San Diego Gas and Electric (SDG&E) is proposing a new fixed rate of $10 and a monthly increased minimum bill proposal, of $1.26 per day (or $38.19 per bill based on a 30-day billing cycle), to be effective March 1, 2020 if approved by the CPUC. SDG&E believes these “modest” increases are necessary to move past “antiquated rate design” that doesn’t account for higher levels of solar penetration.
The transition path that SDG&E has proposed, a modest fixed charge for all residential customers, is a critical first step toward an evolving rate design. Indeed, regulators in several states have already taken positive action and approved a fixed charge for residential customers. For the California utilities to continue to evolve to provide the services that the Commission and customers want then all customers who use and benefit from the grid will need to start to share in the cost of building, maintaining and operating it.
This will entail moving toward a rate design model that allows for a fixed charge to recover fixed costs from all customers. The antiquated rate design model of recovering fixed costs in volumetric rates is no longer a viable option that can promote fairness to all customers and for the utilities to continue providing the services demanded by its customers today and into the future.
In order to fulfill our corporate goals, SDG&E needs and deserves reasonable assurances that recovery of its grid investments will not be bypassed by those who uses very little energy or who have installed DERs.
This construction that ratepayers need to pay more because of the financial harm incurred by customers interconnecting new generational sources out of their own pocket is often cited by utilities in their arguments in rate case proposals (Florida Municipal Power is another recent example). Changes must certainly be made to update our old way of doing things, but this often-cited study from the Lawrence Berkeley Lab shows the threat to the grid is a bit overblown. For utilities in high penetration areas like SDG&E, the Lawrence Berkeley study also offers some alternative ideas that take advantage of the opportunities in a DER reality, versus punitively slapping the hands of ratepaters for having ushered in a new clean energy era:
Efforts to encourage higher value forms of deployment also offer a strategy for mitigating any cost-shifts, for example by directing development toward geographic regions with the greatest T&D deferral opportunities, by developing mechanisms to leverage the capabilities of advanced inverters, or by incentivizing the pairing of solar with storage or demand response. Such strategies represent an alternative (and potentially less contentious) approach to addressing the effects of distributed solar on retail electricity prices (Barbose et al. 2016).
Those suggestions are certainly not antiquated.