CC SR 20240116 03 - AB 205 CALPIRG Fixed Rate Increase Request
CITY COUNCIL MEETING DATE: 01/16/2024
AGENDA REPORT AGENDA HEADING: Regular Business
AGENDA TITLE:
Consideration and possible action to consider the California Public Interest Research
Group’s (CALPIRG) request to oppose income graduated fixed rate increase advocated
by Southern California Edison (SCE).
RECOMMENDED COUNCIL ACTION:
(1) Receive and file a presentation from CALPIRG representatives on SCE’s request
to establish income graduated fixed rates; and,
(2) If deemed acceptable, authorize the Mayor to sign a letter opposing income
graduated fixed rates.
FISCAL IMPACT: None
Amount Budgeted: N/A
Additional Appropriation: N/A
Account Number(s): N/A
ORIGINATED BY: Jesse Villalpando, Senior Administrative Analyst
REVIEWED BY: Same as below
APPROVED BY: Ara Mihranian, AICP, City Manager
ATTACHED SUPPORTING DOCUMENTS:
A. Draft letter of opposing graduated fixed rate increases (page A-1)
B. Text of AB 205
C. Southern California Edison Company, Pacific Gas and Electric Company,
and San Diego Gas & Electric Company Joint Proposal Addressing
Income-Graduated Fixed Charge Proposals
BACKGROUND AND DISCUSSION:
The City was recently informed by representatives of the California Public Interest
Research Group (CALPIRG) that Southern California Edison (SCE) is actively lobbying
cities within its service area to endorse a new higher fixed charge on utility bills.
CALPIRG, known for its advocacy in the public interest, brought this development to the
City's attention, highlighting the potential implications of SCE's proposed charges on our
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community. This revelation comes in the wake of Assembly Bill 205 (AB ) 205, signed
into law by Governor Newsom on June 30, 2022 (Attachment B).
AB 205 contains a variety of energy measures that provide debt relief for utility
customers (California Arrearage Payment Program ), allocations for long-duration
energy storage projects, a new certification process for clean energy generation and
storage facilities, initial investment intended to support California’s energy supply and
avoid outages (Strategic Reliability Reserve), among other investments and
requirements. A critical element of AB 205 is its directive to the California Public Utilities
Commission (CPUC) to implement fixed charges for residential customers. These
charges are based on an income-graduated scale, with higher charges imposed on
customers with higher incomes. The intent behind this structure is to create a more
equitable distribution of electricity costs, enhance bill affordability, and motivate
residential customers to adopt electrification measures. This requirement is slated to be
in effect by July 1, 2024.
AB 205 was introduced as a trailer bill attached to the state budget. Trailer bills expedite
policy changes but typically lack the extensive scrutiny of traditional legislation. In this
case, AB 205 bypassed usual hearings and debates, prompting concerns about
insufficient public input and potential policy shortcomings. Consequently, the CPUC now
shoulders the responsibility of designing the specific implementation of this income-
based utility charge.
In response to the enactment of AB 205, the CPUC launched proceeding R2207005,
aimed at crafting and executing a structure for fixed charges. This initiative is in the
stages of considering various proposals, one of which is a noteworthy submission from
three major power entities in the state: SCE, Pacific Gas & Electric, and San Diego Gas
& Electric. Their joint proposal (Attachment C) outlines the introduction of a uniform
fixed monthly charge for all residential consumers and an energy charge based on the
electricity the customer uses during their billing period. However, it presents an
exception for those enrolled in the California Alternate Rates for Energy (CARE) or
Family Electric Rate Assistance Program (FERA). These programs cater to lower -
income households by offering them bill discounts, and consequently, their fixed charge
under this proposal would be comparatively reduced.
Under the current terms suggested by the state's leading power companies, the
proceeding will focus on basing electric bills on two main charges:
1. A monthly charge to cover certain fixed costs of providing electric service. For
example, the costs of safely building, maintaining and operating the electric grid;
providing customer support; and the cost of state initiatives to help income -
qualified customers and energy-efficiency programs.
2. An energy charge based on the customer’s electricity usage during the billing
period.
According to SCE’s joint proposal, a standard fixed charge of $51 would apply to all
residential customers, except for CARE or FERA customers whose income already
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qualifies them for bill discounts. The fixed charge for those customers would be $10 or
$15, depending on their income level.
Proponents of a high fixed charge argue its necessity for covering costs associated with
wildfire preparedness, electrical grid updates, and statewide electrification. SCE argues
that this proposal would lead to a substantial reduction in the cost per kilowatt -hour of
electricity for all residential customers, decreasing the usage rate from around 36 cents
to 26 cents. According to SCE, this change would result in an average bill reduction of
5%-18% for about 1.2 million lower-income customers, assuming unchanged electricity
use. SCE emphasizes the advantages for lower-income families and offers various
energy-saving programs to assist those who might not benefit immediately.
Californians already face some of the nation's highest electricity rates, often paying two
to three times the national average. The implementation of income -based fixed charges
is poised to further affect base rates for residents of Rancho Palos Verdes. This joint
proposal has significant financial implications, particularly for higher -income households
with California families with an annual income exceeding $180,000 expected to
experience an increase in their electricity costs, averaging an additional $500 per year
compared to their current expenses.
Moreover, SCE's proposal for fixed charges, while seemingly advantageous, is met with
substantial criticism. According to CALPIRG, analysis by the Clean Coalition and utility
experts indicates that such charges minimally enhance the economics of electrification.
Instead, they risk penalizing households with lower energy usage, potentially leading to
increased overall energy consumption. This concern is echoed in an August 2023 article
by CALPIRG and the nonprofit Environment California. The article outlines how the
proposed structure of higher fixed charges and lower volumetric charges could reduce
expenses for high electricity users but escalate costs for those using less. This scenario
disproportionately impacts working- and middle-class individuals residing in smaller
homes or apartments, especially those who have invested in energy -efficient
appliances. The proposed income-graduated fixed rate charges could inadvertently
promote energy wastage and discourage conservation efforts, efficiency initiatives, and
the adoption of rooftop solar, thereby reversing California’s longstanding policy of
incentivizing environmentally beneficial behaviors. Such impacts are evident even with a
modest $30 per month fixed charge, raising broader economic concerns.
In the context of recent wildfires linked to utility negligence, there's a growing argument
for prioritizing corporate accountability over imposing additional financial burdens on
residents, particularly vulnerable groups such as seniors and low-income families.
Exploring alternative funding mechanisms that hold accountable entities responsible
could enhance safety protocols and accelerate grid modernization. Moreover, high fixed
charges threaten to undermine vital energy conservation efforts, potentially derailing
progress toward environmental sustainability.
Jenn Engstrom, State Director for CALPIRG, will be present at tonight's meeting to
discuss AB 205 and its implications. Specifically, she plans to provide a comprehensive
overview of the current status of AB 205, focusing on the proposed fixed charges and
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their potential impacts, highlight the negative effects of these charges on both
consumers and the environment and will discuss viable alternative strategies that
address California's energy challenges without imposing undue burdens on residents,
especially those in vulnerable economic brackets. This presentation aims to foster a
deeper understanding and guide the Council toward informed decision -making on this
significant matter.
After receiving a presentation from CALPIRG, the City Council is being asked to
consider their request to oppose SCE’s request to establish graduated fixed rates.
CONCLUSION:
At the request of CALPIRG and aligning with the City’s 2024 Legislative Platform, the
City Council may wish to authorize the Mayor to sign a letter of opposition calling for the
suspension of the implementation of proceeding number R2207005 by the California
Public Utilities Commission (CPUC) to set fixed utility rates (Attachment A).
ALTERNATIVES:
In addition to the Staff recommendation, the following alternative actions are available
for the City Council’s consideration:
1. Identify revised language to add to the letter.
2. Do not authorize the Mayor to sign the letter
3. Take other action, as deemed appropriate.
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January 16, 2024 Via Email
The Honorable Alice Busching Reynolds
California Public Utilities Commission
505 Van Ness Avenue
San Francisco, CA 94102
SUBJECT: Income Graduated Fixed Charge Rate Design
Dear President Reynolds:
On behalf of the City of Rancho Palos Verdes, I am writing to express our serious
concerns and opposition to the proposed income-graduated fixed charge rate designs
under regulatory proceeding R. 22-07-005, as enabled by Assembly Bill (AB) 205. This
policy, if implemented, is likely to have significant adverse impacts on our residents,
especially on working families, and contradicts California's long -standing commitment to
energy conservation.
Californians already contend with some of the highest electricity rates in the nation, and
the introduction of income-based fixed charges under AB 205 is poised to further
exacerbate this issue. Analysis from the Clean Coalition and several utility experts
indicates that high fixed charges will, at best, only marginally improve the economics of
electrification. Those living in smaller homes or using less energy, many of whom are our
community members, are likely to face disproportionate increases in their u tility bills.
Additionally, the proposed increased rate design directly undermines ongoing energy
conservation efforts. Families in our community have long been engaged in reducing
energy consumption through various means, including the adoption of energy -efficient
appliances and solar panels. The suggested changes threaten to diminish their ability to
control their energy costs effectively, and could paradoxically discourage the desired shift
to electrification, potentially increasing dependence on natural gas.
Our concerns are further compounded by the absence of a cap on the fixed charge and
the lack of any assurance for stabilizing or reducing electricity rates. This policy direction
may lead to escalating utility bills over time, thereby nullifying any temporary benefits and
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President Alice Busching Reynolds
January 16, 2024
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possibly incentivizing increased energy consumption, which is contrary to the state's
objectives of preventing rolling blackouts and promoting sustainable energy use.
Further, we find the CPUC's decision to reject public participation hearings on these
substantial rate changes disconcerting. The CPUC has rejected a request to hold public
participation hearings regarding major changes to the state’s electric rate structure. Given
the breadth of impact to ratepayers, it is only fair, in the name of transparency and
disclosure, that a full, public process be conducted to hear from all parties that will be
affected, not just those who are party to the proceeding. Transparenc y and
comprehensive public engagement are crucial in decisions impacting a broad spectrum
of ratepayers.
The rationale behind imposing high fixed charges for wildfire preparedness and grid
updates also warrants scrutiny. Considering recent wildfires attributed to utility
negligence, prioritizing corporate accountability seems more appropriate than burdening
residents, particularly vulnerable groups such as seniors and low-income families.
Exploring alternative funding mechanisms that hold responsible parties accountable
could not only promote stricter safety protocols but accelerate grid modernization.
In consideration of these factors, we strongly urge the state Legislature to attentively
review the issues highlighted in this correspondence. Immediate legislative action to
repeal Public Utilities Code Section 739.9 is vital to safeguard our residents and maintain
the principles of equitable and sustainable energy management.
For these reasons, the City of Rancho Palos Verdes is opposed to CPUC’s consideration
to establish income graduated fixed rates.
Sincerely,
John Cruikshank
Mayor, City of Rancho Palos Verdes
cc: Ben Allen, Senator, 24th State Senate District
Al Muratsuchi, Assemblymember, 66th State Assembly District
Jenn Engstrom, California Public Interest Research Group (CALPIRG)
Jeff Kiernan, League of California Cities
Marcel Rodarte, California Contract Cities Association
Sharon Gonsalves, Renne Public Policy Group
Rancho Palos Verdes City Council and City Manager
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