PG&E seeks $4.2 billion increase in revenue
The defeat of Proposition 16 on the June 8 ballot has been called a testament to the power of a grassroots public awareness campaign against a corporate opponent with deep pockets. It’s hard to disagree.
PG&E spent nearly $46 million dollars supporting the bill that would have effectively barred competition in its service areas by requiring a two-third vote in the given city for any new utility company to begin service. Opponents to the bill had less than $100,000 and relied instead on community activism and volunteers to educate the public about the bill. Now, with the giddiness of one victory still wearing off, consumer advocacy groups are turning their attention toward PG&E again—this time in response to a request for $4.2 billion in increased revenues over the next three years.
PG&E submitted a general rate case (GRC) to the California Public Utilities Commission (CPUC) in December of last year requesting rate increases that would result in a revenue increase of $1.1 billion, or 19.7 percent, beginning in 2011, with additional increases of $275 million (4.1 percent) in 2012 and $343 million (4.9 percent) in 2013. All three increases over the three years would amount to rate increases of $4.2 billion.
What that means for the average consumer is still unclear, but a statement on PG&E’s website estimates that if the CPUC approves their application, starting January 2011 the average electric bill for a typical residential customer using 850 kilowatt hours per month would increase by $17.44, or 10.6 percent, from $164.15 to $181.59. That’s $209.28 a year, not including seasonal highs during both the winter and summer.
Additional increases could then be added for 2012 and 2013, but exactly how much won’t be decided until after approval of the GRC occurs. PG&E claims these increases are necessary for, among other things: operating and maintaining its systems; serving its customers; administrative and general expenses; and outside contractors and capital investments.
But some groups remain unconvinced of the necessity of these increases, and claim that the amount being requested has as much to do with covering perks and high salaries as it does operational costs.
Mindy Spatt, communications director at The Utility Reform Network (TURN), says that much of PG&E’s request will be used to cover high salaries and the revenues lost in the Prop. 16 campaign. “We don’t believe that the increases are justified,” she says. “Our attorneys and experts have gone through PG&E’s request with a fine tooth comb and we think there is a lot of over-reaching and double dipping.”
The Division of Ratepayer Advocates (DRA), an independent consumer advocacy division of the CPUC, agrees, forecasting that costs over the next three years are $3.2 billion lower than what PG&E estimates.
Based on its own independent analysis, the DRA recommends the CPUC approve lower revenue increases of $227 million (4.1 percent) in 2011, $116 million (2 percent) in 2012, and $107 million (1.8 percent) in 2013, for a cumulative increase of $1.02 billion over the three years. This represents a 76 percent reduction relative to PG&E’s request.
Ever since the application for the increases were announced, TURN has been holding a campaign to rally support against the measure. Much of the problem, says Spatt, is that consumer awareness remains low despite the widespread implications the increase in revenues could pose.
“Unfortunately it’s very hard to get the word out before it actually happens,” she says. “Once it happens everyone is going to be up in arms.”
Additionally, some are concerned that the increases could pose threats to consumers already at risk of having their electricity shut off due to late or insufficient payments.
Lizet Moreno, marketing and outreach manager of Central Coast Energy Services (CCES), a nonprofit organization that provides utility assistance to people in need, says the need for utility assistance has been showing a marked increased since 2008.
Through CCES, households struggling with utility payments or facing shut-offs can apply for a one-time credit of $299 per calendar year with the Home Energy Assistance Program (HEAP).
Moreno says that the number of households who sought and received assistance through the HEAP program almost doubled from 2008 to 2009 (3,506 and 6,676 households, respectively). As of June 14, 2010, HEAP provided assistance to 5,418 households, and assuming the rate increases go through, could continue to increase assistance at an alarming rate.
The increase could have the greatest affect on agriculture workers of Santa Cruz and Monterey counties who lose their income during off-season months starting around October but still need to heat their homes throughout the winter.
“It’s not good timing on [PG&E’s] behalf,” says Moreno. “It’s going to affect a lot of people in this area who live pay check-to-pay check as it is.”
While consumer advocacy groups like TURN and CCES are mounting efforts to repel the revenue increases found in the 2011 GRC, PG&E maintains that costs will not affect consumers as greatly as many believe, and, along with their rate structure reform, could save money for certain consumers in high-cost areas.
Currently PG&E’s rate structure is divided into a five-tier system with high electricity users in the top tier paying $.40 for a kilowatt-hour and low-electricity users in the bottom tier paying about $.12 per kilowatt-hour. The two lower tiers are required by the state to remain at a low fixed rate, which PG&E argues has required it to make disproportionate increases in tiers three, four and five.
As part of the GRC, a restructuring could occur that would result in a new three-tier system that would create a more equitable distribution of cost among the three tiers. For us along the coast this may mean slight increases in utility costs, but for households in areas like Fresno, significant reductions could occur.
Additionally, David Eisenhauer, spokesman for PG&E, says that contrary to what consumer advocacy groups are saying (and perhaps contrary to PG&E’s own website) the company expects little to no change in the rates for the average consumer at the beginning of 2011. He says that much of this will be due to reductions in the cost of getting electricity and expirations in current contracts, although he also says that rate increases for 2012 and 2013 are “hard to forecast.”
The hearings at which PG&E and its opponents will make their final cases regarding the GRC have already begun and a decision by the CPUC should be made by the end of the year.
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