2019 business rate change proposal

SMUD’s 2019 Chief Executive Officer & General Manager’s Report and Recommendation on Rates and Services proposes changes to SMUD’s rates, including an increase in rates, a charge for customers who generate their own electricity (such as rooftop solar) and sell it back to the grid and a restructure of commercial customer rates.

Residential customer? Learn more about our proposed residential rate changes.

Customer resources

   

Overview

The proposal includes a 4.75% rate increase in 2020 and a 4.50% rate increase in 2021 for residential and non-residential customers. The proposed increases apply to energy charges, the System Infrastructure Fixed Charge, Site Infrastructure Charge, Summer Peak Demand Charge and other rate charges.

Why is it needed?

SMUD works hard to control costs and operate as efficiently as possible. The proposed increase in rates is mostly driven by external factors, including:

  • Wildfire mitigation, including the increased cost of wildfire insurance and additional vegetation management.
  • Additional capacity to provide electricity to ensure we can reliably serve customers’ energy needs during times of peak demand.
  • New and enhanced technology solutions to support cyber security, customer experience, improved reliability and distributed energy resources.
  • Investments to meet carbon reduction goals through transportation and building electrification, investment in renewable energy and increased energy efficiency.
 
  

How will this impact my bill?

Bill impacts will depend on how much electricity customers use each month. Below are sample 2020 bill increases. 

Small (20 -299 kW)  $123 on an average monthly bill of $2,598 
Medium (500 – 999 kW)  $1,077 on an average monthly bill of $22,675
Large ( >1,000 kW)
 $4,082 on an average monthly bill of $85,937
Agriculture (Ag & Pumping)
 $16 on an average monthly bill of $329

How do SMUD's rates compare?

As a community-owned, not-for-profit electric utility, SMUD’s rates are among the lowest in California and are on average about 33% lower than those of neighboring PG&E. See how they compare to other utilities.

Additional proposed changes

  • Similar to business customers, the proposal includes the same rate increase for residential customers and a new charge for customers who generate their own power, such as customers with rooftop solar, and provide it back to the grid.
  • Updates to language in the green energy rates to allow them to be updated more frequently as legislation changes.
  • Updates to language related to the Time-of-Day Rate (TOD) to reflect the completed transition to TOD as the standard rate for residential customers.
  • Clarifying language regarding the Power Factor Waiver.
  • Miscellaneous language updates to certain Rules and Regulations.

Public workshops and hearings

Members of the public can ask questions and provide feedback about the Rate Proposal at the following meetings to be held at the SMUD Customer Service Center, Rubicon Room, 6301 S Street, Sacramento. To participate in the process please find more details in our rate ordinance 15-1

Public workshops
Tuesday, April 23 | 10 a.m.
Thursday, May 9 | 6 p.m.

Public hearing
Tuesday, June 4 | 6 p.m.

Accommodations are available for the disabled public.  If you need a hearing assistance device or other aid, please call 916-732-7143 in advance of the public workshop or hearing.

To find out when rate proposal items are being discussed at an upcoming Board meeting, sign up for Board notifications.

How to submit your comments

Comments may be submitted by emailing contactus@smud.org or by mailing written comments to:
SMUD
P.O. Box 15830, MS A451
Sacramento, CA 95852-0830

View comments

If you have questions about the public input process, please read our FAQs.

Rate restructuring

The proposal includes a recommendation to restructure the rates for commercial customers to better align with the cost of providing electricity when it is used and the fixed costs of maintaining the infrastructure and service that supports a reliable grid. The proposed rate restructure includes:

  • Changes to the Time-of-Day time periods to better reflect the cost of providing service, which fluctuates based on the time of day.
  • Adjustments to the fixed charges to ensure enough collection of the fixed costs for providing service to all customers.
  • Consistency of bill components across all commercial rate classes.
If approved, the restructure will start in 2021 with a up to 8 year transition plan, depending on customer rate class, to minimize bill impacts.

Time periods

While SMUD commercial customers have had time-based pricing for many years, the existing time periods no longer align with SMUD’s costs to serve electricity. An accurate time-based rate structure has a higher price per kWh when electricity is most expensive to provide and a lower price when it costs less to provide.

Aligning rates to costs gives customers the opportunity to manage their usage and bills, while helping reduce peak energy use and the need to buy power from less environmentally sustainable and more expensive sources.

Proposed Time-of-Day time periods

Chart showing commercial rate time periods for summer and non-summer seasons

Consistency across rate classes

To improve consistency of bill components for commercial rate classes, the proposal includes increasing the System Infrastructure Fixed Charge, the Site Infrastructure Charge and the Summer Peak Demand Charge, which will be offset by a decrease in the energy charges per kWh.

The proposal also recommends adding the Summer Peak Demand Charge to several rate categories, as well as gradually introducing a monthly demand charge to customers who use less than 20 kW per month, such as small offices and strip mall stores (GSN_T rate class).

Time-of-Day

While SMUD commercial customers have had time-based pricing for many years, the existing time periods no longer align with SMUD’s costs to serve electricity. An accurate time-based rate structure has a higher price per kWh when electricity is most expensive to provide and a lower price when it costs less to provide.

We’re adjusting the time periods to better align with the cost of providing electricity as shown by the image to the right.

Aligning rates to costs gives customers the opportunity to manage their usage and bills, while helping reduce peak energy use and the need to buy power from less environmentally sustainable and more expensive sources.
 

Chart of proposed fixed charges

Fixed charges

The proposal includes an increase in fixed charges, including the System Infrastructure Fixed Charge, Site Infrastructure Charge and the Summer Peak Demand Charge. These increases are offset by a decrease in energy charges.

 

Grid Access Charge

The proposal includes a new monthly charge for customers with an application for on-site generation, such as solar, submitted to SMUD after July 1, 2019. 

The Grid Access Charge will be implemented as early as Jan. 1, 2020 and no later than May 31, 2020 and will be based on the size of the customer’s system.

The proposal recognizes the investment customers have made in renewable energy and includes automatic grandfathering provisions for customers who made on-site renewable generation decisions before this proposal.

How much is the proposed charge?

The proposed charge will vary based on the type of customer and size of the on-site generation system. The following table shows the proposed monthly per kW charge through 2025. The size of a system will vary by business and the charge will vary based on the rate class.

Monthly charge for business rate classes

Rate Class/ Service Voltage 2020  2021 2022 2023 2024 2025
 Agriculture  $8 $8.50 $9 $10 $10.50 $11
 Commercial – GSN_T (<20kW)  $6.5 $7 $8 $8.50 $9 $10
 Commercial – Secondary  $5 $5.50 $6 $6.50 $7 $8
 Commercial – Primary  $5 $5.50 $6 $6.50 $7 $8
 Commercial – Subtransmission  $4 $4.50 $5 $5.50 $6 $6.50

When would the proposed charge go into effect?

  • For customers with solar systems connected to SMUD’s grid before 2018, the Grid Access Charge won’t apply until 20 years from the original billing period after installation.
  • For customers who were connected to SMUD's grid in 2018 or submitted complete applications to SMUD by July 1, 2019, the charge won’t apply until 10 years from the original billing period after installation.
  • The grandfathering provisions don’t apply to customers who move or transfer service. For example, a customer moving into a property with an existing on-site generation will pay the new Grid Access Charge.
  • The proposal continues to pay for excess generation at full retail rates based on the time of day.

As a result of the “back-and-forth” between a customer’s system and the grid, businesses that generate their own electricity use the grid more frequently and in different ways than other customers.

Many of SMUD’s costs to serve customers are fixed such as grid maintenance, wildfire mitigation and other costs, regardless of the amount of energy used. A large portion of these costs are collected through energy use charges. Customers with solar or other on-site generation do not pay for as much energy use since they are generating some of their own power. This means that they're not paying their fair share and are being subsidized by all other customers. The subsidy is $30 million per year and growing.

This new charge will help ensure all customers are paying their fair share of the fixed costs.

Infographic showing how grid access worksWhen a customer generates their own power, the excess electricity is fed into SMUD’s grid when the system is producing more power than the customer needs. When a customer’s system isn’t producing enough electricity to meet their needs, they receive power from SMUD. This means the grid needs to be able to manage a frequent flow of power in both directions — from the grid and to the grid — as shown in the illustration.

When a customer’s system generates more electricity than they use over the course of a month, the customer receives a credit on their bill based on the amount of electricity they sold back to the grid. The credit is at full retail rates, the same as SMUD charges customers. If a customer’s system produces less electricity than they use in a given month, they need to buy electricity from SMUD to make up for the difference.