Starting in 2019 and 2020, Pacific Gas & Electric (PG&E), Southern California Edison (SCE), and San Diego Gas & Electric (SDG&E) will move its residential customers to default Time-of-Use (TOU) electricity rates. With TOU rates, electricity prices vary throughout the day and are most expensive during the early evening. These prices impact operating budgets, household bills and cost-savings for energy improvements at a property. This transition may adversely impact low-income renters if they are not able to avoid using electricity during expensive peak periods. Similarly, energy efficiency and solar improvements intended to benefit tenants may result in fewer bill savings. While commercial accounts such as multifamily common areas and laundry rooms are already on TOU rates, new resident outreach and education can also encourage them to use laundry equipment outside of peak periods.
Here are 5 things that multifamily affordable housing property owners should be aware of before these three utilities default all residential customers to a TOU electricity rate.
Residential customers will be transitioned to default TOU electricity rates in 2019 and 2020.
SDG&E will begin in March 2019. PG&E and SCE will begin in October 2020. Customers will receive bill protection for their first year on default TOU rates. Municipal electricity utilities are not required to adopt default TOU rates like the Investor Owned Utilities (IOUs), but some (i.e., Sacramento Municipal Utility District) are voluntarily adopting residential default TOU rates.
Each utility is proposing different TOU rates.
- Mass TOU Default Rate: A 3-Period Default TOU rate that includes a baseline adjustment credit to minimize the structural impacts to customers switching from the current tiered rates to a TOU rate. Customers may opt-out of Mass Default.
- Opt-out TOU Rate: A 2-period TOU rate for customers that opt-out of Mass Default and prefer a simpler TOU rate with only on-peak and off-peak periods. It includes a baseline adjustment credit. The difference between on-peak and off-peak rates is smaller than for Mass Default.
- Opt-out Tiered Rate: A 2-tiered rate for customers that opt-out of Mass Default and do not want to be on any form of TOU rate.
- Default E-TOU-C: A two-tiered default TOU rate with a peak period of 4-9pm every day (weekdays, weekends and holidays).
- Optional E-TOU-B: A new optional TOU rate with a shorter peak period of 5-8pm only on weekdays (excludes holidays). It has a greater price differential than the Default TOU rate.
- Optional E-1: A non-TOU rate with two tiers.
- Optional E-Flat: A non-tiered and non-TOU rate for customers that want to reduce bill volatility. Customers must be on 100% renewable energy service from PG&E or a Community Choice Aggregator.
- Residential customers will not be transitioned to default TOU rates during the summer months (April to September 2021) when bills will likely be highest. The transition will resume October 2021.
- Default TOU Rate: SCE is still reviewing findings from its Default TOU Pilot and will transition customers to the “lowest cost” Default TOU rate – either 4-9PM or 5-8PM.
- Tiered rates that vary by season: SCE will also adopt seasonally differentiated tiered rates for customers that choose to opt-out of the Default TOU rate.
Bill impacts will vary by IOU and depend on household routines, but all customers should prepare for higher summer bills.
Nexant’s review of the TOU Opt-in Pilots (2016-2017) found that annual bill impacts are not expected to be significant (+/- 2%), but seasonal peaks will be more extreme and likely put pressure on households with low or fixed monthly incomes. Educating residents to budget for greater month-to-month volatility may help them soften the impact of higher summer bills. While default TOU rates may vary from the pilot rates, many of the below trends are still relevant for the transition to default TOU rates.
- Lower winter prices generally offset higher summer prices. Winter prices may be lower but there are fewer opportunities to save electricity because most apartments have electric air conditioning (summer use) and gas heating (winter use).
- PG&E and SCE customers will see greater bill increases than SDG&E customers. Most PG&E and SCE customers were only able to offset a small portion of the structural bill increase through behavior change because the current tariffs do not vary by season. PG&E customers saw summer bills increase by $8.10 to $28.16. SCE customers saw summer bills increase by $5.05 to $36.13. SDG&E customers saw mild changes to their electric bills because current tiered rates already vary by season and are similar to a TOU structure. SDG&E customers saw summer bills change from a $2.83 decrease to a $2.56 increase.
- Vulnerable customers, such as those on CARE/FERA rates in hot climate zones, are most likely to see higher bills without being able to adjust energy use. CARE/FERA customers in hot climate zones will be excluded from all default TOU pilot rates in 2018 but the CPUC will determine if these customers will also be excluded from the full transition to default rates in 2019 and 2020.
Residents can soften bill increases by adapting their daily routines to avoid peak periods when electricity is most expensive.
Shifting use of “high energy” appliances such as air conditioning, dishwasher, and clothes washer and dryer will be the best way to keep bills low. Peak periods will be in the late afternoon and early evening but each IOU will have a different rate and time frame (PG&E, SCE, SDG&E). Comfort and safety should always be a priority so owners and renters should try to use electricity when it is less expensive without compromising health or quality of life.
If residents benefit from a tenant-serving solar PV system before default TOU rates are adopted in 2019 and 2020, then they must be on TOU electricity rates as a condition of Net Energy Metering (NEM).
The California Public Utilities Commission’s (CPUC) new Solar on Multifamily Affordable Housing (SOMAH) program incentivizes common area and tenant-serving solar PV systems. The CPUC recognizes that some tenants may see higher bills on TOU rates so they have exempted tenants in SOMAH from mandatory TOU rates. When default TOU rates are implemented for residential customers, SOMAH participants like other non-NEM residential customers may choose to opt-out of TOU rates. In the meantime, tenants in SOMAH may voluntarily opt-in to a TOU rate if they think their annual electricity costs could go down. For more information about SOMAH, please contact Blanca de la Cruz: email@example.com.
This blog is based on information in each IOU’s 2018 Residential Rate Design Window Application and Nexant’s evaluation of the California Statewide Opt-in TOU Pricing Pilot. Visit the California Public Utilities Commission for more information.
We will share each IOU’s contact information for transitioning tenants to mandatory TOU rates (before the default transition) and receiving tenant education materials once the IOUs make this available. For more information about the California Housing Partnership’s sustainable housing initiatives, please contact Collin Tateishi: firstname.lastname@example.org.