March 2008 Bill Inserts
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Notification of Application by PG&E to Increase Electric Rates to Recover Increased Procurement Costs Application 08-01-014, Filed January 23, 2008
Each year, Pacific Gas and Electric Company (PG&E) is required to forecast how much it will spend the following year to ensure adequate electricity supplies for its customers. This forecast is reviewed and approved by the California Public Utilities Commission (CPUC). Under California law, if PG&E's power procurement costs (that is, the costs of purchasing electricity for PG&E's customers) exceed the CPUC-authorized revenues by 5% or more, PG&E must file an application for expedited recovery of such costs. PG&E recovers these costs dollar-for-dollar through rates charged to customers, with no profit margin.
On January 23, 2008, PG&E filed Application A.08-01-014 forecasting that its power procurement costs will exceed its CPUC-authorized revenues by more than 5% at the end of March 2008, and that its power procurement costs in 2008 will be $531 million higher than previously forecasted. This increase in procurement costs is due to the Department of Water Resources' (DWR) recent termination and replacement of its so-called Calpine 2 power contract, which was expected to have provided PG&E's customers with 1000 megawatts (MW) of power in 2008, and PG&E's need to procure additional sources of electricity to replace the Calpine 2 power.
Does this mean electricity will cost me more?
PG&E's request in this proceeding will increase rates, but PG&E has proposed rate reductions in related CPUC proceedings that, if adopted, would offset the requested rate increase.
To collect the $531 million in higher costs by the end of 2008, A.08-01-014 requests an overall electric rate increase of 6.8% to go into effect with usage beginning May 1, 2008. The rate changes by customer class for bundled customers and direct access customers associated solely with A.08-01-014 are provided in the second and third columns of the table below. The final two columns of the table show the rate impact of A.08-01-014 combined with the effects of the cost decreases proposed by PG&E in the other proceedings (described on reverse side). “Bundled customers” means customers who receive electric generation as well as transmission and distribution services from PG&E. “Direct access” customers are customers who purchase energy from a supplier other than PG&E but still get transmission and/or distribution services from PG&E.
Pacific Gas and Electric Company Illustrative Revenue Increase
(Dollars in Thousands)
|Customer Class||Proposed Revenue Increase||Percentage Change||Proposed Revenue Change with Offsets from Other Proceedings||Percentage Change with Offsets from Other Proceedings|
|Total Bundled Change||$734,692||6.8%||-$44,901||-0.4%|
|Direct Access Service|
|Total Direct |
As noted on other side of this insert, PG&E has proposed rate reductions in other CPUC proceedings that, if adopted, would offset the rate increase requested in A.08-01-014. PG&E anticipates that it will receive a reduction in costs as part of DWR's 2008 revenue requirement proceeding, and PG&E has proposed in a related proceeding that it receive a further reduction in costs to compensate PG&E's customers for the power lost by the Calpine 2 termination. In addition, PG&E expects a decrease in the pending 2008 power procurement cost forecast case. All together, PG&E has proposed that the $531 million requested in A.08-01-014 be offset by an even larger reduction in costs in other CPUC proceedings, for the net overall decrease of $45 million shown in the fourth column of the table.
If the CPUC approves A.08-01-014, without any of the offsetting decreases proposed in the other proceedings described above, the bill for a typical bundled customer using 550 kWh per month would increase $1.51 from $72.28 to $73.79. The bill for a typical bundled customer using approximately twice the average baseline allowance, or 850 kWh per month, would increase $10.94 from $147.49 to $158.43 per month.
PG&E has requested that the rate changes associated with A.08-01-014 be consolidated with changes in other CPUC proceedings and incorporated into rates on or after May 1, 2008, so the eventual net change in rates for individual customers is difficult to predict.
Detailed Information About PG&E's Application
Due to DWR's termination of the Calpine 2 contract, PG&E forecasts that its power procurement costs will exceed revenues by more than 4% by the end of January 2008 and by more than 5% by the end of March 2008. PG&E also forecasts that its power procurement costs in 2008 will be $531 million higher than forecasted prior to DWR's Calpine 2 termination unless immediate rate relief is approved. PG&E requests that it be permitted to recover this increase in costs over the 8 months remaining in 2008, assuming a May 1 implementation date for new rates. PG&E asks that a decision approving its application be issued by April 10, 2008.
THE CPUC PROCESS
The CPUC's independent Division of Ratepayer Advocates (DRA) will review this application, analyze the proposal, and present an independent analysis and recommendations for the CPUC's consideration. Other parties of record will also participate.
The CPUC may hold evidentiary hearings where parties of record present their proposals in testimony and are subject to cross-examination before an Administrative Law Judge (ALJ). These hearings are open to the public, but only those who are parties of record are allowed to present evidence or cross-examine witnesses during evidentiary hearings.
After considering all proposals and evidence presented during the hearing process, the ALJ will issue a draft decision. When the CPUC acts on this application, it may adopt all or part of PG&E's request, amend or modify it, or deny the application. The CPUC's final decision may be different from PG&E's proposed application filing.
FOR FURTHER INFORMATION
For more details call PG&E at 1-800-PGE-5000
You may also contact the CPUC's Public Advisor with comments or questions as follows:
Public Advisor's Office
505 Van Ness Avenue, Room 2103
San Francisco, CA 94102
1-415-703-2074 or 1-866-849-8390 (toll free)
TTY 1-415-703-5282, TTY 1-866-836-7825 (toll free)
E-mail to firstname.lastname@example.org
If you are writing a letter to the Public Advisor's Office, please refer to A.08-01-014. All comments will be circulated to the Commissioners, the assigned ALJ and the CPUC's Energy Division staff.
Reviewed by the California Public Utilities Commission