2012 Rate Restructuring FAQs

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2012 Rate Restructuring: frequently asked questions

Why is SMUD proposing to restructure its rates?
SMUD wants its rates and charges to better align with the costs they are meant to reflect, including the cost of electricity and the cost of maintaining the infrastructure that supports a reliable power-delivery system. Proposed changes would move charges closer to that ideal.

For small commercial customers, a key part of the proposed restructuring is to have rates better reflect the cost of electricity when it is used. This would encourage customers to reduce usage during the summertime hours of peak demand, when electricity is most expensive.

Read the general manager's report on rates and services.

Is SMUD doing this to increase its revenues?
No. The proposed restructuring is designed to be "revenue neutral" for SMUD. It would not be a general rate increase, and it would not produce any increase in SMUD revenues. However, the restructuring could impact some customers because components of the rates are changing.

What are the most significant elements of SMUD's proposal to restructure rates?
SMUD is proposing small increases in fixed monthly service charges to recover a higher proportion of the total infrastructure costs associated with providing service to residential and small commercial customers. These costs include equipment such as wires, poles, transformers, and substations. (Medium and large commercial customers already pay closer to their proportionate share of these fixed costs in monthly charges that don't depend on how much electricity they use.)

To offset the increase in the fixed service charge and minimize impacts on residential customers, SMUD would slightly reduce its kilowatt-hour prices for electricity usage. In addition, SMUD would shorten the summer billing season from six months to four months (June through September). Rates per kWh will continue to be higher in the summer billing season than the rest of the year, reflecting market costs.

For all small commercial customers, SMUD is proposing "time-of-use" rates. Customers would be charged more for power between the peak usage hours of 3 and 6 p.m. on weekdays in summer, when electricity is most expensive. SMUD would shorten the summer billing season and reduce the kWh price of electricity on all "off peak" hours.
SMUD proposes to institute a late fee of 1.5 percent on the current amount due if SMUD does not receive full payment within three business days of the due date on the bill.

How would rate restructuring affect customers' bills?
Most customers would see very little change in their electricity bills on an annual basis, and SMUD rates would remain more than 20 percent lower than PG&E's electricity rates on average.

SMUD projects that in 2012 the average bill impact for approximately 90 percent of all residential customers will be less than $2 a month. Some residential customers would save money on an annual basis. Eighty-seven percent of residential customers who have electric heat would see bill changes averaging less than $2 a month.

Seventy-five percent of small commercial customers (drawing 21 to 299 kilowatts) and 7.5 percent of very small commercial customers (drawing less than 21 kW) would save money in 2012 under the proposed changes. For 95 percent of the very small commercial customers, bill impacts would be less than $10 a month on an annual basis.

For information on projected bill impacts beyond 2012, see Addendum 2 to the General Manager's Report and Recommendation on Rates and Services.

What types of customers are apt to have higher electric bills under the proposal?
Small and very small commercial customers who use a lot of power during the peak hours of 3 to 6 p.m. on weekdays in the summer billing season (June through September) – when electricity is most expensive – could have higher bills on an annual basis unless they shift power consumption to off-peak hours.

Residential customers who have gas heat and use very little electricity may pay slightly higher bills because of a proposed increase in the fixed monthly charge, which is designed to recover more of the fixed costs of the infrastructure for the power delivery system. For these customers, the maximum impact in 2012 would be $2.80 a month.

Eighty-seven percent of residential customers who have electric heat would see bill changes averaging less than $2 a month.

To encourage energy efficiency, customers on the Energy Assistance Program Rate (a discount rate for qualifying low-income residents) will pay the standard rate for electricity use that exceeds their "base usage" plus 600 kilwatt-hours a month. (Base usage is 700 kWh in the summer billing season and 620 kWh the rest of the year for customers with gas heat.)

How would low-income customers on the Energy Assistance Program Rate be affected by the proposal?
SMUD projects that 90 percent of these customers would save money in 2012, while the 10 percent who have energy use that exceeds the discount cap will see their bills go up if they don't reduce their power usage.

Customers on the low-income rate would continue to get a 35 percent discount on base electricity usage and a 30 percent discount on up to 600 kWh of additional ("base-plus") electricity usage in any given month. For electricity usage in excess of that, customers would pay the standard residential rate. This proposal was designed to encourage energy efficiency. (Base usage is 700 kWh in the summer billing season and 620 kWh the rest of the year for customers with gas heat.) These customers would see no change in their fixed monthly service charge of $3.50 in 2012.

Beginning in 2013, the fixed monthly charge would increase $1 each year, topping out at $8.50 in 2017, and there would be a corresponding decrease in kwh charges for electricity use. For information on projected bill impacts beyond 2012, see Addendum 2 to the General Manager's Report and Recommendation on Rates and Services.

Overall, proposed changes in Energy Assistance Program Rates would be "revenue neutral" for SMUD, meaning the changes would neither increase nor reduce the revenue SMUD collects from this group of customers.

Will SMUD do anything to help customers who might have higher bills as a result of rate restructuring?
SMUD encourages customers to take advantage of its wide range of programs to improve energy efficiency. For all residential customers, SMUD has – among other things – a comprehensive, whole-house solution called the Home Performance Program, rebates on energy-efficient appliances, and loans for investing in improvements such as dual-pane windows. For qualifying low-income customers, SMUD also offers special efficiency programs such as home weatherization, in addition to discounted rates.

For commercial customers, SMUD offers energy audits, product rebates, energy tracking services and help with retrofit projects, among other things. For more information, click here.

How is SMUD letting customers know about the proposed rate restructuring?
Complete information on the proposal is posted on smud.org. In addition, SMUD is conducting a public outreach campaign to explain the proposal to customers.

The campaign includes approximately 100 presentations for business associations, civic organizations and neighborhood groups. (To request a presentation, contact Rosanna Herber at SMUD, 916-732-5850 or rherber@smud.org.) Media outreach, print ads and bill inserts are part of the effort.

How can customers comment on the proposal or get answers to their questions about rate restructuring?
SMUD welcomes feedback from customers. Customers may submit written comments through Aug. 4 to rates@smud.org or to Rates Administrator Rob Landon, Mail Stop A451, SMUD, P.O. Box 15830, Sacramento, CA 95852-1830.

Customers who have questions or would like to request a hard copy of the General Manager's Report and Recommendation on Rates and Services may call the rates hotline, (916) 732-6222, or e-mail rates@smud.org.

When will the SMUD Board of Directors decide on restructuring, and when will changes take effect?
The SMUD Board is expected to vote on rate restructuring on Thursday Aug. 4 at at 6 p.m. in the SMUD Headquarters Auditorium. Most of the changes will go into effect on Jan. 1, 2012.

Why is SMUD proposing to increase the monthly service charge?
SMUD needs to increase the fixed monthly service charge for residential and small commercial customers because the current charge does not cover the true cost of maintaining the infrastructure that enables reliable power delivery through a robust electric grid. This includes the cost of poles, wires, transformers, and substations, which must be covered even if an individual customer is not using any electricity.

How much of an increase is SMUD proposing for the monthly service charge?
For customers on standard residential rates, SMUD is proposing an increase of $2.80 in 2012, making the new charge $10 a month. The service charge for low-income customers on the Energy Assistance Program Rate would remain $3.50 a month in 2012.

For five years starting in 2013, the annual increase in the fixed monthly charge would be $2 for customers on standard residential rates and $1 for customers on the assistance rate. In 2017, customers would pay a fixed charge of $20 a month if they are on standard residential rates and $8.50 a month if they are on the low-income rate.

For very small commercial customers (drawing less than 21 kW), the fixed charge would increase from $8.25 a month to $12 in 2012. Beginning in 2014, the charge would increase $2 annually, reaching $20 a month in 2017.

For small commercial customers (drawing 21-299 kW), the monthly charge would be $22, an increase of $1.50 per month.

For both residential and very-small commercial customers, the increase in the fixed monthly charge will be offset by corresponding decreases in kwh charges for electricity. Beginning in 2012, the service charge will appear on bills as the System Infrastructure Fixed Charge.

Why is SMUD proposing to reduce the "summer" billing season from six months to four months?
SMUD is proposing a four-month summer billing season (June through September) to better align its summer electricity usage rates with the hottest months of the year, when demand and market prices are highest.

Why is SMUD proposing to adopt a late charge for customers who don't pay their bills on time?
To meet its expenses and maintain cash flow, SMUD needs customers to pay their bills on time. The value of overdue SMUD bills has increased to approximately $2 million a month. SMUD hopes that by instituting a modest late charge, more customers will be conscientious about paying their bills on time.The proposal is designed to ensure that all customers, including government, would pay a late fee if they don't pay their bill on time.

How much would the late charge be, and when would it be assessed?
SMUD is proposing to institute a late charge equal to 1.5 percent of the current amount, due 22 business days after the bill has been sent, if SMUD has not received payment by then. This proposal is designed to give customers a three-day "grace period" after the due date that appears on the bill.

Why does SMUD want to have all of its small commercial customers on time-of-use rates?
Time-of-use rates better reflect the true cost of electricity, which rises sharply between 3 and 6 p.m. in the summertime, when demand surges. Time-of-use rates also allow customers to utilize energy-management technology. All of SMUD's medium-size and large commercial customers have been on time-of-use rates for years and many have successfully used energy-management technology to reduce their bills. Time-of-use rates also encourage the use of beneficial technologies, including solar and electric vehicles.

Is SMUD going to put residential customers on time-of-use rates?
For a small fraction of residential customers, SMUD will launch a two-year study of time-based rates in 2012. Participating customers will help SMUD understand which pricing plans work best. Any future residential rate design proposals will be presented to the public for comment and input prior to any changes taking place.

Why is SMUD proposing to apply the "demand charge" to the first 20 kilowatts of electricity drawn by some of its small commercial customers?
This is part of the effort to better align SMUD bill charges with actual costs. For small commercial customers that draw 21 kW to 299 kW, SMUD is proposing to apply the maximum-demand charge of $6.80 per kW on all demand, not just the portion exceeding 21 kW. The new demand charge will be offset by lower off-peak electricity rates for this customer group.
Starting in 2012, the demand charge will appear on bills as "Site Infrastructure Charge."

Why is SMUD changing some of its terminology for rates?
SMUD is changing some of its rate terminology in an effort to better define for customers what they are paying for and why, to introduce customers to some new concepts, and to prepare for the future. This part of the rate restructuring is called the SMUD Clear TermsSM Initiative.

Other rate-related information

If you would like more information or have questions or comments about rates, rules, and regulations go to: pricing@smud.org.

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