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HomeMy WebLinkAbout6/17/2015 - STAFF REPORTS - 5.A. OF PALM Sa � 4� ti c u � Qq<fFORt��P City Council Staff Report DATE: June 17, 2015 NEW BUSINESS SUBJECT: CITY COUNCIL DISCUSSION REGARDING THE PUBLIC UTILITY COMMISSION'S PENDING RESIDENTIAL RATE REFORMS APPLICABLE TO INVESTOR OWNED UTILITIES, INCLUDING SOUTHERN CALIFORNIA EDISON FROM: David H. Ready, City Manager BY: Douglas Holland, City Attorney SUMMARY The Public Utility Commission is considering a proposal to change the existing four- tiered residential rate structure for investor owned utilities to a two tiered rate structure in which there is no more than a 20% difference between customers. Currently higher use customers can pay as much as twice the amount of lower use customers. The new program would be phased in over four years and establish a minimum monthly bill for customers. The proposal also includes a shift to time of use rates by 2019. In other words, the new program will allow investor owned utilities to charge more during peak hour usage. The PUC will be conducting a hearing to discuss the proposal at its June 25, 2015 meeting. RECOMMENDATION: Provide d' ctfon to staff as the Council deems appropriate. Douglas Holland, City Attorney David H. Ready, City ITF'" NO. 2__ Edison Rates / Official Comments for PUC To: Public Utilities Commission This letter serves to officially advise California's Public Utilities Commission on the proposed rate changes from the perspective of the City of Palm Springs. The City of Palm Springs categorically rejects current proposals to charge residential customers based on time of use rates. • Residents of Palm Springs and the Coachella Valley cannot adjust their daytime use of electricity in any meaningful way,because average daily temperatures exceed 100 degrees for roughly 4 months of the year. • The residents who will most need to use daytime air conditioning are our most vulnerable citizens - that is retired senior citizens who live on fixed incomes and families with young children who are not yet old enough to go to school. • The City of Palm Springs feels that Time of Use rate surcharges will negatively impact the health and welfare of its citizens. If the number of tiers are going to be reduced,the City of Palm Springs is supportive of Commissioner Florio's new three tiered rate proposal. • Absent a detailed analysis it is not possible for the City to fully evaluate the impacts of Florio's proposal, although it appears to be far superior to the one advanced by the utility companies. The City of Palm Springs opposes the proposed two-tier rate changes advanced by Edison, PG&E,SD Gas&Energy and PUC President Michael Picker for the following reasons: • Changing the current system from four tiers to two tiers will raise rates on the lowest energy consumers and reduce rates on the biggest energy consumers. • This is poor public policy that undermines efforts to encourage people to conserve energy. • By raising rates for our low and fixed-income citizens,this poses a threat to the health and welfare of our most vulnerable citizens who may have to choose between using air conditioning and other life essentials such as medicine and food. The City of Palm Springs understands the need for some kind of minimum utility charge for grid maintenance,and therefore supports Florio's proposal for a monthly$10 minimum charge,but does not support the utility companies'proposal for an additional fixed charge for all residential customers. O& flJ�vls TE" 5.4 A-DD)1 T 1 0 • Outside of a monthly minimum charge, which would likely only apply to solar energy users, the cost of grid maintenance can be adequately built into the tiering system for residential consumers Residents of Palm Springs already pay some of the highest electricity rates in the nation.We encourage the PUC to consider the most vulnerable residents in our community who would be negatively impacted by proposals to raise rates on the lowest energy consumers in order to lower rates on the biggest energy consumers. Furthermore,we reiterate that time of use rates could be devastating to the health and welfare of our citizens who cannot live without air conditioning during our hottest months. Thank you for your consideration. Sincerely Stephen Pougnet, Mayor, City of Palm Springs Paul Lewin, Mayor pro tem, City of Palm Springs Ginny Foat, Council Member, City of Palm Springs Chris Mills, Council Member, City of Palm Springs Rick Hutcheson, Council Member, City of Palm Springs Cc: Desert Sun, Governor Jerry Brown Electricity rates debated at California Public Utilities Commission Page 1 of 8 Debate over California electricity rates rages on Sammy Roth,The Desert Sao 5:17 p.m. PDTJune.Q 2015 (Photo:Crystal Chathan✓rhe Desert Sun) A controversial proposal to raise electricity rates for most Californians would"give a really big break"to the state's wealthiest communities,top utilities regulator Mike Florio said. Southern California Edison and other utility companies are pushing major changes that would raise prices for those who use the least and lower prices for those who use the most.Critics have slammed the proposal,saying it would harm low-income households and reduce the incentive for high-income households to invest in solar and energy efficiency. Edison, Pacific Gas&Electric and San Diego Gas&Electric have defended their proposal,arguing that current rates unfairly penalize high-usage customers.Their plan has the backing of Michael Picker(/storv/tech/science/energy/2015/04/30/southern-california-edison-energy-rates/26670409/), president of the California Public Utilities Commission. Florio,who also serves on the five-member commission, sees things differently. Under Florio's alternate proposal Ostorv/tech/science/energy/2015/05/06/too-regulator-pitches-alternate-electricity-rate-plan/70919380/1,electricity rates would still rise for low-usage customers and drop for high-usage customers. But neither change would be as dramatic as utility companies have proposed. "I see it as only a very minor difference from that which we have today,"said Russ Garwacki,Edison's director of pricing design and research. The Desert Sun discussed the potential changes this week with Florio and Garwacki. Here's a breakdown of what they had to say about four of the most Ali important issues being debated:fairness,fixed charges,time-varying rates and impacts on conservation and solar. !Buy Photo i Southern California Edison's Mirage Substation in Thousand Palms is seen on Tuesday.Edison and other utility companies are pushing major changes that would raise prices for those who use the least energy and lower prices for those who use the most.(Photo:Sammy RoOuThe Desert Sun) http://www.desertsun.com/story/tech/science/energy/2015/06/09/top-officials-pitches-alternate-electricity-rate-plan/28767927/ 6/17/2015 Electricity rates debated at California Public Utilities Commission Page 2 of 8 Fairness Edison's residential customers currently pay for electricity in four tiers,with rates rising as energy users cross the threshold into each tier. The first block of energy doesn't cost very much,per unit of energy;the second block is more expensive.The third block costs even more, and the fourth block costs the most. The difference between the first and fourth tiers is stark. Under Edison's current rates,energy use in the fourth tier costs more than twice as much as energy use in the first tier. Utility officials say that difference is fundamentally unfair. High-usage customers,they argue,are paying more than their fair share to maintain the electric grid,while low-usage customers are paying less than their fair share. Edison estimates that its high-usage customers are"subsidizing"its low-usage customers by more than$600 million per year. Under commission president Picker's proposal,the number of tiers would eventually be reduced from four to two,with a price difference of just 20 percent between the two tiers. "When we start talking about rate fairness, 1 think that's something that's universally acknowledged as a good thing—customers should pay their fair share;"Garwacki said."They shouldn't pay subsidies" California's current rates are a product of the 2001 energy crisis,which saw rolling blackouts cripple the state and the utility industry teeter on the brink of collapse.To keep Edison and other utility companies afloat,state officials approved huge rate increases—in such a way that high-usage customers would permanently bear the brunt of any new costs going forward. Today,that crisis-driven rate structure is outdated, Garwacki said. Over the past 15 years, he said, high-usage customers have paid more than their fair share for grid maintenance, clean energy,and other changes that have nothing to do with the energy crisis. "Once somebody gets a subsidy, most people don't want to give it up;"Garwacki said."That's why some people will say the bill impacts are unfair as a result of this proposed decision." Florio agrees there's too big a gap between what high-usage customers and low-usage customers pay.He just thinks Edison's plan is much too extreme. Picker's proposal would raise rates for 85 to 90 percent of Californians,often by as much as$15 to$20 per month, Florio said.That plan wouldn't increase the utilities'revenue because some customers would save money.But almost all of the savings, Florio said,would go to the highest-usage customers—who also tend to be the wealthiest. 'The current rates do need to change, but this is a very dramatic shift,'Florio said."It's really going have a negative impact on a lot of people." Under Florio's proposal,the number of tiers would drop from four to three. Electricity use in the third tier would ultimately cost about 77 percent more than electricity use in the first tier. "We should protect small users,who tend to be lower-income;"Florio said. http://www.desertsun.com/story/tech/science/energy/2015/06/09/top-officials-pitches-altemate-electricity-rate-plan/28767927/ 6/17/2015 Electricity rates debated at California Public Utilities Commission Page 3 of 8 How much electricity do we use? Researchers at UC Berkeley built a calculator tool that predicts average household electricity use in any given city.Those predictions are based on many factors,including electricity costs,household income,and climate conditions.The Desert Sun compared actual electricity consumption in 2014 with the predictions generated by the calculator,finding that residents of eight of the Coachella Valley's nine cities use substantially more electricity than predicted.That's an indication that valley residents could do a lot more to save energy.(Note:All electricity Consumption data is monthly.) Predicted kilowatt-hours 0 Actual kilowatt-hours L sco 1 _C3 600 0 0 `� e. e\\s s`` `O \ 0\\9 Qe\6`SQ G0 9 �ca\G �olJ` \sP1 t\ca\s�� e\R��ee \� repo& der?' P Sources:CoolClimate Network at❑C Berkeley,Southern Calff mia Edison,Imperial Irrigation District,cesen Sun Mysis Chart:Rated Hopwood,The Desert Sun Garwacki pushed back against that argument,noting that about a third of Edison's customers are enrolled in the California Alternate Rates for Energy program,which provides discounts for low-income customers. He also said many high-usage customers are large families with little room to cut back. "It's no secret that as households have more occupants,that drives a lot of the electricity that they use,"Galwacki said."It's a bit of a misnomer to think that just because a customer is high-usage that that necessarily means they're high-income" Asked to respond to that argument, Florio pointed to a well-established link between income and energy use. "I've looked at where those largest users live,and it's the rich communities around the state. It's not the middle class,as the utilities have tried to spin it," he said. :Buy Phnto v +1 y v r� Sun Up Energy workers Lupo Cruz,right,and Hipolito Herrema Install solar panels on top of a home in the Coco Cabana Homeowner's Association In Palm Springs on June 17,2014.Critics say new electricity rates proposed by Southern California Edison could limit the incentive for some consumers to go solar.(Photo:Zoe MeyerwThe Desert Sun) Conservation and solar http://www.desertsun.com/story/tech/science/energy/2015/06/09/top-officials-pitches-alternate-electricity-rate-plan/28767927/ 6/17/2015 Electricity rates debated at California Public Utilities Commission Page 4 of 8 Critics charge that the utilities'plan would discourage conservation,energy efficiency and rooftop solar.That's because it would make electricity less expensive for those who use the most—in other words, critics say,the people who can most afford to invest in efficiency and solar. Rooftop solar systems could take two to four years longer to pay for themselves under Picker's proposed changes,according to the California Solar Energy Industries Association.Similarly, investments in energy efficiency would take longer to pay off for some customers. Edison officials say their proposal would have little to no impact on energy efficiency and solar. Even under Picker's proposal, Garwacki said,California would still have some of the highest electricity rates in the nation. Rooftop solar prices,he noted, continue to drop,and Edison will still offer incentives to buy energy-efficient air conditioners, refrigerators and other appliances. While the changes might result in slightly less incentive for high-usage customers to conserve,they would also increase the incentive for low-income customers to use less energy,Garwacki said. "It's important that all customers receive a fair price signal,so they can make a fair and correct energy-efficiency investment,"he said."You have low- income customers who have no incentive to conserve" Electricity use by city/zip code The Desert Sun analyzed electricity consumption across the Coachella Valley,calculating the average number of kilowatt-hours(kWh)used by a household in a month,for every zip code in the valley.In 2014,residents of Palm Springs were among the lowest electricity consumers in the valley,and residents of Indian Wells and Rancho Mirage were among the highest.Click on a zip code to see the average monthly electricity use for that area.(Note:Some zip codes are served primarily by Southern California Edison,with a few customers of the Imperial Irrigation District.For these areas,data for IID customers was excluded.Also,some zip codes cover areas larger than the city they encompass,like the zip code for Indian Wells.) San-Bernardino # sheephole Valley San Sem.vayw Wrfdemess iv raid! No Tonal rotes r, I im 1 Joshua free National Pad Iksert Center i1 � r, Temecula e Bar o Sw gs Carl bad Escondido + 3 Anza-earn a Woolley Desen Slate Bark }y '" Cleveland Narionof rarest Imperil Zen er r Sources:Southern Calff mia Edison',Imperial Imgatim Distrid Desen Sun analysis Map:Robert Hopwood,The Desert Sun Florio doesn't buy that argument.The utilities'proposal, he said,"reflects their longstanding ambivalence about energy efficiency,"and is motivated in part by a fear of"solar companies taking away their business." It's important to balance the need for conservation and solar with fairness for high-usage customers, Florio said. But he believes the utilities'proposal strikes the wrong balance. "Based on my experience, it just seemed like three tiers,each a third higher than the other,was a kind of place that was a good compromise,"Florio said. "There's no science to that. It's a judgment call" Fixed charges Ratepayer advocates have also criticized the utilities'proposal to add a fixed monthly charge of$10,or$5 for low-income customers enrolled in the California Alternate Rates for Energy program. The fixed charges,they've argued,would essentially be a regressive tax, hitting low-usage customers the hardest.Solar advocates,meanwhile,see the fixed charges as a thinly veiled attempt by Edison and other utilities to bring in some money from solar customers. "If you can get people to pay you just to be your customer,that's a pretty good deal,"Florio said."Any business I know would love to have that." http://www.descrtsun.coa✓story/tech/science/energy/2015/06/09/top-officials-pitches-alternate-electricity-rate-plan/28767927/ 6/17/1015 Electricity rates debated at California Public Utilities Commission Page 5 of 8 Utilities officials have dismissed that argument.Solar customers,they say, benefit from being connected to the grid,even though they don't pay much for its upkeep.Hence the need for fixed charges. "It's important that customers who choose to install solar do so knowing what the true costs and benefits are,"Garwacki said. Edison has estimated actual fixed costs at about$30 per month,but it's only proposed to charge$10.All other customer classes,Garwacki noted— including businesses—pay some kind of fixed charge. "It's very strange that we would single out residential customers,and say that it doesn't make sense for this group of customers,"he said. Commission president Picker has proposed phasing in the$10 fixed charge over the next few years. Edison officials have criticized that plan,saying the charges should take effect immediately. Florio's proposal would reject fixed charges, instead implementing a$10 minimum bill for most customers,or$5 for California Alternate Rates for Energy customers.The fact that utilities have criticized his proposal, he said, is a sign that their intentions aren't pure. "If all they wanted was to collect some money from people who have no or very low usage,a minimum bill would satisfy them,"Florio said.'That's why I think it's pretty clear there are other motivations at work." Buy Photo I 1` E Southern California Edison's Mirage substation in Thousand Palms Is seen on June 9,2015.(Photo:Sammy Rou✓The Desert Sun) Time-varying rates Rate tiers and fixed charges are one conversation."Time-of-use"rates are another conversation entirely. The idea behind time-varying electricity rates is simple:The cost of electricity changes depending on the time of day and time of year,so we should pay more—or less—depending on when we use energy. If there's one thing Florio and Picker agree on, it's that residential customers should automatically be enrolled in time-of-use electricity rates starting in 2019(/story/tech/science/energy/2015/05/20/maior-changes-coming-electricity-rates/27679433/).Consumers would have the option of switching back to the tiered rate structure,but experts say that most people would stick with the default rates. Proponents say time-varying rates would help reduce our dependence on climate-altering fossil fuels.That's because when demand is highest,Edison and other utilities are forced to buy expensive electricity from"peaker"power plants that wouldn't otherwise be needed.Those plants are generally inefficient, spewing more air pollutants and planet-warming greenhouse gases than most energy sources. By charging more for electricity when demand has traditionally been highest,utilities could reduce"peak demand,"limiting the need for peaker plants, proponents say. Time-varying rates would also give consumers"another way to save,"Florio said,allowing them to reduce their bills by moving energy-intensive activities from peak times to non-peak times. http://www.desertsun.com/story/tech/science/energy/2015/06/09/top-officials-pitches-alternate-electricity-rate-plan/28767927/ 6/17/2015 Electricity rates debated at California Public Utilities Commission Page 6 of 8 "You can't expect people to move everything,but there are things that people can do to save money,"he said."If you just go ahead and build another plant to meet that peak demand,everybody's got to pay for ft." Puy Photo OnO IOU 31, Y� —V�6.I�yVT`j wow 11 rilw'��-- a*^' M + �rrw OW 93 r_°xl any eil'M ha' 01`""� go�k�' Tr»Imo' tfe"_ p _-,atV. f'YO'R�f M�1,„0.. NMt!� W 1.47 �y�lonopw rVMt yrvlb rto� y,w, soa .ITV M„Oo �,W as mnP sp GO rc' ° rt mT ,m° .rgosuA° pOse n based nn mao into �CFt ilghlsV An electric bill shows the energy use of Rancho Mirage resident Clarence Keatley.(Photo.'Cnata/ChethaMrhe Desert Sun) The Utility Reform Network, a ratepayer advocacy group, is worried default time-of-use rates would have unintended consequences.For instance,the group has argued,the new rates could make electricity much more expensive during the summer,hitting desert residents hard during air conditioning season. Florio said he's concerned about impacts on desert residents,which is why his proposal doesn't implement default time-of-use rates for several years. "I expect we're going to be doing a lot of analysis between now and 2019,"he said."If we see that there are going to be adverse impacts,we'll need to deal with that" Southern California Edison officials are somewhat ambivalent about default time-of-use rates. While the company supports prodding residential customers toward time-varying rates,the transition should be gradual,Garwacki said. Edison doesn't think customers should be automatically enrolled in the new rates,although that seems like a foregone conclusion now. What happens next? III It's unclear how soon the public utilities commission will choose between the dueling electricity rate proposals.The five-member panel could vote as soon as its June 25 meeting in San Francisco. While Picker's position is clear, Florio said he doesn't know how the other three commissioners—Carla Petennan,Liane Randolph and Catherine Sandoval—will vote. It's possible, he said,that he or Picker will modify their proposals to win support. "It takes three votes. I've said how I would do it if I were king,but I'm not,"Florio said."I think there will be other options floated,and it'll take some time to �I sort this out" Sammy Roth writes about energy and water for The Desert Sun. He can be reached at sammy.roth@desertsun.cem,(760)778-4622 and (BtSammv Roth (hrosaAwitteccom/Sammy Roth). Have an opinion? Members of the public can tell the California Public Utilities Commission what they think of proposed rate changes by emailing the commission's public advisor,Karen Miller,at public.advisor@cpuc.ra.aov(mailto:public.advisor(opcpuc.ca.gov).They can also send mail to:CPUC Public Advisor,505 Van Ness Ave.,Room 2103,San Francisco,CA 94102. http://www.desertsun.com/story/tech/science/energy/2015/06/09/top-officials-pitches-altemate-electricity-rate-plan/28767927/ 6/17/2015 Electricity rates debated at California Public Utilities Commission Page 7 of 8 Source:California Public Utilities Commission By the numbers Right now,Southern California Edison customers pay for electricity in four tiers.Here are the rates: -Tier 1: 14.9 cents per kilowatt-hour -Tier 2: 19.3 cents per kWh(30 percent higher than Tier 1) -Tier 3:27.9 cents per kWh(87 percent higher than Tier 1) -Tier 4:31.9 cents per kWh(114 percent higher than Tier 1) Michael Picker, president of the California Public Utilities Commission, has proposed collapsing the number of tiers from four to two.Under his plan, electricity use in Tier 2 would cost 20 percent more than electricity use in Tier 1,although actual rates have yet to be determined. Mike Florio,another member of the public utilities commission, has proposed a three-tiered rate structure.Under his plan,electricity use in Tier 2 would cost 33 percent more than electricity use in Tier 1,and electricity use in Tier 3 would cost 77 percent more than electricity use in Tier 1. Source:Desert Sun reporting Read or Share this story: http://desert.sn/I lDBwF7 Take theBandages 7 Have a wound that won'fn l?Two convenient locat DESER"t' REGIONAL MEDICAL CENTER 1drmccd ICiwod Ncalm"Center TOP VIDEOS 2893001760001 43024E Hands-on with Sonv's new virtual reality headset (/videos/tech/2893001760001/43 Prepare to have Your mind blown as bridge is 3D-orinted over Dutch canal (/videos/tech/2893001760001/< 01:03 (/vide o s/tech/28 930017 60001/4 29 9361 http://www.desertsun.com/story/tech/science/energy/2015/06/09/lop-officials-pitches-altemate-electricity rate-plan/28767927/ 6/17/2015 Commuter Transportation Survey Form City of Palm Springs 1. First Name Last Name Middle Initial 2. Home Address(Address is confidential and will not appear on anyone else's RideGuide*) Street Number Street Name City Zip Code 3. Home Cross Streets and 4. Contact Phone Number (Please Check One Box) ' ❑ ❑ ❑ (Area Code) Extension Work Home Cell 5. Typical Work Hours AM AM m m PM m m PM Start Time (Circle One) End Time (Circle One) If your work hours vary from day today please check here ❑ If you have up to one hour flexibility in your start and leave times,please check here ❑ 6. Work Department 7. Employee ID 8. Email Address 9. Typical Commute Mode(Check One Box) 0❑ Drive Alone C❑ Carpool V❑Vanpool P❑ Public Bus R❑ Metrolink/Rail W F Walk B❑ Bicycle r❑Telecommute M❑ Motorcycle 10. ❑ Yes: Please send me a RideGuide which provides a list of commuters(including co-workers)who live near me and are interested in sharing a ride to work.The RideGuide also provides a list of Park and Ride lot locations and information on other ridesharing options such as Metrolink/rail,vanpools and public bus. By checking yes, I understand that my name,telephone number and/or email address will be provided to other commuters who want to carpool to work. ❑ No: I do not want to receive a RideGuide at this time. 1-866-IECS4HELP(1-866-432-7443) PLEASE COMPLETE SIDE 2 'Per California Penal Code section 637.6,this information will only be used for ridesharing purposes. Home addresses are never disclosed. Regional rideshare services are provided by Inland Empire Commuter Services,a joint effort of Riverside County Transportation Commission and San Bernardino Associated Governments. 10.2011 INSTRUCTIONS: 1)You MUST enter your work start time for each day. If you were on vacation,out sick or had a regular day off during the survey week, please provide your normal scheduled start time for that day. 2)You must circle AM or PM for each of the seven days. 3) Place one check mark(�) in each column telling us how you got to work. There should be no more than one check mark for each day. 2015 SURVEY WEEK DATES 6/1 6/2 6/3 6/4 6/5 6/6 6/7 Monday Tuesday Wednesday Thursday Friday Saturday Sunday Write in the Time You Began Work For Each Day Circle AM or PM AM or PM AM or PM AM or PM AM or PM AM or PM AM or PM AM or PM MAKE ONE SELECTION FOR EACH DAY: A. Drive Alone B. Motorcycle C. 2 Persons in Vehicle D. 3 Persons in Vehicle E. 4 Persons in Vehicle F. 5 Persons in Vehicle G. 6 Persons in Vehicle H. 7 Persons in Vehicle I. 8 Persons in Vehicle J. 9 Persons in Vehicle K. 10 Persons in Vehicle L. 11 Persons in Vehicle M. 12 Persons in Vehicle N. 13 Persons in Vehicle O. 14 Persons in Vehicle P. 15 Persons in Vehicle Q. Bus R. Rail/Plane S. Walk T. Bicycle U. Zero Emission Vehicle V. Telecommute(Reduction of More Than 50%of Trip) W. Noncommuting X. 3/36 work week days off(2 days off) Y. 4/40 work week day off(1 day off) Z. 9/80 work week day off(1 day off) AA. Vacation BB. Sick CC. Regular Day Off,Jury Duty, LOA,etc You should only have seven (7)check marks, one for each day of the survey week. Signature Date Thank you for completing your Commuter Transportation Survey!