In summary

New bill would limit sky-high fees that enrich utilities at the expense of ratepayers, but legislators may need a push.

By Sam Liccardo, Special to CalMatters

Sam Liccardo is the mayor of San Jose, sam.liccardo@sanjoseca.gov.

I just voted to hike electricity rates in San Jose. Many other mayors and public officials sitting on boards of municipal and community-choice utilities — serving tens of millions of Californians — have done the same in recent weeks.  

You should be mad as hell about it — especially because local utilities’ wholesale costs to provide electricity have not increased a dime.  They’ve actually dropped.

So why increase rates?  The California Public Utilities Commission doesn’t give us much choice.  Over the last decade, state regulators have consistently rubber-stamped requests by large investor-owned utilities for higher fee revenues for the Power Charge Indifference Adjustment (PCIA), a fee on ratepayers to cover the cost of those companies’ older, less efficient energy plants and supply contracts.   Although PCIA fees are paid by ratepayers living in one of the 200 cities and towns now served by a publicly owned “community choice” utility to procure greener, cheaper electricity, the fee revenues still flow to the coffers of Pacific Gas & Electric, San Diego Gas & Electric and Southern California Edison.  

In PG&E’s service area, the annual PCIA fee has skyrocketed 900% since 2013. Across California, it amounts to a $3.8 billion annual transfer of wealth from ratepayers’ pockets to those of PG&E, SDG&E and Edison.   

Indeed, San Jose ratepayers pay more, even though San Jose Clean Energy procures electricity that is 30% cheaper than investor-owned PG&E’s — and 90% of SJCEs power comes from zero-greenhouse-gas power sources.  Like other local community-choice utilities, SJCE doesn’t have to pay PG&E’s hefty executive salaries, shareholder dividends or excessive debt service. If the PCIA fee were calculated equitably, these advantages would enable SJCE ratepayers to consistently enjoy lower rates. But this year, many won’t — because of the hefty PCIA fee.  

PCIA fees came into being to ensure that former customers of big investor-owned utilities — those residents and businesses who switched to lower-cost, greener community-choice providers — bore their fair share of the utilities’ above-market costs of state-mandated investments in legacy power plants and older electricity supply contracts. To be sure, SJCE and other community-choice utilities pay less for greener electricity because they entered energy markets more recently. 

Fair enough, but if the PCIA fee merely serves to fairly apportion costs, it should directly reflect those companies’ actual energy costs. In actuality, while the PCIA tariff has ballooned in the past seven years, the wholesale price for electricity hasn’t increased at all. One also might reasonably expect that fees to ratepayers would increase commensurate with the benefits they receive for those legacy energy contracts. Not so. The California Public Utilities Commission requires ratepayers to pay without requiring private utilities to provide them with any benefit for the power ratepayers paid for through the imposition of the fee.  

Why? These rate hikes have nothing to do with economics. They have everything to do with the political power of the big utilities and their allies, and with the consistent capitulation of state regulators to that power. With great power comes an even greater electricity bill.

Modest recent reforms should improve the transparency of the PCIA fee-setting process, but Californians deserve more. For example, Sen. Anthony Portantino’s ratepayer equity bill — Senate Bill 612 — would enable ratepayers to benefit from the energy supply they’re already paying for through the PCIA fee.  

Even greater reductions in PCIA fees are possible with the injection of market discipline into big utilities’ cost management of their electricity supply portfolio, rather than merely allowing them to hike fees without restriction. For example, regulators could annually require PG&E to sell any excess electricity supply, and to renegotiate or buy out expensive legacy energy contracts, thereby reducing costs for both the company and ratepayers.   

Reforms are long overdue. As many Californians struggle to recover from the financial effects of the pandemic, the passage of SB 612 grows more urgent. Some righteous ratepayer anger directed toward state legislators and regulators could help spur their courage to ease unfair financial burdens for millions of California families.

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Sam Liccardo has also written about fighting antisemitism and how California must wean buildings off fossil fuels to combat climate change.

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