PPD/sbf Date of Issuance 6/28/2012

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Rulemaking on the Commission's Own Motion to Conduct a Comprehensive Examination of Investor Owned Electric Utilities' Residential Rate Structures, the Transition to Time Varying and Dynamic Rates, and Other Statutory Obligations.

FILED PUBLIC UTILITIES COMMISSION JUNE 21, 2012 SAN FRANCISCO OFFICE RULEMAKING 12-06-013

ORDER INSTITUTING RULEMAKING ON THE COMMISSION'S
OWN MOTION TO CONDUCT A COMPREHENSIVE EXAMINATION
OF INVESTOR OWNED ELECTRIC UTILITIES' RESIDENTIAL RATE STRUCTURES, THE TRANSITION TO TIME VARYING AND DYNAMIC RATES, AND OTHER STATUTORY OBLIGATIONS

1. Summary

In 2009, the Legislature enacted Senate Bill 695 which allows the Commission to transition residential customers onto time variant rates as early as 2013. The Commission hereby institutes this rulemaking on its own motion to examine current residential electric rate design, including the tier structure in effect for residential customers, the state of time variant and dynamic pricing, potential pathways from tiers to time variant and dynamic pricing, and preferable residential rate design to be implemented when statutory restrictions are lifted.

The Commission, in opening this Rulemaking, intends to ensure for the foreseeable future that rates are both equitable and affordable while meeting the Commission's rate and policy objectives for the residential sector. This is especially true in terms of ensuring that low income customers have access to enough electricity to meet their basic needs at an affordable cost. As set forth in Decision 08-07-045, residential rate design focuses on five guiding principles:

1. Rates should be based on marginal cost;

2. Rates should be based on cost-causation principles;

3. Rates should encourage conservation and reduce peak demand;

4. Rates should provide stability, simplicity and customer choice; and

5. Rates should encourage economically efficient
decision-making.

The Commission seeks to explore if the current rate structure is meeting the stated objectives or whether alternative rate designs other than an inclining block rate can better achieve all of these objectives. Moreover, the Commission opens this rulemaking to examine whether the current tiered rate structure continues to support the underlying statewide-energy goals, facilitates the development of technologies that enable customers to better manage their usage and bills, and whether the rates result in inequitable treatment across customers and customer classes. The Commission seeks involvement in this proceeding from a variety of participants, including electric utilities, consumer advocates including advocates for low-income and disabled persons, environmental advocates, third party vendors and service providers, the California Independent System Operator, the California Energy Commission and other parties impacted by these policies.