9. Rate Design - Residential Customers
PG&E's current residential CPP rate, SmartRate, allows the PDP surcharge to be added to non-TOU rates. However, the Rate Design Guidance in D.08-07-045 requires residential PDP to be combined with TOU in non-event hours. Consequently, PG&E's original testimony proposed to terminate its current residential CPP rate or SmartRate Program on Schedule E-RSMART on or before May 1, 2010, giving these customers the option of choosing the new PDP rate or defaulting to a non-PDP rate. According to PG&E, because Schedule E-6 includes relatively steep TOU pricing incentives, bill comparison results indicated that many residential customers currently served on non-TOU rates would incur significant bill increases simply from moving to the TOU component of the PDP rate (without even considering the effect of the PDP price signal). Also, the proposed compliant PDP rate is significantly different than the current SmartRate option available to residential customers. The new PDP rate would have a PDP price signal set at a level approximately two-and-one-half times the current SmartRate price signal.19 PG&E indicated that it would only assign a residential SmartRate customer to PDP if the customer affirmatively elects that option.
In its prepared testimony, DRA stated its belief that a PDP rate would work better with a TOU schedule that has a more gradual differential between peak and off-peak rates. DRA also recommended that Schedule E-RSMART be closed to new customers and that existing customers be grandfathered on this schedule indefinitely.
In its prepared testimony, TURN recommended that the Commission authorize PG&E to design its residential PDP rate on top of non-TOU inverted tiered rates to encourage customer participation in hotter inland climates and to increase demand response and reduction from PDP rates.
In response to DRA and TURN concerns, PG&E presented two alternatives for residential customers in its rebuttal testimony. In its Alternative 1 proposal, PG&E responded to concerns about adverse bill impacts by including TOU rates that are less steeply time-differentiated than those offered under the Schedule E-6 tariff. If Alternative 1 were approved, PG&E states that it would extend the existing residential SmartRate tariff for one additional year for both existing and new enrollees, and then implement the revised residential PDP rate design for all residential dynamic pricing participants beginning in 2011. PG&E states that by approving Alternative 1, the Commission would facilitate a smooth transition of existing residential customers to the revised PDP rate.
Alternative 2 is PG&E's original proposal, which combines PDP with the existing time-differentiated E-6 TOU rates. SmartRate would end after 2009 under Alternative 2 and existing SmartRate customers could opt into Alternative 2 PDP. The fully compliant PDP residential tariff, however, would have severe bill impacts for many of the early SmartRate participants due to the relatively steep TOU differentials in Schedule E-6.
Both DRA and TURN indicate that PG&E's Alternative 1 responds to their concerns and recommend that it be adopted. PG&E also agrees that Alternative 1 is the superior residential PDP proposal. No other party addressed this issue. The alternative 1 proposal is reasonable and will be adopted.
19 Calculated using the originally proposed PDP charge of $1.50/kWh.
