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Calif. regulators switch big electric, gas utilities to 4-year rate cycle


According to Market Intelligence, December 2022


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Calif. regulators switch big electric, gas utilities to 4-year rate cycle

The California Public Utilities Commission on Jan. 16 unanimously agreed to set rates for the state's major investor-owned gas and electric utilities every four years, changing a decades-old tradition of doing so every three years.

The new schedule for general rate cases will take effect for Pacific Gas and Electric Co., Southern California Edison Co., San Diego Gas & Electric Co. and Southern California Gas Co. The decision means that whatever customer rates the commissioners set in future cases will remain in effect for four years instead of three. The commission adopted the three-year rate cycle in 1989.

With its decision, the commission also moved the filing date for general rate applications from Sept. 1 to May 15.

While the PUC for years has considered lengthening the rate cycle, Commissioner Clifford Rechtschaffen said changing the process is very difficult because at least one rate case generally is always pending. "It is like trying to change a tire on a car that is moving," said the commissioner, who presided over the proceeding in which the decision was prepared.

With the commission's 5-0 vote, SCE now is required to amend its current application to add 2024 to its rate case and to file its first four-year rate application on May 15, 2023. Also, Southern California Gas and San Diego Gas & Electric must file petitions to amend their 2019 general rate case applications in order to accommodate the new schedule. Their next general rate applications are due on May 15, 2022, according to the decision.

The PUC required Pacific Gas and Electric to combine its currently separate electric and natural gas rate cases into a single rate case. Its next general rate case application is due to be filed in 2021.

Under the three-year cycle, the commission often slipped behind schedule in deciding rate cases, and new rates accordingly had to be put into effect retroactively, especially as the cases have grown increasingly complex. Rapid technological changes and catastrophic events such as the San Bruno pipeline disaster and devastating wildfires require that the commission consider rate changes in the context of rapidly unfolding developments that were not factors in earlier years of ratemaking. Risk-based decision-making now is substantially incorporated in rate applications, and the PUC must evaluate utility safety and reliability improvements.

With the change, utilities will have more time for budget and infrastructure planning and commissioners will be able to provide greater oversight of utility performance and spending, Rechtschaffen said. Also, the commission's independent Public Advocates Office will have more time to complete its comprehensive review of the utilities' applications and file testimony.

The PUC's staff and some other parties expressed concern that a four-year rate cycle would result in greater uncertainty due to longer-range forecasts of utility revenue needs.

Pacific Gas and Electric is a subsidiary of PG&E Corp., SCE is a subsidiary of Edison International, and both SDG&E and SoCalGas are subsidiaries of Sempra Energy.