Dive Brief:
- A comparison of the cost of electricity sold to residential customers in October 2014 by California’s municipal utilities (munis) and the cost of that electricity from the state’s investor owned utilities (IOUs) showed a huge difference, according to the Southern California Public Power Authority.
- A Sacramento Municipal Utility District residential customer was charged $58. A Los Angeles Department of Water and Power (LADWP) customer was charged $79. A Pacific Gas & Electric customer paid $93. A Southern California Edison customer paid $97. A San Diego Gas & Electric customer paid $116, according to a survey performed by the Public Power Authority and the San Diego Union Tribune.
- A California Public Utilities Commission (CPUC) spokesperson told the LA Times the difference is not a failure of oversight by the commission, which must approve all IOU rate increases but has no control over munis. It is because munis have access to low cost federal financing that reduces their cost of capital and because they get cheap federal preference power from federally operated dams.
Dive Insight:
IOUs say the higher costs are due to the stricter regulatory regime under which they operate, which includes mandates like the state’s 33% renewables by 2020 standard and the prohibition against them using cheap coal in their portfolios.
IOUs must also charge customers according to a four-tiered rate structure, in which costs escalate as more power is consumed. That system was put in place to protect ratepayers following the California energy crisis last decade, but the IOUs have proposals at the CPUC to reform the rate structures, and commissioners are mulling their own proposals and compromises.
The CPUC, which regulates IOUs, is currently under state and federal investigation for potentially unethical or illegal ties to utility leadership.
Munis say their rates are lower because there is no profit margin and revenue is reinvested.
But a recent LADWP audit found $40 million of ratepayer money was misspent on salaries, expenses, and non-competitively chosen vendors. The City of Riverside muni has been charged with using high rates to cover other city costs. A City of Pasadena muni employee was arrested last year for embezzling $6.4 million.
