When utility companies come up short on annual profits, ratepayers are the ones expected to foot the bill and make up the difference.
Such is the case for customers of Southern California Edison (SCE) this month, as the state’s Public Utility Commision (PUC) gave the company permission to increase energy bills by approximately 5% in 2019 to recover a $983.8 million deficit.
The decision comes as another blow to California residents not generating their own electricity with solar power systems, following Pacific Gas and Electric’s January bankruptcy filing, which is expected to cause 15% rate increases for its clientele.
“The gas market is no longer competitive,” Commissioner Martha Guzman said after voting in favor of the PUC’s unanimous decision.
Comments made by members of the PUC in their official findings and at the public hearing make it clear they are disappointed with SCE for the nearly $1 billion revenue shortfall, but don’t have much wiggle room when deciding how to finance it.
SCE writes that the reasons for its undercollection are “due to various factors, mostly related to the limited availability and increased cost of natural gas, especially over the summer.”
Constrained gas supply and higher prices coupled with aging fossil fuel infrastructure is good reason to believe that such annual rate increases to cover operational costs will happen again.
For its part, the SCE didn’t get in hot water by incurring a deficit, but rather got in trouble for not reporting the event to the PUC sooner. California Assembly Bill 57, passed in 2002, allows investor owned utility companies to recover fuel and purchase costs from ratepayers by raising their bills, but must notify the PUC if they need to cover more than 4%. SCE states that it didn’t notify the PUC in May when accounting showed there might be a problem, because it thought the market would correct. It never did.
As a result, Californians in SCE’s region will be the ones paying a higher tab, seeing a increase in their energy bills.
Luckily for residents that converted their homes to solar, utility bills will see a minimal change, if any, thanks to the self-generating energy ability of renewables. Events such as the PG&E bankruptcy filings and, now, SCE’s eleventh rate increases have generated more interest than ever before of homeowners looking to break free from utility companies unpredictable changes to their monthly energy bills.