That Email You Just Got From SDG&E? Here’s What It Means…
Homeowners often go solar is in order to insulate themselves from future rate increases. It’s a cornerstone in the decision making process, and one of the highest regarded reasons. They know that over time, the power company jacks up rates at a pace considerably higher than inflation. With each passing year, the power bill consumes more and more of the paycheck. However, when folks no longer “buy in” to the notion of ever increasing costs of electricity, solar isn’t nearly as appealing.
Over the last few days, SDG&E distributed an email to it’s customers about some important changes in the rate structure that are taking place in the coming years. The message was somewhat misleading, and may have left some residents a different impression than it should.
A friend of mine remarked that it looked like looked like SDG&E was taking steps to lower electricity rates. This is what SDG&E wants you to believe.
To think that power rates on the whole are actually going down is laughable. Over the last 20 years, they never have receded. In fact, they’ve marched upwards at an average rate of 5% per year. The email from SDG&E may make it appear like power is going to get cheaper. No way. Tier 1 and 2 are currently set at $0.17 and $.20, respectively. Effective tomorrow (July 1), they are combining increasing to $0.22. Tier 3 is in fact coming down a little bit, but not as much as Tier 1 & 2 are going up.
SDG&E can pull a number of levers to affect the total cost of power. In one particular section of the bill, they lower the costs. But on the other side of the coin, they raise it. It’s sleight of hand at it’s best, and pure manipulation at it’s worst.
Our analyst team at Sunrun ran 15,000 scenarios of hypothetical SDG&E power bills with varying combinations of power consumption. They discovered very few combinations that would actually result a lower bill than before.
My friend also speculated that these rate changes were a likely response to the new competitor on the street — solar. In most industries, this logic prevails. Losing customers to the competitor? Well then, lower the price!
With utilities, the situation is different. For years, they’ve operated at a cost-plus model. Whatever their costs are, they get to add on a guaranteed 7% profit, and that’s the revenue they are entitled to collect from ratepayers. So unless their costs can come down dramatically, the rates don’t stand a chance of getting any more affordable.
SDG&E has already lost 100,000 customers to solar. Assuming each one of those customers paid $2,000 a year in power bills before going solar, that is $200 million dollars per year that they need to find somewhere else. They literally have no way of reducing their operating costs enough to make up for that reduction in revenue. Those who are left behind have to pay for those who no longer SDG&E for power. It’s a virtuous cycle that will only become exacerbated with time.
Curious what solar can do for you? I’m Greg Muender, and I’m a solar consultant at Sunrun. Text or call me at 858.230.2033.
