PUC considers changes to allocation of public good gas charges

By CMTA Staff

Capitol Update, Oct. 22, 2008 Share this on FacebookTweet thisEmail this to a friend

California’s Public Utilities Commission is considering changing how costs for public purpose programs (PPP) are allocated between customer classes. Their proposed decision is expected soon with a final decision by year end.

Currently, several of the more costly PPPs such as CARE (a discount for low-income residential customers) are allocated to gas customers using the "Equal Cents Per Therm" method which simply allocates the costs based on each customer's usage.  As a result, large industrial customers contribute about 35 percent of the costs of the CARE program.  CARE costs are about $225 million annually and will continue to grow as the PUC seeks to encourage greater participation of all eligible customers.
CMTA’s proposal to the PUC is to allocate all of the current PPP costs using a methodology known as "Equal Percent of Base Revenues" (EPBR).  This method is based on the total costs that the utility incurs to serve each customer class.  "Base Revenues" consist of the revenues that the utility derives from such cost of service items as customer costs (meters and service lines), distribution lines (low pressure) and transmission facilities (higher pressure).  EPBR allocates the PPP costs, including CARE, in proportion to the base revenues of each class, a practice commonly used in ratemaking to allocate other types of indirect or overhead costs.  Under this methodology, industrials would contribute about 8 percent of the total cost of the CARE program.  Thus, since the cost of serving industrials is only about 8 percent of the utility's total costs, industrials should only bear 8 percent of the CARE costs.   Gas commodity costs are excluded from this analysis since not all customers buy their gas from the utility.  The EPBR method would save industrial customers about 20 cents for every decatherm of gas that they use.
Furthermore, in light of AB32 and other measures, the costs of PPPs are expected to grow substantially in coming years.  For example, a proposed decision which is likely to be adopted by the PUC would increase the spending on the utilities' energy efficiency programs by several fold, from the current level of less than $200 million per year to roughly $1 billion per year.   Thus, the savings associated with EPBR would grow substantially over several years. Conversely, maintaining cost allocation under the current ECPT method would disproportionately burden industrial customers.
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