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SMUD proposes new rate plan that would convert all customers to time-of-use rates by 2018


From the May 28, 2013 issue of Public Power Daily

Originally published May 28, 2013

By Jeannine Anderson
Editor
Faced by rising costs -- including the higher cost of adding more renewable energy to its portfolio, as required by California state law and its own goals -- the Sacramento Municipal Utility District has proposed a rate plan that, among other things, would convert all of its residential customers to time-of-use rates starting in 2018.

The municipal utility's board has not yet voted on the proposal, which was recommended by SMUD General Manager John DiStasio in a report early this month. The gradual transition from the current tiered rates to time-based rates that he has proposed "will bring all customers in line with the true cost of electricity and will avoid some customers paying more than it costs for SMUD to serve them," DiStasio said. SMUD's commercial customers already are on time-of-use rates.

The proposal calls for rates for all customers, residential and commercial, to go up by 2.5 percent in 2014 and another 2.5 percent in 2015. The two-step rate increase "will produce the revenue SMUD needs to pay for the higher costs of renewable power required by the state, for the lingering effects of the recession on growth and low-income energy assistance, and for our debt service obligations," DiStasio said in his report recommending the sweeping rate changes. 

The rate plan will be explained at a public workshop today (May 28) and at two more public meetings over the next two months, with a second public workshop set for June 18 and a public hearing on the rate proposal set for July 18.

SMUD's rates remain lower than those of most other utilities in California, the city-owned utility says in a four-page flyer on its website that outlines the proposal. "Of the 19 largest electric utilities in the state, SMUD has the third lowest average cost per kilowatt-hour."

Most customers would see their monthly bills go up by $2 to $4 as a result of the proposed changes, SMUD said, although some customers would see no increase and others would see a decrease. 

With time-of-use rates, "the amount you will pay for electricity may be significantly  higher in the summer during the 'peak hours' of 4 p.m. to 7 p.m., Monday through Friday, but lower the other 21 hours a day on weekdays and all day on Saturday and Sunday," SMUD said. "This aligns with the cost of providing electricity service, which fluctuates based on when you use it." The time-based rates also will give customers "direct control of how much you pay for electricity, based on when you use it," the utility said in its online flyer.

The rate proposal "represents responsible, forward-looking fiscal management on behalf of our customer-owners," DiStasio said. "We are approaching the proposed rate changes carefully to minimize any customer impacts and to help them with new opportunities for making informed choices about their energy consumption. Among other things, the rate restructuring will help residential customers take advantage of new energy management technologies and new electric services, including solar and electric vehicles."

The Sacramento Bee applauded the SMUD plan in a May 8 editorial. The current rate system "results in heavy users unfairly subsidizing low-use customers who use a disproportionate amount of electricity during times of peak demand," theBee said. "It sends the wrong price message to customers."

Smart meters the utility has installed over the last few years have "given the utility the ability to measure not just how much electricity its customers use but, most critically, when they use it," the newspaper said. "That allows for more efficient use of electricity, which means SMUD can avoid building new power plants. That not only minimizes the utility's carbon footprint, it saves money for SMUD and its customers."

More information on the rate proposal, including the general manager's report, is posted on SMUD's website.

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