Learn the how and why of gas and electric rates

PG&E collects revenues from our customers through electric and natural gas rates. The electric rate helps pay for sending and receiving electricity, purchasing power and operating power plants. The natural gas rate helps us purchase natural gas and pay for pipelines. Both rates help fund public programs and provide a financial return for investors.


Learn about tiered rates

To encourage customers to use less energy, California law mandates tiered electric and natural gas rates. Rates increase with each tier. Customers who use less energy have lower bills. They also pay a lower overall average rate than customers who have more usage in higher-priced tiers.


Learn how rates are set by climate zone and tier

Electric and gas rates are the same across the PG&E service area. However, the amount of electricity required to move up through the rate tiers over a month varies for each customer. We base the amount on the following criteria:

  • Your location
  • The season
  • Type of home heating, either electric or natural gas

Because of the tiered system and baseline- and climate-zone design, businesses across the PG&E service area pay similar rates for electricity and gas. About every three years, the California Public Utilities Commission (CPUC) reviews and updates baseline quantities.


Understand the baseline tier

Electric usage has five tiers, and gas usage has two tiers. The first tier is the baseline tier, or Tier 1. The baseline tier is the minimum level of usage needed to satisfy most of the electricity or gas needs of the average business customer in a specific service area called a climate zone.

PG&E has 10 climate zones across our service area. These zones do not follow county borders. They are based on areas with similar geographic and climate characteristics.


Read about additional rate tiers

Each rate tier represents usage at, or a percentage amount above, the baseline amount. If your electric usage is 101 percent to 130 percent above the baseline amount, for example, you are charged at the Tier 2 rate.

If your business is located in a hotter climate zone, you have a higher baseline than businesses in cooler climate zones. You must use more electricity to move into the next tier.

Having different baselines across the PG&E service areas prevents a business in a hotter climate zone from paying for the electric usage of businesses in cooler climate zones.

Find your baseline. Visit Tiered Base Plan E1.


Understand PG&E sales and revenues

Learn how decoupling relates to the way we make money. Also, learn how we work with the state to save energy and help your business save money.


Learn about decoupling

The CPUC oversees state utility companies and sets the amount of profit that each utility company can make. When this profit is separated from the amount of gas or electricity sold, it is called 'decoupling'.

Even though decoupling separates sales from profits, it still allows PG&E some flexibility in revenues and rates based on actual sales. Sales can fluctuate from forecasts because of unexpected weather, economic activity or conservation. Electric sales can be higher than forecasted, for example, during periods of unusually hot weather. Sales can also be lower than expected because of conservation efforts.

Our profits generally do not depend on how much energy we sell. Therefore, we have no reason to encourage customers to use more energy. We get incentives from the state by actually encouraging customers to use less energy.

Check out ways to conserve energy. Visit Find Money Back Rebates for Your Business.


Learn how we work with the state to save energy

California leads the way in energy-efficiency programs. These programs date back to the 1970s and have been evolving ever since.

Over the past 30 years, per capita electricity use nearly doubled across the U.S. However, in California, the use has remained about the same for the past three decades. Energy-efficiency programs and policies help to maintain usage levels.

The CPUC oversees investor-owned utility (IOU) energy-efficiency programs. The agency establishes key policies and guidelines, sets program goals and approves spending levels.

California's 2010-2012 Energy Efficiency Plan set targets for the state’s four major electric and gas utilities. The plan called for 7 billion kilowatt-hour savings over a three-year period. The amount represented 0.9 percent of statewide electric usage.

Using energy more efficiently saves your business money on energy bills. Conservation is also the fastest, most cost-effective way to reduce greenhouse gas emissions and fight global climate change. Since 1976, PG&E and our customers have kept more than 160 million tons of carbon dioxide (CO2) out of the atmosphere, based on cumulative life-cycle savings.

Learn how we promote energy efficiency, provide clean energy solutions and fight climate change. Visit What We’re Doing.