Recently a potential client was asking us about an oddity in their Pasadena Water and Power (PWP) electric bill. PWP has a tiered rate structure, but the most visible component of that tiering, the Distribution charge, steps up above 350 kWh of usage in any one month, but it steps down above 750! Which lead us to the question, are PWP’s electric rates regressive?
PWP’s Residential rate structure, like many utility tariffs, is a model of complexity. On your bill there are a number of obvious charges, and a few that are not so obvious. The obvious ones are on the right-hand-side of the bill and include a Customer charge, a Distribution charge, a Transmission charge, and an Energy charge. (The not-so-obvious charges include those related to public benefit programs and paying to put power lines underground.)
All of these obvious charges are tied to the customer’s usage, but only one, the Distribution charge, is tiered. At or below 350 kWh of usage per month, the customer pays just 1.5¢/kWh. Between 351 and 750 kWh of usage the Distribution charge increases dramatically all the way up to 11.65¢/kWh, nearly an eight-fold increase! Ok, the whole point of a tiered rate structure is to discourage higher use by making you pay more as your usage increases. But PWP’s rate then does something truly odd - above 750 kWh/month the rate comes down, dropping from 11.65¢/kWh to just 8.5¢/kWh! What sort of an incentive is that?
That rate design is certainly counter-intuitive, to say the least, but is it regressive? In other words, is there a point at which a large residential user ends up paying less per kWh than does someone who uses less? To find out, we modeled daily usage from 10 kWh/day all the way up to 60 kWh/day. As a reference, a typical Run on Sun client in PWP’s service area averages around 25 kWh/day. Since the Transmission and Energy charges are adjusted higher in the summer months, we broke out the overall rates seasonally as well.
Here are our results (click for larger):
The blue line is the winter rate and the orange is summer. If you use a tiny amount of energy you will pay between sixteen and seventeen cents per kWh, with rates rising sharply until you get to 25 kWh/day. Beyond that, the rate of growth flattens out markedly, but it never dips down. (That is true even if you carry the analysis all the way out to 200 kWh/day!)
Contrast this with the SCE Domestic rate - that is a truly aggressively progressive rate structure with energy charges of 14.5¢/kWh for those using within the smallest (baseline) tier of energy, going all the way up to 30.8¢/kWh for energy used in the fourth tier, which kicks in for monthly usage above approximately 900 kWh.
So no, PWP’s Residential rate is not regressive, but by flattening out the rate for usage above 25 kWh/day, it sends at best a mixed signal if the utility is trying to encourage its customers to reduce their usage.
How does this relate to solar? Well, if your usage is above 20 kWh/day you are spending at least 20¢/kWh whereas the cost of a solar power system will be less than half of that! So yes, in PWP territory - and particularly while they still have rebates in place - installing solar will still pay you big dividends.
Pasadena Water and Power (PWP) is set to roll out an entirely redesigned Residential rate structure that could spark serious concerns if you are a big user of energy. Here’s our analysis.
PWP customers have been pretty smug (something we are apparently famous for) as we sit back and watch our neighbors in SCE territory suffer through significant rate increases. Well, no more. Now you too, fellow PWP customers, are about to feel the bite of a double digit rate increase. And here’s the thing—the more you use, the bigger that rate increase will be!
PWP has a somewhat hybrid rate structure, meaning that while the pure energy charges are the same no matter how much energy you use (in contrast with SCE’s four-tier rate structure), other components, most notably the customer and distribution charges, are actually tiered. In the newly revised rate structure the customer charge is now split out and is a flat fee of $7.76/month. The distribution charge, however, remains tiered under the new structure, albeit in an odd fashion. The first 350 kWh of energy per month see a low distribution charge of just 1.5¢/kWh. The next 400 are really jacked up: to 11.65¢/kWh before subsiding to 8.5¢/kWh for every kWh thereafter. Which raises the question: if you want to incentivize people to reduce their usage, why is the third tier lower than the second?
As a result of the change in structure as well as the rate components, the impact on your bill varies a lot depending on your usage, as you can see from the following chart:
As you can see, two bars (at 15 and 25 kWh) actually show rate decreases and the percentage increase continues to swing back and forth until you get to 35 kWh per day when the increase is monotonically upward.
Indeed, if you are sucking down 100 kWh/day, your rates will go up by nearly 50%!
Fortunately, very few customers are in such rarefied air as that; but a homeowner who had an average usage of about 25 kWh/day who then goes out and purchases an EV that she drives a lot, could bump into the 50 kWh range and she would see a 19% rate increase. Have a big house with a pool and a jacuzzi and a couple of EVs? If that gets you to 80 kWh/day your rate increase will be 40%!
In fact, it is actually worse than what we are showing here since this is only looking at the energy services part of your bill. On the left-hand-side of your bill you will find the Public Benefit Charge (tied to how much energy you use) and it is going up by 19%. On top of that are taxes that you pay on those energy services amounts and you can see that PWP customers, except on the lowest end of the scale, are in for some serious rate hikes starting July 1.
Of course, solar is the perfect hedge against these rate increases (and others sure to come in the future) and PWP still is offering the highest rebates around: $0.85/Watt. But in all likelihood we will see those rebates step down soon so now is the time to act! Give us a call at 626-793-6025 and let’s get started.
In our first two posts this week recapping the state of solar feed-in tariffs in the Run on Sun service area, we focused on what is happening with the biggest FiT around, that run by LADWP. But that isn’t, nominally at least, the only game in town so this post will summarize the progress, or lack of same, at the other FiT programs around: Glendale, Anaheim and Riverside.
We have written at great length about the problems with the FiT program that Glendale Water & Power designed to meet their state mandate. We noted that the prices being offerred—which were actually even 10% lower than what was presented to the Glendale City Council when they approved the program—were way too low to pencil out for a project, and that other uncertainties made it highly unlikely that anyone would participate. In other words, as we told the Glendale City Council, they were approving a program that was designed to fail.
Nine months into the experiment, where do things stand today? Let’s take a quick look at the FiT queue as of today:
All that empty space is just hard on the eyes.
In nine months, GWP has not received a single application for their FiT program—and contrary to how GWP officials refer to their defunct commercial solar incentive program as a “victim of its own success,” this program is a victim of GWP’s design.
Given the failure to attract a single project application, you might think that GWP would take steps to address their failure by increasing the offer price for energy, but you would be wrong. This table summarizes the progression on GWP’s FiT offer price for energy:
The “City Council” price is what GWP suggested to the City Council the offer price might be when the program went live and that is the price the Council had before it when they approved the program. The “Program Start” price is what was actually offered to potential project developers when the program went live last July.
The “Q214″ price is what is being offered today—a reduction of 5.5% for Peak and 4.8% for Off-Peak deliveries. That’s right, in response to offering a price that was already so low that no one was willing to put forward an application, GWP has responded by cutting its offer price by 5%. Genius.
GWP will no doubt say that they have no choice, that the formula approved by the City Council for setting the offer price mandates this result, but that’s merely self-referential nonsense. GWP designed the formula and the City Council confessed that they had no way to assess the technical merit of what was before them. The formula is supposed to be based, in part, on avoided costs—but guess what? So is the offer price for the LADWP FiT and yet it is twice what GWP is offering. Are we to believe, therefore, that GWP’s costs are half of those incurred by LADWP? If so, we suspect the customers of GWP would be surprised then that there rates are as high as they are.
It is high time that the Glendale City Council call GWP to task and insist that they re-create this FiT program so as to achieve what the state law intended—the actual installation of solar power in the City of Glendale.
The representative from Anaheim Water & Power had told us last year that their program to date, despite being started in 2010, had yet to attract a single application. Checking in on Anaheim’s FiT website confirms that unbroken string of failure continues to this day with no projects in the queue.
Anaheim’s offer price tells us why: it ranges from 3.883¢/kWh for Off-Peak to 6.472¢/kWh for Mid-Peak to a summer On-Peak price of 9.708¢/kWh.
Last year Riverside’s representative told us that they knew that their price was so low no one would bite and that was fine because they didn’t want solar installed in Riverside anyway. Today, Riverside’s “we don’t want anybody to participate” price for energy is 6.2¢/kWh—exactly the same as GWP’s off-peak price. Looks like GWP is playing follow the (non)leader.
Which brings us to our friends at Pasadena Water & Power. At a meeting yesterday we learned that PWP is considering a Feed-in Tariff program of its own. Now we are fans of PWP, indeed, we think they are the easiest and best utility around to work with (and for, for that matter). So that begs the question: What sort of FiT will PWP create? They could base their program on what has been done at LADWP (with necessary tweaks to make small projects viable) and thereby insure a successful program that reduces pollution, creates local jobs and helps to green PWP’s energy mix. Or they could follow the misguided path of GWP and its ilk, creating a program in name only, that guarantees that not a single kWh of clean energy will ever be generated.
Needless to say, we will follow FiT development at PWP closely. Watch this space.
We have been teasing out bits and pieces of our new book, Commercial Solar: Step-by-Step, all summer as we neared the end of the publication process. Well today we can formally announce that it is available both at the Run on Sun Publishing eStore (where we get a better royalty - hint, hint!) and on Amazon.com!
Commercial Solar is intended for two primary audiences:
As the title suggests, the book provides an overview of the process by which an interested party - say, a facilities manager - can go from knowing next to nothing about commercial solar to identifying appropriate contractors to provide bids, analyzing those bids to make meaningful comparisons, determining financing options that are appropriate and even overseeing the actual installation process.
The book features a Foreword written by Boaz Soifer, VP of Sales at Focused Energy:
The material could be dry (much of the reading on this subject is), but is instead casual but precise, clearly laid out, and made accessible through handy use of a narrative in which the Facilities Manager of a fictional company undertakes a commercial solar project himself…
In his typical style—approachable, honest, quirky, and occasionally scathing—Jim has thoughtfully flattened out the complex world of commercial solar PV into an understandable roadmap that anyone can follow to project success.
Interested? You can download a two-chapter excerpt of the book for free, here. Better yet, you can purchase the book today from either our eStore or Amazon for just $9.95. If you are interested in bulk sales (i.e., ten or more copies), discounts are available. Please contact us at Bulk Sales for more information.
And of course, we welcome your comments either here on the blog or at Amazon. Thanks for your support.
UPDATE - Citing technical issues, PWP has informed us that for now, these rates are NOT available for solar customers. Apparently the Meter group does not yet have a TOU meter that will properly account for energy generation as well as energy consumption. We will report back when PWP has this resolved - hopefully in a couple of months.
Pasadena Water & Power (PWP) is rolling out on a temporary, experimental basis, new Time-of-Use (TOU) based rates for customers with electric vehicles. The new rate structures, designated EXP-TOU-EV-1 and -2 are available to existing residential customers (either single family or multi-family service) who can demonstrate proof of ownership of a plug-in electric vehicle.
The two TOU rates differ from the existing R1 residential rate structure in that they provide discounts for energy consumed during mid- or off-peak hours. (Mid peak runs from 8 a.m. to Noon and from 9 p.m. to midnight. Off peak runs from midnight to 8 a.m.)
Here is how the two rates compare:
|TOU Period||Rate 1||Rate 2|
(Noon - 9 p.m.)
(8a.m. - Noon; 9 p.m.- Midnight)
The second rate has much greater discounts for energy use outside of the On Peak window, but it is combined with a significant penalty for energy use during the On Peak window.
Of course, this is where a solar power system comes in. Since a solar power system produces the bulk of its energy during the On Peak window, it could prove highly beneficial to EV owners who add solar to their homes. We will do a more complete analysis of how these two rates could work for a solar powered home in a future post.
To learn more about the program, check out PWP’s webpage devoted to these new rates.