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Electricity’s High Costs And High Prices

This presentation by John A. Bohn from the California Public Utilities Commission highlights the high rates for electricity services in California. It explores the reasons for these high rates, including the high resource costs and the impact of various mandates and subsidies. The presentation concludes with a plea to consider the affordability of further improvements in electric service.

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Electricity’s High Costs And High Prices

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  1. Electricity’s High CostsAnd High Prices John A Bohn California Public Utilities Commission For Presentation to the NCPA January 24, 2007

  2. California’s IOU Customers FaceHigh Rates For Electric Service • Prior to the crisis, residential rates were “only” about 60% higher than the national average. • Now, California’s electric rates for residential service are large multiples of the national average.

  3. Example: PG&E’s Residential Rates The so-called “Good Old Days” Two-tier tariff prior to the crisis Cents / kWh 13.3 1.6 X 11.6 8.24 National average rate in 2000 100 130 200 300 Percent of Baseline Quantity (kWh)

  4. Example: PG&E’s Residential Rates 36.4 Today’s steep tiered tariff 31.7 Cents / kWh 22.7 3.8 X 3.3 X 2.4 X 12.9 11.4 9.45 National average rate in 2005 100 130 200 300 Percent of Baseline Quantity (kWh)

  5. Why Such High Rates? • High Resource Costs • Very little Coal (dirty and inexpensive) • Much Natural Gas and Renewable Sources (cleaner and more costly) • Very Costly Clean-Up from the Crisis • Fixed Baseline Rates force up other residential rates • Mandates, mandates, mandates. All for the good, but at what cost?

  6. Mandates • Subsidies to Low-Income Customers • Subsidies to Low-Use Customers • Renewable Portfolio Standard – toughest in the nation • California Solar Initiative • Efficiency RDD&D • Greenhouse Gas – Procurement Rules

  7. One Man’s Conclusions • California electric service customers are paying very high prices • Every new mandate costs money • Cause and effect not always clear • Unintended consequences • We should be aware of costs in decisions “Please don’t improve my life any more; I can’t afford it.”

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