San Francisco residential electric customers are getting a healthy rate increase on the “generation” portion of their electric bills, at least if they get their power from the city’s CleanPowerSF program.
After a no-drama hearing Tuesday, the San Francisco Public Utilities Commission (not to be confused with the California Public Utilities Commission) unanimously approved an average rate increase of 8.5 percent, effective July 1, 2024. SFPUC is a city department and has jurisdiction over rate-setting for CleanPowerSF’s rates.
While the explanatory materials prepared by SFPUC and posted on its website before the hearing said the average rate increase would be 8.5 percent, they added that “some customers will see higher, some customers will see lower changes in rates.”
What the posted materials didn’t specifically say, despite SFPUC’s vow that it is “dedicated to transparency,” is that the commission approved an average rate increase of more than 10 percent for 360,000 residential customers and 27,000 small business customers. It only worked out to be an overall average 8.5 percent increase because a group of large general service users are getting a decrease in rates.
In other action, SFPUC approved a flat rate increase for its Hetch Hetchy electric customers of 12 percent.
The mystery of setting rates
Ratemaking is one of those subjects that makes most people’s eyes glaze over. The topic is especially complicated in San Francisco where a residential consumer of electric power can easily be forgiven for not knowing who is providing his or her power.
Here is a quick primer.
Charges for electric service are divided into two essential buckets. The first bucket — call it “delivery charges” — are the costs relating to delivering power to the customer over the electric grid. Delivery charges do not include the cost of power itself, just the costs of delivering it.
The delivery of power in this part of California is provided by PG&E, which has a near monopoly on delivery services and is regulated by the CPUC as a public utility.
The second bucket — called “generation” — is the cost of the power itself.
Generation is provided by energy suppliers that deliver their electricity to customers over PG&E’s system. PG&E supplies generation for customers that don’t choose (or have chosen for them) a different supplier.
Under this structure, a residential customer’s monthly bill will, broadly speaking, include delivery charges payable to PG&E and generation charges that ultimately go to the supplier of the power.
In many parts of the country there are a number of different energy suppliers and the consumer chooses the one that he or she likes.
In San Francisco, the situation is more complicated. In 2016, San Francisco implemented CleanPowerSF as a municipally operated “aggregator” of electric power consumers. Consumers were “auto-enrolled” in CleanPowerSF (with the right to opt-out).
CleanPowerSF was intended to leverage the negotiating power of a large block of customers to make attractive deals to acquire generation from suppliers. It hoped to accomplish two broad objectives beyond generating enough money to cover the cost of obtaining the power.
First it wanted to procure clean, or at least cleaner, power than other suppliers. Second it wanted to charge consumers a lower price than would be available from a for-profit company like PG&E, that would have make money for its shareholders in addition to covering its costs.
CleanPowerSF today serves more than 380,000 customer accounts in the city, but many residential consumers don’t realize that their power comes from CleanPowerSF. This is because they were enrolled automatically and their bill — including both the delivery and generation charges — comes from PG&E.
The CleanPowerSF program is regulated by SFPUC, not CPUC, and it currently sets power rates on an annual basis.
SFPUC prides itself on setting the rates through “a transparent and public process.” The stated goals are to set rates for generation that are lower than or equal to PG&E’s generation rate in each customer class, and maintain rates that are “equitable for customers based on latest billing data.”
SFPUC gets input on rates from the Rate Fairness Board — a city body established to review proposed rate-setting and give the SFPUC an opinion on fairness of proposed rates.
The board’s May 3, 2024 memorandum on the SFPUC’s proposed 2024-25 rates concluded that the proposal was fair and the board recommended approval.
The board noted that while an 8.5 percent increase in average rates “may appear to [be] excessive,” it found that the increases were necessary to cover costs and less than initially proposed by SFPUC’s staff.
In its view, the “rate proposal is mostly ministerial: adjusting rates to account for current and expected costs, while meeting the twin goals of establishing rates based solely on cost of service and providing service at rates competitive with PG&E.
The board memorandum — like the SFPUC’s explanatory materials — did not break the overall 8.5 percent increase into separate numbers for the major classes of rate payers like residential and small commercial customers.
The SFPUC’s materials show that when the rate increase is effectuated, CleanPowerSF’s average generation rate for residential customers will now be the same as PG&E’s projected rate. This is a change from 2023-24, when CleanPowerSF’s annual average rate for generation for residential customers was 15 percent lower than PG&E’s April 2024 rate, according to the SFPUC materials.
Other rate classes will be lower than PG&E’s projected rates.
Given that at least for residential customers, CleanPowerSF’s rate is the same as PG&E’s rate, a comparison of their energy portfolios on renewable power sources would be desirable. Neither the SFPUC rate materials or the board’s memorandum contained comparative information.
PGE’s website touts its efforts in procuring clean power, saying “PG&E delivers some of the nation’s cleanest energy.”
In 2021, “we supplied approximately 48 percent of the electricity our customers use from renewable resources that qualify under California’s Renewables Portfolio Standard (RPS),” the utility says.
CleanPowerSF’s website says that it defaults customers into a 50 percent “green” portfolio and also offers a more expensive 100 percent green option. Overall, for 2022, CleanPowerSF’s portfolio was 59.9 percent renewable.
The dream of full public power
There is a much larger story behind the city’s annual rate setting for CleanPowerSF customers.
San Francisco would like to buy PG&E’s distribution assets in the city so that it can deliver “full public power” — not just generation — to San Francisco customers.
San Francisco has not kept its ambition to acquire those assets — nor the reason for it — a secret.
SFPUC’s “Our City, Our Power” campaign website explains it in unusually strong terms: “PG&E has used its position as the monopoly grid owner to frustrate, delay, and increase costs for … CleanPowerSF. For decades now, PG&E has obstructed public power projects in San Francisco. The corporate giant has a long history of throwing up costly roadblocks and charging exorbitant fees for basic power hookups, blocking everything from affordable housing to new public transit projects in San Francisco.”
The website says that in a poll, 70 percent of San Franciscans said they favored shifting from PG&E to full public power.
Whether the dream of full public power will ever be fulfilled is unknown. The city made an initial bid of $2.5 billion in September 2019. PG&E did not accept the proposal, saying its assets were “not for sale” and that the city’s bid was “significantly below fair-market value.” PG&E renewed this message in August 2020.
Given that, the pathway to an acquisition is far from clear. In the meantime, the city reports that valuation and related proceedings are underway at the CPUC and the Federal Energy Regulatory Commission. Moreover, an environmental review is also being conducted by San Francisco’s Planning Department. But even if all approvals are obtained, it will be a multi-year process to separate and transfer PG&E’s assets to the city.
Even though acquiring full public power is a daunting undertaking, the Our City, Our Power website says, “we have reached the point where pursuing full public power in San Francisco is our only option to ensure that all of our residents, businesses, and municipal operations receive safe, reliable, affordable, and sustainable electric service today and for the decades to come.”