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Tiers for Fears, PG&E’s Latest Rate Increase

South County residents will likely see an increase in their energy bill while North County dwellers may see a reduction. Pacific Gas and Electric Company (PG&E) and the California Energy Commission (CEC) have made changes, and are continuing to do so, to various aspects of customer billing. The latest alterations, implemented March 1 of this year, were the reduction of tiers from 3 to 2, the addition of a high usage surcharge, and a tier price adjustment.

In July 2015, the California Public Utilities Commission (CPUC) voted on changes to residential rate structures. Due to the California energy crises is 2001, billing tiers were implemented to encourage energy conservation. However now that the crisis has passed, the CPUC states in their Residential Rate Reform memo that the old tier pricing was unfair and higher tier users were basically subsidizing lower tier user’s energy costs.

“Because of the implementation of the rate freeze in accordance with Assembly Bill (AB) 1X, users in the lower tiers pay significantly below the cost of electricity service, while users in the higher tiers pay significantly above cost,” according to the memo.

Essentially, homes living in temperate climates tend to use less energy to regulate temperatures, as opposed to homes in volatile climates. In turn, SLO South County residents can expect increases in their bills, while North County residents are likely to get a slight break.

Mark Mesesan, PG&E’s communications principal, wrote in an email, “It is important to note that PG&E does not make more money when customers use more electricity. We are paid for providing energy that is safe and reliable while supporting California’s clean energy goals. All of our rates are subject to review and approval by the California Public Utilities Commission.”

It may be confusing, but customers are not really paying for electricity and gas, they are paying for the infrastructure and the process that provides the energy. PG&E, like the majority of utility companies, produces a profit by reinvesting in infrastructure, but according to a recent Los Angeles Time article there has been a growing argument that California has a “glut of power.” The law of supply and demand basically dictates if something is common, then it is cheap. Currently, Californian has a massive excess of energy, but residents are still paying higher rates than the national average, even though on average the energy consumption has dropped.

Electricity Local, an online statistical energy use resource, states that despite California ranking 48 in the nation for electricity consumption, the state pays 29.12% more in rates than the national average, though these numbers do not necessarily reflect the latest rate increase.

“PG&E customers’ bills are below the national average [for use] due in part to our weather, energy efficiency programs working so well and the proliferation of solar,” said Mesesan. “Yet we understand any change in bills for customers can be challenging and we are here to help. PG&E has a number of programs and tools to help our customer take control of their energy use and monthly bills.”

A large portion that is driving the continual building of arguably unneeded facilities is a tax break incentive called accelerated depreciation which allows companies to defer taxes until a later date. Executive Director of the Institute of Taxation and Economic Policy (ITEP), Matt Gardner said, “Accelerated depreciation just means that you get to postpone paying taxes, not that you won’t have to pay them eventually, but what you see with companies that make a lot of capital investments, PG&E is I guess pretty clearly in that camp, is that you defer so much each year that even over the long run you are basically paying nothing or close to it.”

A report published by Citizens for Tax Justice, a non-profit public interest research and advocacy organization, claims that PG&E had negative tax rates. Gardner who participated in the study said, “PG&E sticks out primarily, because they were the only company out of the 258 that managed to pay zero incurred federal income taxes in all eight years that we looked at.”

In response Mesesan said, “Accelerated depreciation was included in Congressionally-approved tax policy changes designed to stimulate the economy after the 2008 recession, and encourage capital-intensive businesses such as PG&E to resume capital investment. PG&E and others have used the incentive for the reason it was passed by Congress, using the tax savings to help fund billions of dollars in infrastructure investments and create jobs. While accelerating depreciation creates near-term tax savings, it means the depreciation is not available later, so companies would pay more in future taxes.”

PG&E is well known in the Central Coast area for its philanthropic work, “We still are finalizing our 2016 figures, and we will share them when we have them,” said Mesesan. “In 2015, however, PG&E made charitable donations of nearly $900,000 to nearly 900 non-profit agencies, including schools, located in San Luis Obispo and Santa Barbara Counties. These donations are shareholder and employee-funded, plus, our people volunteered thousands of hours of personal time in 2015, like every year, in support of community programs, projects and events.”

By Mark A. Diaz

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