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Understanding California Electric Utility Rates

Most electric customers in California are not familiar with how their utility rates work, how much electricity they consume or even how much they spend every month. Here is a primer about the current rate structure as established by the California Public Utilities Commission (CPUC). The rate structure applies to utilities like PG&E, SCE and SDG&E.

How Utility Rates Work

Your monthly electric bill is based on the kilowatt hours (kWh) used times a rate per kWh. A kilowatt hour is 1,000 watt hours. For example, using 10 light bulbs rated at 100 watts for one hour would require 1 kWh. If the rate per kWh is $0.15, then the utility charges you $0.15 for that 1 kWh.

The CPUC sets a monthly baseline usage level for customers. The baseline represents how much electricity a customer needs for basic living; things like lighting, refrigeration, etc. When a customer uses more electricity above the baseline amount, the price per kWh goes up. In other words, the more you use, the more you pay per kWh. The kWh rate can also vary by time of day used, or peak vs. off-peak usage, and by season, winter or summer.

The electricity you use in a month is broken up into tiers or usage levels. As you use electricity during a month, you move up from one tier or usage level to the next. The price you are charged goes up in each tier.

Show Me The Rates

The most recent rate tiers in California start with Tier 1 the Baseline rate of $0.14 per kWh. Tier 2 includes usage from 101% to 130% of Baseline and this tier is billed at $0.15 per kilowatt hour. Next, the price really jumps to almost double in Tier 3, from 131% to 200% of baseline, for a rate of $0.27 per kWh. Finally, Tier 4 kicks in at more than 200% of baseline with a rate of $0.29 per kWh. Here are the rate tiers in easy-to-understand list form.

  1. Baseline rate of $0.14 per kWh. Set between 50% to 60% of the electricity the average residential customer uses in each climate territory.
  2. Usage from 101% to 130% of Baseline and this tier is billed at $0.15 per kilowatt hour.
  3. Usage from 131% to 200% of baseline, for a rate of $0.27 per kWh, nearly double.
  4. 200% or more of baseline at a rate of $0.29 per kWh.

That seems straightforward enough, but now the BIG UTILITY SECRET kicks in. The price for all these rates can vary by time of day use and by season. Think of it this way, if you use a lot of power from 10:00 AM to 6:00 PM during the hot Summer months, the actual rate will be much higher and can only be found on your electric bill.

Other factors that can affect your actual rates include your climate zone. There are four climate zones in California: Coastal, Inland, Mountain and Desert. Each climate zone is assigned different daily baseline allowances. Baseline allowances are set between 50% to 60% of the electricity the average residential customer uses in each climate territory. Understanding electric utility rates is clear as mud.

What You Can Do To Save Money

Once you know how much electricity you consume and how much it truly costs, we recommend that you take steps to improve your energy efficiency and use solar panels to generate electricity.

  1. See our TOP 10 WAYS TO BE ENERGY EFFICIENT so you can save money by using less electricity.

  2. Use our online SOLAR ENERGY ESTIMATOR to see how many solar panels you need to make your own power.


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