California electric bill shock: Private firms charge way more than public utilities

In Sacramento, a family using 500 kilowatt hours of electricity last October was charged $58. Customers in Los Angeles, also served by a public utility district, paid $79.

Pacific Gas & Electric charged $93 for the same amount of power. Southern California Edison billed customers $97. And San Diego Gas & Electric topped the Southern California Public Power Authority survey at $116 for 500 kilowatt hours.

The comparison of rates charged by public and private electricity providers in California shows a notable discrepancy in the amounts customers pay for power, depending on where they live and which provider serves them.

Especially for heavy users, bills are higher at the investor-owned utilities SDG&E, Edison and PG&E, overseen by the California Public Utilities Commission. The commission is required to make sure the rates are just and reasonable at the private utilities, and doesn’t oversee the municipal districts.

The utilities commission, which is the subject of separate state and federal investigations into possible favoritism and back-channel communications with utility executives, says costs are higher at private companies, in part, because they operate under different rules.

“There are federal and state regulatory requirements that apply to investor-owned utilities that do not apply to publicly owned utilities,” said Terrie Prosper, a commission spokeswoman. “Publicly owned utilities have access to very-low-cost federal preference power from federally operated dams that the investor-owned utilities do not have access to, and many publicly owned utilities have access to low-cost financing that makes their capital investments much less expensive.”

Municipal utilities say their rates are lower because there is no profit margin and their revenue is reinvested into the public service.

“Simply put, money spent here stays here,” said Heather Raymond, a spokeswoman for the city of Riverside, which has delivered its own water and power since 1895. “That’s great news for communities like Riverside that have utilities that are able to give back in the way of community support.”

The public agencies have their problems as well, including in Los Angeles, where a recent audit found $40 million of ratepayer money was spent on overpaid managers, personal expenses and vendors hired without competitive bids.

Critics have said the Riverside utilities department artificially increased rates to cover other city costs, and in Pasadena, a city employee was arrested in December and charged with embezzling $6.4 million of power customer payments.

For-profit utilities say they do their best to keep rates and rate increases to a minimum. They point out that they provide more renewable power than most public utilities and are working to deliver even more.

“Under the law, we can’t buy electricity generated from coal while the municipal utilities are permitted to do so,” said Russell Worden, managing director for state regulatory operations at Edison. “And we have a greater number of renewables in our generation portfolio.”

Salary and benefits paid to executives at investor-owned utilities -- generally higher than those paid by public agencies -- also affect rates, consumer advocates say.

Public salaries criticized at the Los Angeles utilities department were $220,000, compared with $11.6 million in cash and equity in 2014 for the CEO of PG&E, an investor-owned utility, or IOU.

“Public utility executives don’t make nearly as much as IOU executives do, and they are typically smaller agencies with smaller staffs, so executive compensation is a big cost driver,” said Stephanie Chen of the Greenlining Institute, a Berkeley nonprofit group.

San Diego Gas & Electric spokeswoman Amber Albrecht said several factors can result in different energy costs imposed by municipal and investor-owned utilities.

“This includes the number of customers, the type of customers, energy consumption, if the utility has a service fee and the regulatory process,” she said. “In our service area, our customers use less energy, which means fewer [kilowatt hours] to spread costs to maintain a safe and reliable energy network.”

Electric rates charged by Edison, PG&E and SDG&E are divided into four tiers, the cost of each level climbing as more power is consumed. All three have applications pending that would raise rates.

According to utility records, Edison charges residential customers a baseline minimum of 14.88 cents per kilowatt hour. The PG&E base rate starts at 16.35 cents per hour, and the SDG&E cost opens at 17.4 cents.

The Public Utilities Commission is now considering a change to its long-standing rate structure. Under the so-called time-of-use standard, the number of tiers would be reduced to two and customers would pay sliding costs depending on when they use the power they consume.

Jeff McDonald is a staff writer for the San Diego Union Tribune