SDG&E 2016 General Rate Case
Phase II - Rate Design 


The second phase of SDG&E’s General Rate Case (GRC) will address certain Rate Design issues, and parallels SDG&E’s first phase GRC which determines how much revenue the utility will require for its operations for 2016-2018. The purpose of GRC Phase II is to determine how the utility’s costs will be allocated to customers.

Typically this process begins with the CPUC’s examination to determine whether to update marginal costs. Marginal costs are the change in total costs resulting from the production of an additional kilowatt or kilowatt-hour of electricity - or the connection of an additional customer to the utility’s system. While it is generally agreed that using marginal costs is the preferred method to calculate and allocate the utility’s costs to customers, there is a lack of consensus on how to calculate the marginal costs.

The CPUC will review parties’ proposals and determine policies in this proceeding that will be applied to any revenue changes that are ordered in SDG&E’s 2016 General Rate Case.


On August 24, 2017, the CPUC issued its Final Decision:

  • Approves parties' revenue allocation settlement which is based on capping the rate increases such that the class average rate change will not exceed the system average rate change plus 1.5%.
  • Approves parties' residential and small commercial rate design proposals which would move rates closer to costs while providing stability, simplicity, and customer choices.
  • Adopts a five-months summer season (June – October), 4-9 p.m. on-peak hours .The following tables show the adopted TOU hours by periods:

TABLE 1: Adopted TOU Periods (Weekdays) 

TABLE 1- Adopted TOU Periods (Weekdays)

TABLE 2: Adopted TOU Periods (Weekends and Holidays)

TABLE 2- Adopted TOU Periods (Weekends and Holidays)  

  • Adopts 2-6 p.m. for dynamic pricing event hours while directing SDG&E to keep revenue over/under collections associated with dynamic pricing incentives within the customer class eligible for this rate.


SDG&E's Rate Design Application

On April 13, 2015, SDG&E filed its GRC Phase II Application, requesting the CPUC allow it to: 

  • Implement new Time-of-Use (TOU) period definitions:
    • On-Peak Electricity Use:  4 - 9p.m. Daily
    • Off-Peak Electricity Use:  All Other Hours
    • Super Off-Peak Electricity Use:  12a.m. - 6a.m. Weekdays and 12p.m. - 2p.m. Weekends / Holidays 
    • Summer: May 1 through October 31
    • Winter:  November 1 through April 30  
  • Update marginal costs and the revenue allocation. 
  • Increase various customer charges and demand charges. 
  • Reduce discounts for low income customers on the California Alternate Rates for Energy (“CARE”) rate declining towards the 30% to 35% range, in order to comply with Assembly Bill 327. 
  • Reduce Peak Time Rebate (“PTR”) incentives in 2016 and 2017, and eliminate the PTR program in 2018. 

The CPUC is considering other policy issues in its Residential Rate Redesign proceeding.


ORA Position

ORA has performed an in-depth review of SDG&E’s application and provides its analysis and recommendations in its Testimony. ORA recommends that the CPUC adopt the following changes to SDG&E’s proposals:

Marginal Cost and Revenue Allocation

The CPUC should:  

  • Reduce SDG&E’s marginal costs to reflect new customer connections and near-term surplus capacity conditions.
  • Use a simplified TOU period definition:
    • Reject SDG&E's proposal for a Super Off-Peak Hours
    • Define summer as July 1 through October 31
    • Define winter as November 1 through May 31  
  • Allocate revenue responsibilities to customer classes based on ORA’s marginal costs and TOU periods.   
  • Allocate costs of various programs to better reflect costs to the system caused by the classes, based on the ratio of each class’s energy consumption to system energy consumption.  
  • Cap the revenue requirement changes to each class such that the class average rate change will not exceed the system average rate change plus 1.5%. See the Comparison Table. 

Rate Design


The CPUC should:  

  • Cap residential baseline (Tier 1) rate increases at residential average rate change plus 5% (relative to rates for the prior twelve months), which will continue to allow progress in narrowing the differential between Tier 1 and Tier 2 rates. 
  • Consolidate rate changes to reduce customer confusion. 
  • Reject SDG&E’s proposal to double fixed charges for small commercial rates. 
  • Adopt ORA’s moderate TOU transitional rates to mitigate small commercial bill impacts.



ORA's June 3, 2016 Testimony.


ORA's January 27, 2017 Opening Brief.


Proceeding Record

See the Proceeding docket.