorial. Even though the consumer in me would love to get something for nothing, I think regulators are using the wrong method to set electricity prices. Today, it's based in part on the book value of the power plants and wires. Some (OK, many) of those power plants and wires were built 30-40 years ago for 10% or less of what they would cost today, so they're carried on the utility's books at close to zero. The old plants are dirty, they use fuel inefficiently and they require a lot of maintenance. When they are finally replaced, prices will rise a bit. They'll rise more in places that have coal plants with little or no pollution controls. Same for poles, transmission towers, transformers and wires, many of which are more than 40 years old. However, the prices we pay should be based on the cost of replacing all of this stuff. Prices would be a lot higher (and accounting rules would likely have to be changed so the utilities didn't spend the extra profits on junkets to Tahiti instead of squirreling the money away for the next round of improvements and replacements) but we'd also be a lot more thoughtful about how we use energy and manufacturers would be a lot more careful about how energy efficient their products were. Builders would put in ultra-high efficiency appliances instead of the junk that goes in spec homes today. They'd insulate and seal buildings properly. Zombie appliances would be a think of the past. We'd all use LED lights for Christmas and install motion sensors in rooms we use infrequently.

      Don't worry too much, though. Regulators don't have the stomach to change the way prices are set as I suggest, even in California. It's unlikely to happen in our lifetimes.

      Comment

      • JR
        The Full Monte
        • Feb 2004
        • 5633
        • Eugene, OR
        • BT3000

        #4
        It may also be interesting to note that by 2010 20% of California power will be produced by renewable sources. By 2020 it will be 30%.

        JR
        JR

        Comment

        • jackellis
          Veteran Member
          • Nov 2003
          • 2638
          • Tahoe City, CA, USA.
          • BT3100

          #5
          It may also be interesting to note that by 2010 20% of California power will be produced by renewable sources. By 2020 it will be 30%.
          Those are the targets. They are not going to be met. Setting aside the cost, our democracy at work makes it really tough to site and build new power plants and new transmission lines quickly unless there are blackouts caused by a lack of natural gas.

          Comment

          • jackellis
            Veteran Member
            • Nov 2003
            • 2638
            • Tahoe City, CA, USA.
            • BT3100

            #6
            Baseline Quantity 606 Kwh
            Baseline Usage 357 Kwh @ $0.11536
            Net Charges $41.18
            Tom, I'm confused. I can see how the first 357 kWh costs $41.18 but it seems like your total usage is 606, in which case the bill should be over $70.

            SG, I'm not I answered some of your questions.

            Does the rate structure that Chris listed take into account the number of people in a household? Or are families penalized for having several users in a single residence which push the total electricity usage higher than a person living all alone would use?
            The baseline amounts are per account and do not consider how many people live in a household. Tying baselines to the number of people in a household would invite rampant cheating (as if anyone would do that).

            Are the higher rates effectively a tax, where the government takes the spread between the basic rate (which reflects the actual production cost) and the actual billed rate? Or does that windfall go into the utility's pocket?
            Unless the utility misstates its forecasts for costs and sales, there's no windfall. In most states, there is a regulator that is supposed to scrutinize the forecasts and costs whenever a utility asks for higher rates. Attorneys general and public advocates also get involved. In California, literally dozens of parties participate in the proceedings that set rates, and many of them hire experts to scrutinize the utility assumptions.

            Comment

            • Kristofor
              Veteran Member
              • Jul 2004
              • 1331
              • Twin Cities, MN
              • Jet JTAS10 Cabinet Saw

              #7
              We're going down the same road 25% by 2020 (but we also get 20% from nuclear and there's a push just this week to repeal the ban on new nuke plants). I'm not opposed to renewable energy but the way we're going about implementing it here is a bit goofy.

              All of the providers in the state need to meet those targets so these little municipal electricity companies are buying small wind turbines in onesy-twosy fashion (including several refrub units removed from California to make room for bigger units).

              In my mind that's a political statement and not the most rational approach to the problem. MN is something like the 4th "best" wind potential state and is right next door to North Dakota ranked as the best. Instead of putting up a dozen short, widely spread, baby turbines in different cities why not each buy 1/6th (or whatever fraction) of a real unit in a windfarm in North Dakota or in one of the windy parts of the state? That seems like it would reduce costs and improve the "bang for the buck" factor.

              On the bigger picture conservation makes great sense for a limited resource, so if you argue to conserve oil, or gas or whatnot that seems reasonable... But, in a more general sense we actually have a massive surplus of potential energy when you look at that million mile wide fusion reactor in the sky and the things it drives (all biofuels, wind, photovoltaic), rotational/gravitational (hydro, tidal, geothermal), and nucleosynthesis (fission/fusion). Sure spend some effort on efficiency but going from a 99% efficient furnace to a 99.9% efficient one makes less sense to me than spending those dollars on better PV research or bioreactor design or whatnot...

              Comment

              • Tom Slick
                Veteran Member
                • May 2005
                • 2913
                • Paso Robles, Calif, USA.
                • sears BT3 clone

                #8
                My Baseline usage is 357, Baseline quantity is always 606 so I assume it is the first tier of pricing but I've never gone over baseline.
                Opportunity is missed by most people because it is dressed in overalls and looks like work. - Thomas Edison

                Comment

                • jackellis
                  Veteran Member
                  • Nov 2003
                  • 2638
                  • Tahoe City, CA, USA.
                  • BT3100

                  #9
                  On the bigger picture conservation makes great sense for a limited resource, so if you argue to conserve oil, or gas or whatnot that seems reasonable... But, in a more general sense we actually have a massive surplus of potential energy when you look at that million mile wide fusion reactor in the sky and the things it drives (all biofuels, wind, photovoltaic), rotational/gravitational (hydro, tidal, geothermal), and nucleosynthesis (fission/fusion). Sure spend some effort on efficiency but going from a 99% efficient furnace to a 99.9% efficient one makes less sense to me than spending those dollars on better PV research or bioreactor design or whatnot...
                  Pretty sensible. You wouldn't happen to be an engineer, would you?

                  My take is that relying on any one source, whether it's wind, coal, nuclear, or cattle turds, is foolish. As far as efficiency is concerned, we're installing a boiler for our hydronic heating that's 94% efficient when it makes warm water for the floor. The 30+ year old gas furnace at our home in Silicon Valley is about 55% efficient. Unfortunately, gas is too cheap to make a replacement economically rational, so when it dies or the house gets renovated, that's when the furnace will be replaced.

                  As far as the renewable resources, there's a lot of research under way but if oil and gas stay cheap, the motivation to do that research dries up.

                  Comment

                  • JR
                    The Full Monte
                    • Feb 2004
                    • 5633
                    • Eugene, OR
                    • BT3000

                    #10
                    Originally posted by jackellis
                    As far as the renewable resources, there's a lot of research under way but if oil and gas stay cheap, the motivation to do that research dries up.
                    This is the conundrum, isn't it? Fossil fuels have to be expensive to justify the investment in alternatives. If the alternatives get close to the bang for the buck of fossil fuels, OPEC can drive their prices down.

                    Eventually oil will be depleted, but until then market forces will probably cause lots of gyrations.

                    JR
                    JR

                    Comment

                    • jackellis
                      Veteran Member
                      • Nov 2003
                      • 2638
                      • Tahoe City, CA, USA.
                      • BT3100

                      #11
                      This is the conundrum, isn't it? Fossil fuels have to be expensive to justify the investment in alternatives. If the alternatives get close to the bang for the buck of fossil fuels, OPEC can drive their prices down.
                      OPEC used to be able to drive prices down. It's not true any more now that China and India have become major oil consumers. The Saudis are probably close to being tapped out in terms of how much they can produce and all of the new fields around the world are in places where the costs of exploration, extraction and transportation are much higher than they have been. Besides, all of the major oil producers in Africa, the Middle East and Asia are depending on oil revenues to feed their economies. They will cut production if demand falls, but they're too addicted to the revenues they receive to cut price. What drives prices down is falling demand. So the best thing we can do to keep prices down is to keep using less, though I'm not sure the people who go flying by me on the freeway in their 8 cylinder monster trucks and SUVs get it.

                      Eventually oil will be depleted, but until then market forces will probably cause lots of gyrations.
                      Yep. That's going to upset the public, but the alternatives are not a whole lot better. Last time the government tried to stabilize the price of gasoline, there were long lines, so rationing is very unlikely. Legislating prices creates all kinds of perverse incentives and a constituency for continuing to legislate prices forever. I hope no one is dumb enough to suggest that.

                      Somewhat related to this point, several months back I read an excellent paper written for a regulatory (Public Utility Commissioners) audience that explained why speculation (up to a point) helps stabilize prices. Since it was written for people that are not technical experts, it was unusually clear and readable.

                      Comment

                      • dlminehart
                        Veteran Member
                        • Jul 2003
                        • 1829
                        • San Jose, CA, USA.

                        #12
                        I agree with Kristophor's point about the degree to which politics (what I would actually term grandstanding) is entering into these energy efficiency decisions. In MN, every little municipal utility wants its own *local* wind generator. Out here, San Francisco, with its notorious fog, is investing in solar energy production. I can see SF citizens deciding to do this, but not in San Francisco! Even my own city, San Jose, with much more sun, could do better than to invest in local solar. They could build a plant in southern California, where it's sunny 350 days a year, and sell the electricity to the grid. But local politicians and green organizations wouldn't get the same PR bump as having one just down the street.

                        One of the more popular sales pitches: "Your kids will learn about renewable energy, the energy of the future, by your city investing millions in a big solar/wind/biofuels or whatever facility." Who could argue against kids getting an education? How about a spoilsport who has them do the calculations about how much more efficient it is to site these facilities where they have the best return?
                        - David

                        “Be yourself; everyone else is already taken.” -- Oscar Wilde

                        Comment

                        • Slik Geek
                          Senior Member
                          • Dec 2006
                          • 669
                          • Lake County, Illinois
                          • Ryobi BT-3000

                          #13
                          Originally posted by jackellis
                          Finally, there's a special treat for those of us who use a higher-than-average amount of electricity in California courtesy of the legislature. Legislation passed just after 2000 essentially freezes the lower rate tiers and requires that any cost increases put into rates be loaded into the top tiers. If you're an energy hog, you pay through the nose. As a consumer, I hate this but from a policy perspective, it helps lower income folks by providing enough power to cook and read by at a discounted price and for that reason, I can't object quite as much, especially now.
                          That's nuts. Shouldn't everyone have an incentive to reduce their power consumption? Over time, the lower rate tier will become so cheap that people will seek ways to split their usage between meters. For example, having a second power drop installed (like you were renting out a portion of your home) so that you get double the power usage at the lower rate.

                          And it won't be just "energy hogs" who will be penalized. A family of five that actually uses less power per capita (ie is more efficient on a per person basis) will be penalized, while the person living alone who is less efficient on a per capita basis is heavily subsidized. California legislators have actually implemented a disincentive for energy efficiency for some members of the state. Users already have an incentive for conservation simply because their power usage is metered: the more one uses, the more one pays.


                          Originally posted by jackellis
                          The baseline amounts are per account and do not consider how many people live in a household. Tying baselines to the number of people in a household would invite rampant cheating (as if anyone would do that).
                          But how can a baseline be relevant if it doesn't take into account the number of people? It's like eliminating the exemptions on the federal income tax, effectively shifting the tax rate higher for filers with dependents.


                          Originally posted by jackellis
                          Unless the utility misstates its forecasts for costs and sales, there's no windfall.
                          So are you saying that the rates are proportioned so that the net rate charged in the end (over the various tiers) matches the cost plus allowed profits? If so, then the cost of generating electricity in California IS awfully expensive.

                          Comment

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