Residential ratepayers in the San Diego Gas & Electric (SDG&E) utility territory will be experiencing a drastic change in billing this year. Beginning on March 1, 2019 SDG&E will start phasing its residential customers to a new form of billing for electricity, known as time-of-use rates.
Most SDG&E residential utility customers are familiar with the tiered billing structure, which is a rate structure based on how much the customer uses; the more energy a customer uses, the more they pay. Conversely, in a time-of-use billing structure, customers are charged for energy based on what time of day they use power, not just simply how much they use. In a time-of-use billing structure, hours of the day are segmented into different periods with different costs, known as “on-peak,” “semi-peak” and “off-peak” times. Rates are relevant and unique to those time periods and will differ between summer and winter months.
SDG&E is not the only utility in California rolling out this mandatory program. Southern California Edison (SCE) will be transitioning its residential customers to a mandatory time-of-use program starting in 2020, and Pacific Gas and Electric (PG&E) has already begun transitioning customers to a pilot program with this billing structure.
Many will remember the time when homeowners were advised to avoid using energy during the middle of the day because demand was high. Since then, the energy landscape in California has changed. A major reason for this drastic shift in energy billing is that California currently has a surplus of energy during the day due to large amounts of renewable energy connected to the grid. However, in the evening when the sun sets and solar systems stop producing, demand spikes and there are no longer renewables feeding the grid.. For this reason, utilities all across California are forced to use expensive and inefficient means to meet the evening demand, raising the cost of electricity during this time.
“The utilities plan to ‘boil the frog’ and stifle the renewable energy industry in California backfired,” said Daniel Sullivan, founder and president of Sullivan Solar Power. “Now homeowners and businesses are incentivized to manage their energy themselves, with solar plus battery storage, in a way that is more efficient, clean and cost-effective than the utility’s failing model.”
Newly defaulted customers on the time-of-use rate in SDG&E will experience on-peak hours from 4 p.m. to 9 p.m. While all residential customers will be defaulted onto this new billing structure, SDG&E solar customers have already been on a mandatory time-of-use rate since the March 2017, as part of the net energy metering 2.0 program for distributed generation customers.
It is important to note that SDG&E solar customers who energized their systems before June 29, 2016, under net energy metering 1.0, received grandfathering protections for 20 years on the tiered rate. These customers will retain the option to opt out and return to tiers during this transition process, as long as tiered rates are available. It is important for solar customers consult with both SDG&E to determine which rates will be the most beneficial for how their solar power system was designed. Customers can only change rates once a year, and being on the correct rate for their system is critical to securing a solar investment. SDG&E has developed a rate analysis tool to help solar customers navigate their new rate structure and determine what their new bill will be if they choose to remain on time-of-use billing. A certain group of net metering 2.0 customers will not be defaulted on the new time-of-use rate, according to provisions from an SDG&E open rate case. However, all SDG&E solar customers should continue to actively look to see if they have been defaulted.
While the utilities in the state continue to pivot, one thing is for sure. Producing and storing your own energy with solar and batteries allows you to take back control. While rates continue to rise and utilities are considering getting out of energy purchasing altogether, we can rely on our solar to save us money and provide us with power on our own terms.