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Clearing up Rumors on So. Cal Edison Rate Changes

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I thought we'd try something a little different with Westlake Revelations, and learn something more about what we were all complaining about a few months back ... and likely will be again this coming summer.

Rest assured, however, we'll be back on issues uniquely Westlake Village again shortly.

Let me know what you think of this piece/topic.

____________________

Electricity Bills, Where they headed?

If you pay attention to discussions around electricity bills, you've probably heard by now "rates are going up" or "their adding a 5th tier". There's a ton of misconception about what happened last summer, what will be happening, and how to reduce your bills. Let me try to clear some of it up.

Southern California Edison does not make money when more electricity is consumed. In fact, they are limited by the government on what their profits can be. The profit is calculated by a fixed percentage return on investment. In other words, the more they invest in the electrical infrastructure, the more they can profit -- but always at the same rate of return.

Summer 2006 was a "1 in 50" heat wave. In other words, it was the hottest summer in 50 years. As a result, electricity consumption -- aside from prices -- was the highest ever.

Prices went up for a couple of reasons.

1) Edison convinced the PUC that they needed to spend to beef up/replace aging infrastructure.

2) Because Edison has to deliver, regardless of the price and the quantity asked for. That means when they need more than they expect, they have to go out to the spot market ... which as you can imagine is like looking for Playstation on Christmas Eve.

The billing setup, as you've probably noticed on your electricity bill, is divided into tiers. The lowest two tiers are fixed by law, and cannot go above the rates set in 2001. When more revenue is needed to meet costs, it comes from tiers 3 and up. Tier 5 was put into place last summer, but uses the same rate as Tier 4 until now.

The good news is that our rates are going DOWN as early as next month, but more likely will show up on your Feb bill.

Why? Because when so much electricity was consumed this past summer, Edison made too much money. They weren't overcharging, per se, they just sold more than they expected to. Once a year, rates are re-evaluated and they either go up or down to compensate for the prior year.

How much will your rates go down? Well, it depends. Tier 1/2 stay the same. Tier 3 will drop about 1 cent. Tier 4 will drop from 31.2 to 24.9 cents. Tier 5 will drop from 31.2 to 28.4 cents. For most people, they will likely see a 5-15% drop from the current rates, but for energy in Tiers 3/4/5, it will continue to remain 25-43% higher than a year ago.

A couple of interesting things that I found while poking around.

Edison is mandated by law to reach 20% of their energy from renewable sources by 2010. Right now, we're already at 17-25% (it varies during the course of the year). Here are some of the sources:


  • Coal: Less than 5%, 2-5 cents per unit
  • Natural Gas: 30-35% (peaked the last summer as 65%), 7-9 cents
  • Nuclear: 21% (no seasonality), 1.5 cents
  • Hydro: 10%, cost varies
  • Other: 10% (including from other utilities), cost varies

  • Renewable energy, 17% (at times goes to 25%), 8-9 cents
    Made up of:
    - Wind (more in winter, less in summer)
    - Solar (more solar, less in winter), price not competitive with wind yet
    - Geo-thermal

There are no more nuclear plants planned at this time.

The only way that we are likely to get our rates lower, and anywhere near close to the rates that other states have (which are usually far less), is to get more cost effective production. Rumor has it, that as more silicon comes available (we've been in a shortage), solar may also become that much cheaper for home installations in the next year.

If you are interested in reducing the energy in your home, there are a few things that you can do.

Air conditioning is the big eater of electricity in your home (worst during the summer, obviously). Traditional central air systems can lose 40% of their energy in the duct work (the ducts are in the brutally hot attic). 85% of the homes in California are estimated to fail a leak test. You can make your attic cooler with an attic fan. If you are interested, I did a "real world" product review of one in the magazine I publish, on an actual installation on my home. See it at:

www.mactech.com/articles/mactech/Vol.22/22.07/2207KoolTools/

In short, a solar attic fan did an amazing job of cooling our attic ... even during the worst of the heat wave this past summer.

The next biggest consumers are things like refrigerators -- which are easily $30-40 of electricity per unit. You can measure what appliances use with a $35-40 product called the "Kill A Watt". You can see a review of this at the URL above as well.

(Please note: This is not a plug for the magazine. Beyond the above review, almost all Westlake Revelations readers would not find MacTech relevant to them.)

There's your lesson on what's up with electricity. Hope it was useful.

- Neil