Sacramento home energy users could be among the first in California to pay rates that rise or fall based on the time they consume energy, with summer peak time electricity prices possibly costing three times that of current base rates.
The new structure, called a “time of use” rate, seeks to shift demand for power away from times when energy is typically consumed the most – during summer weekdays from 4 p.m. to 7 p.m. By 2018, all Sacramento Municipal Utility District rate payers would likely be transitioned to the new rate system, if the utility’s board approves the rate structure.
“The impact to each customer’s bill will vary depending on the way he or she uses energy, how much energy is used and whether or not that customer chooses to shift some use to lower demand times,” said SMUD spokesman Jonathon Tudor.
SMUD is eager to have ratepayers move more of their electricity use to off-peak times, which would free power purchasers from turning to the more expensive spot market when demand is high, said Erik Krause, director of retail strategy at SMUD. Instead, utilities would be able to purchase more renewable energy and less expensive power at times of less demand.
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Commercial and agricultural customers in the Sacramento region are already using time of use rates, and roughly 500 SMUD residential customers have enrolled in the plan. Later this year, SMUD plans to offer the rate to solar and electric vehicle users and enroll another 2,000 customers, Krause said. All customers will have the option to adopt the plan in 2017, with SMUD expecting 10,000 customers to enroll by the end of that year.
Under the time of use rate plan currently in place for customers who have opted in at SMUD, the off-peak rate running from 9 p.m. to 9 a.m., Monday through Friday, is 8.67 cents per kilowatt-hour, which applies all day on weekends and holidays. The rate rises to a peak category 14.67 cents per kilowatt-hour between 9 a.m. to 4 p.m. Monday through Friday all year.
The most expensive rate – 30.93 cents per kilowatt-hour – goes into effect from 4 p.m. to 7 p.m. from June 1 through Sept. 30. The current base rate for energy users is 10.6 cents per kilowatt-hour, with the rate rising for more energy-intensive users. During summer that base rate is roughly 11 cents per kilowatt-hour.
SMUD said the proposed time of use rates for all residential customers in 2018 would be similar to the rates already in effect for those who have already opted in.
The new electricity rates will require board approval and about 75 community meetings seeking input from customers, Krause said.
Ratepayers can also opt out of the time of use rate plan and stay with the rates they pay now, Krause said.
In 2015, the state Public Utilities Commission gave all three of the state’s investor-owned utilities – PG&E, Southern California Edison and San Diego Gas & Electric – approval to adopt time of use rate for implementation by 2019. That approval was the result of AB 237, signed into law by Gov. Jerry Brown in 2014, which removed restrictions limiting the commission’s ability to modernize electricity rates by replacing long-standing rate structures.
PG&E spokesman Donald Cutler said he believes the new rates reflect changes in power use over the last two decades. “Fifteen or 20 years ago, the peak time was the middle of the day, when everyone was doing things, but that’s not true anymore,” Cutler said. Much of that change is driven by the evolution of solar and renewable sources, which produce much of their energy in the middle of the day and lower demand for power.
Critics of the proposed plan said the rate structure would disproportionately cost lower income ratepayers and impose higher costs on Central Valley rather than coastal ratepayers.
Matthew Freedman, attorney at The Utility Reform Network, a San Francisco-based consumer utility ratepayer advocacy group, believes the new rate structure will hurt those who can’t shift their power use during hot summer months.
“We’re concerned that time of use rates will create greater variability between summer and winter electric bills and that customers may have few options to avoid higher bills other than not using air conditioning,” Freedman said. “Vulnerable customers, such as homebound seniors who rely on air conditioning during hot summer months, could suffer the worst consequences.”
Severin Borenstein at UC Berkeley’s Energy Institute at the Haas School of Business, said his research has shown that rate increases would be minor, with increases in most case of less then 5 percent, because people would shift their energy use to off-peak hours.
“It would hurt lower income people slightly more than wealthier people, but the difference is very minor,” Borenstein said. “Central Valley customers would be made a few percent worse off if they did not make any adjustments.”