F. Rate Design

Sierra proposes to double its customer charges for its commercial classes. Sierra argues that its customer charge should be set at cost-based levels to recover facilities cost that do not vary with usage. ORA recommends a lesser increase of 25%.

Consistent with its approach to its rate design, ORA recommends a more gradual increase towards a cost-based monthly customer charge. ORA agrees that the customer charge should reflect the non-usage based facility costs, but it argues that moving towards this goal should be approached on a gradual basis. Accordingly, ORA recommends increasing the commercial monthly customer charge by no more than 25% for all commercial tariff schedules. Sierra's request for doubling the customer charge for these customer classes is excessive. ORA's recommendation to increasing the commercial monthly customer charge by no more than 25% for all commercial tariff schedules is reasonable.

Sierra uses a 15% tier differential in developing the energy rate for its residential tariffs. The tier differential is calculated excluding any customer charge, thus is called the "simple basis" approach. Sierra proposes to set the residential baseline and excess rates on a simple basis by using only the tier 1 and tier 2 energy revenues. The difference between the excess rate over the baseline rate is the tier differential. In making this computation, Sierra excludes all customer charge revenues from the calculation; only energy revenues are used to establish the relative rates.

ORA recommends a modified composite methodology for determining the tier 1 and tier 2 residential rates differential. Under ORA's methodology a 1.15:1 composite tier differential results between the baseline rate (tier 1) and the excess rate (tier 2). ORA did not apply Sierra's methodology for determining the tier differential because it does not comply with Pub. Util. Code §739(3), which states that:

"At least until December 31, 2003, the Commission shall require that all charges for residential electric customers are volumetric. . . "

ORA argues that the Sierra residential customer charge has to be treated as volumetric for the purpose of calculating the tier differential. Commission decisions support the use of the composite tier methodology. Based on ORA's analysis of Sierra's inverted rate structure, Sierra's composite baseline rate (including customer charge revenues) is higher than its proposed tier 2 energy rate, thus not in compliance with an inverted rate structure.

We adopt ORA's method of setting the tier differential. This method has been used consistently in the past and recently in D.00-04-060, where we again found it appropriate to use the composite method in determining the tier 1 and tier 2 differential. We said:

Section 739 (c) requires the Commission to establish "baseline rates" which apply to the lowest block of an increasing block rate structure. The statute is premised on the principle that "electricity and gas are necessities, for which a low affordable rate is desirable." (739 (c)(2).) Section 739.7 similarly requires an "appropriate inverted rate structure." These code sections have been consistently interpreted to include the customer charge in determining whether the rate structure is, in fact, inverted. Under this "composite tier differential" approach, customer charges are considered part of the Tier I, or baseline, rate for the purpose of calculating tier differentials.

···

We reject SoCalGas' proposal. As we said in the last SoCalGas BCAP, "Therefore we should retain the existing tier differential calculated on a composite basis. The composite tier differential is more meaningful than the simple differential because it gives the price for access and purchase of a quantity of gas that covers basic needs. (D.97-04-082, mimeo., et 118.) (D.00-04-060, mimeo., at 105, 107; 202 PUR 4th 255, 310,311.)

Sierra's baseline allowances are consistent with the final Phase 1 Interim Order in R.01-05-047 (the Baseline Order), which sets the new baseline allowances for residential customers in tier 1. ORA accepts Sierra's proposed new baseline allowances.

Sierra's California Alternative Rates for Energy (CARE) discount rate of 20% is consistent with D.02-01-040. Accordingly, ORA accepts Sierra's proposed CARE billing determinants. ORA's base energy rate component is discounted by 20% to determine the residential CARE energy rates.

Finally, ORA agrees with Sierra's request to merge tariff schedule A-1A with A-1. Tariff schedule A-1A was established for small commercial customers whose demand was greater than 20 kW, and which did not qualify for the AB 1890 mandated 10% discount. Customers with demand less than 20 kW were served out of schedule A-1, which provided a 10% discount from the frozen base rate. ORA agrees that with expiration of the AB 1890 rate freeze period, there is no longer a need for the separate rate schedules.

Previous PageTop Of PageNext PageGo To First Page