Page One | Page Two | Page Three | Page Four | Page Five | HOME VOLUME 12, NUMBER 1 SEPTEMBER 2008 INSIDE: Edison General Rate Case Heats Up Little Legislative Action on Energy Matters Will Direct Access Return Soon? California Wholesale Energy Prices PG&E ratchets up rates again, with more increases to come By Dan Geis, AECA Public Affairs Director On October 1, PG&E increased electricity rates for all customers by 6.0%, reflecting growing commodity prices for natural gas and other generation cost drivers. Investor-owned utilities do not earn a rate-of-return on the cost of the actual electricity commodity, which is required to be a “pass-through” cost to customers. Each year the utility forecasts the costs of the commodity, then “trues-up” the actual cost against their projections. In this case, PG&E underestimated the cost of natural gas when it originally set rates in late 2007, and this led to the proposed increase in rates. As illustrated below, agricultural rates increased, on average, by 5.3%. Because agricultural rates have a smaller-than-average generation cost component, rates increased at a lesser rate than other customer classes: In the table above, we have highlighted three of the 19 agricultural and water pumping rate schedules. AG-1A is the most popular non-time-of-use rate schedule, while AG-5B and AG-5C comprise most of the larger time-of-use agricultural accounts. These increases are driven almost exclusively by larger global commodity shifts in oil and natural gas. Because generation costs constitute nearly 2/3 of the total cost of electricity, rising oil and natural gas prices over the last few years has heavily influenced electricity rates. Because these commodity costs are a “pass-through” cost for the utility, consumers groups such as AECA have little ability to directly address these rising costs. AECA and other customer groups are largely involved in issues that affect distribution and transmissions costs and how they are allocated amongst the various customer classes. Those decisions are made in “General Rate Cases,” which occur every three years. PG&E will be filing their next General Rate Case in 2009. PG&E Rate Increase – Round 2 While the previously described rate increase reflected past undercollections for 2008 costs, PG&E has also submitted their next filing to adjust rates on January 1, 2009 for the prospective 2009 year. Again, they have forecasted rising energy costs, which they estimate will lead to an average increase of 2.6%. If PG&E has overestimated the commodity prices, rates will be adjusted downward later in 2009 to reflect their over-collection of revenues. The following table illustrates their proposed rate change on January 1, 2009: Again, due to higher-than-average distribution and transmission rates, when commodity rates increase agricultural increases will be lower than average. The “Previous Average Rate” listed does not perfectly correlate with the October 1, 2008 rate listed in Article #1 due to other minor regulator changes that will also occur on January 1, 2009. About AECA | Legislation | CPUC Cases | Newsletter | About Ag Energy | Energy Links | Glossary | HOME Contact the AECA by E-Mail Agricultural Energy Consumers Assocation 925 L Street, Suite 800 / Sacramento, CA 95814 1 (916) 447-6206 Content and graphics copyright ©2000, Agricultural Energy Consumers Association . HTML and design copyright ©2000, ABC Internet. All rights reserved.