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How Energy Companies Are 'Robbing the 'Hood'

Low-income residents in Oakland and throughout the state likely will face higher energy bills in the years to come, while wealthy residents will see rate cuts.



The Kardashian family's spotlight consumes real power. For five seasons, the gated-community of Hidden Hills, Calif., served as the backdrop for the TV show "Keeping Up with the Kardashians." During that time, Hidden Hills consistently topped the list of what Forbes magazine has called the state's "most egregious energy hogs."

In September 2012, every home in Hidden Hills consumed an average of nearly four-and a-half megawatt hours of electricity, according to energy consumption data from the California Public Utilities Commission. That's 4.3 million watts used to fuel each of the star-powered homes owned by Drake, Britney Spears, the Osbournes, Jessica Simpson, and Sean Penn. For just a single month. You would have to leave a standard light bulb on for more than eight years to match that level of energy use.

About 370 miles north, the average household in Oakland used less energy than that during all of 2012. But Oakland and Hidden Hills aren't anomalies. There's a strong correlation between energy use and wealth.

Browse the country's most expensive zip codes, and you'll find a list of the state's biggest energy consumers. Atherton, Hillsborough, Los Altos Hills, Rolling Hills, and Woodside, are all among the state's biggest energy hogs, while communities like Oakland and Southeast Los Angeles consume the least energy.

Yet, in the coming years, energy bills likely will be going down in Hidden Hills and up in Oakland, thanks to a controversial energy rate restructuring plan that was passed by the legislature and signed by Governor Jerry Brown last year.

This is the story of how that bill passed, why a notorious special-interest junket to Maui is partially to blame, and how the state Senate's only convicted felon tried to stop his colleagues from "robbing the 'hood."

Not every kilowatt of electricity sold in California costs the same. The CPUC categorizes rates in five different price tiers, based on energy consumption. Some consumers, as a result, pay as much as 233 percent more than others. Pacific Gas & Electric Company customers in Tier 1 pay as little as 12 cents per kilowatt, whereas Tier 4 customers, who use more than 200 percent of the baseline energy consumption, pay 40 cents for the same quantity of electricity.

As heavily regulated and complicated as it may be, energy policy in California traditionally could be reduced to one simple philosophy: The more energy you use, the more you pay.

Is this tiered-pricing fair? Well, that depends on your perspective. For low-income families, it means a relatively fixed price as long as they stay within the energy baseline. The rate structure also encourages energy conservation and provides an incentive to make energy-savings improvements to older, energy-inefficient homes. However, in hot-weather areas of the state, such as the Central Valley, rich and poor alike spend big bucks to run the AC during the middle of summer.

Fair or not, the policy means higher energy bills for hot-weather regions of the state and large commercial users that consume substantial amounts of energy. It also means lower bills for consumers who invest in renewable energy systems that take their homes off the grid.

But that all may come to an end with Assembly Bill 327, which took effect on January 1. Authored by Assemblyman Henry Perea, D-Fresno, the bill promises to produce the biggest change to California's energy laws since deregulation. The bill grants the California Public Utilities Commission substantial power to rewrite California's energy policy.

Perea contends that the state's energy policy needed to be updated for the 21st century. "AB 327 is a balanced approach to modernizing California's outdated rate structure to protect all Californians from soaring energy bills and addressing the state's renewable energy goals," he said in a statement.

AB 327 authorizes the CPUC to reduce the number of rate tiers and significantly lower energy rates for the state's biggest energy users. It also will allow utilities to charge customers who install rooftop solar panels and send energy back to the grid. And it allows the CPUC to add a surcharge of up to $10 on all energy bills — regardless of how much energy people consume. All of these changes likely will mean higher bills for people who conserve and for poor and middle-class families in the state's lowest tiers, including low-income electric and gas customers in the California Alternate Rates for Energy (CARE) program.

State Senator Jim Beall, D-San Jose, who was one of one of only a handful of state legislators to oppose the energy rate-restructuring bill, believes it is unfair to raise rates and add a $10 monthly surcharge on people who are conserving energy. "You could use no electricity — you could put back into the system — and you'd still be charged," said Beall. "I kind of thought of it as a tax increase, where you tax people that conserve."

Oakland residents could be among the hardest hit by AB 327. In 2012, the average monthly bill for each of PG&E's 161,288 customers in the city was $55. That means the potential $10 monthly surcharge would represent an 18 percent increase in energy costs for the average Oakland household. And that price hike does not include further tiered-rate increases made possible by the new law.

PG&E officials contend that the law is necessary to bring equity to the state's energy rate structure, because the utility argues that the biggest energy users have been paying more than their fair share. "By making it possible to bring high rates back into line with costs, the law will help make California's system of electric rates fairer, simpler, and more equitable," PG&E President Chris Johns told Currents, the company's in-house publication.