Commentary: Utilities plan changes to time-of-use electric rates


Issue Date: April 26, 2017
By Karen Norene Mills
Karen Norene Mills
Net metering projects such as solar facilities will be affected by electric utilities’ planned revisions to time-of-use rate schedules.
Photo/Dave Kranz

It's been close to 30 years since California electric utilities began offering time-of-use rates to agricultural customers. When TOU rates began, the electrical system signals were clear that demand on the system and available electricity production resulted in benefits to the system if usage was avoided during peak periods. But things are changing.

Throughout the state, the highest-cost, on-peak periods have been from noon to 6 p.m. on weekdays. All other hours have been lower-priced, with holidays and weekends set at the lowest cost. Generally, prices are higher in the summer than the winter, as rate schedules and pricing provided incentives to avoid use of electricity during peak hours.

The electric system has changed significantly in recent years because of large solar facilities, increased demand and customer-owned generation, as well as how the energy is managed. Those changes have driven on-peak pricing periods upside down, primarily because there is so much electricity generated from solar during the afternoon.

Now, the on-peak period has generally been pushed to the 5 p.m. to 9 p.m. time frame, moving off-peak and mid-peak periods outside that range. At the same time, the difference in the energy prices among the various periods is flattening.

For the past few years, electric utilities, energy agencies and representatives of utility customers have been examining how best to restructure time-of-use rates to match the cost and usage patterns. Ultimately, that discussion must occur in utility rate proceedings at the California Public Utilities Commission, where changes to rate schedules will be made.

The California Farm Bureau Federation has been a consistent participant in those proceedings. We use expert analysis and advocacy tailored to the pragmatic considerations of agricultural operations to present proposals for a transition to electric rate schedules that capture the new TOU periods.

The major concern, of course, is that the changes will cause significant cost increases if customers cannot adapt to the new rate structures. Each major electric utility has proposed changes to its time-of-use periods:

San Diego Gas & Electric Co. was the first to consider mandatory changes to TOU periods. Most agricultural customers in SDG&E were not required to be on TOU rates until 2016. After extensive discussions, CFBF settled the debate with SDG&E about application of new TOU periods to customers on Schedule TOU-PA as follows:

  • On-peak periods would be set at 4 p.m. to 9 p.m. weekdays.
  • Off-peak periods would be the remainder of times and days.
  • The new time periods would not be mandatory until 2019, but customers could opt in to the new TOU periods earlier.
  • Summer months would be June to October.
  • An additional, optional rate would also be offered with three TOU periods.

A settlement has been submitted, but no decision is expected for several months.

Pacific Gas & Electric Co. submitted its proposed time period changes last June. The proposal would require rate schedules to include the following time period structures, and would mandate customers be placed on them by 2019.

  • Summer Season: June-September (currently May-October).
  • Peak: 5 p.m. to 10 p.m., summer and winter, all days.
  • Partial Peak: 3 p.m. to 5 p.m. and 10 p.m. to 12 midnight, summer only, all days.
  • Off-Peak: All remaining hours

CFBF submitted expert analysis and proposals, which recognize the changes agricultural customers have made to adapt to existing time periods, and requesting a measured transition to the new periods. We recommend that customers not currently on TOU rates not be transitioned to such rates until the new TOU periods are established. In addition, an assessment should be made of those customers' usage and of any others who opt in to the new TOU periods, prior to any mandatory implementation by the remaining agricultural customers.

Under any transition scenario, Farm Bureau also supports a rate schedule be offered to agricultural customers that allows longer off-peak periods during two consecutive weekdays or even a weekend, thereby recognizing the realities of efficient irrigation systems. In other words, agricultural customers should have a 48-hour period with lower-priced power to manage operations. Such a rate structure would also provide PG&E with more certainty about when usage occurs, to better manage the local grid.

Southern California Edison proposed its new TOU periods last fall. It also recommends on-peak periods be weekdays from 4 p.m. to 9 p.m., with all other hours classified as off-peak or mid-peak. Edison would require agricultural customers, except those on Super Off-Peak rate schedules, be placed on the new TOU periods in 2019.

This case is moving forward quickly. SCE would simply insert the new TOU periods into existing schedules. As in the PG&E case, CFBF will advocate for a more reasonable amount of time for customers to transition to the new periods.

Net metering projects, particularly solar facilities, are also affected by revisions to TOU periods, because pricing changes affect credit calculations. The PUC approved 10-year grandfathering for non-residential solar facilities, allowing them to be served under the existing TOU periods from the date of interconnection. However, the decision applies only to those for which applications were submitted by Jan. 31, 2017, and interconnected by June 2017.

CFBF will remain engaged as these cases move through the review process. Please watch Ag Alert® for future updates.

(Karen Norene Mills is associate counsel and director of public utilities for the California Farm Bureau Federation. She may be contacted at kmills@cfbf.com.)

Permission for use is granted, however, credit must be made to the California Farm Bureau Federation when reprinting this item.