PG&E on Friday is expected to file a proposal to dramatically restructure electricity rates for residential users in a way certain to increase the amount low-usage customers pay each month.

The proposal, unveiled Thursday, will be subject to months of debate and hearings before the full five-member state Public Utilities Commission makes a final decision, likely near the end of this year.

Key issues in that debate will be whether the proposed rate structure favors the wealthy and reduces incentives for customers to save electricity.

"There is no question that lower-usage customers will all see increases in their electricity bills in the coming years relative to the current rate structure," said Matthew Freedman, a staff attorney with The Utility Reform Network, a consumer group. "The primary goal of this proposal is to drive up the bills for lower-usage customers."

San Francisco-based PG&E's proposed rate structure would reduce the number of payment tiers from the current four to two, a move that would result in higher rates for low-usage customers, the utility says. The proposed rate structure also would allow customers to opt into what's called "time-of-use" pricing, in which they would pay less for electricity if they shift their usage to off-peak hours. That might mean running appliances late at night or early in the morning on hot summer days, or reducing air conditioner operations.


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"The current rate structure is broken," said Trina Horner, PG&E vice president for regulatory proceedings and rates. "It needs to be fixed to reflect our current cost structure."

At present, the highest-usage residential customers pay as much as 36.4 cents a kilowatt-hour for electricity and the lowest-usage customers pay 13.2 cents, which means the highest-usage customers pay 176 percent more. TURN says the new proposals will produce a differential of 20 percent.

PG&E spokesman Jonathan Marshall said the new rate structure, if approved by the PUC, would be phased in beginning in early 2015 and be fully implemented by the end of 2018.

"We will try to transition to this slowly and carefully and use a lot of customer education," Marshall said.

Low-usage customers at present can receive a 50 percent discount on their bills. The new proposal would likely whittle down the discount to around 30 percent to 35 percent, PG&E said.

The proposed rate changes are driven in part by customer protests following heat waves in the Central Valley during summer 2009, when residents complained about sky-high bills from running air conditioners. The current rate structure obliges utilities to charge high-usage customers much more for electricity consumption regardless of where they live or how much power they need.

The uproar eventually led to the passage last year of AB 327, a state law that gives the PUC greater flexibility to set residential electricity rates. Both houses of the state Legislature approved the bill by wide margins.

PG&E isn't alone in its quest to restructure electricity rates. Southern California Edison and San Diego Gas & Electric also are expected to file similar proposals. The new rate proposals are certain to be controversial, since affluent customers could wind up as the beneficiaries.

"The benefits go to a relatively small group of high-usage customers," Freedman said. "We find there is a correlation between high incomes and high usage. People with higher incomes tend to have larger houses."

Basing charges on time of usage worries TURN because it could discourage energy conservation.

"It will matter more when people use electricity rather than the amount of electricity they use," Freedman said.

Contact George Avalos at 408-859-5167. Follow at twitter.com/georgeavalos