SDGE 2 tier proposal & solar payback assumptions

[Alan007]

I live in San Diego and use an ave of 900 kwh per month (pool, hot tub, and AC when it's hot during day for my wife and 2 babies). I've usually end up in tier 4 of SDG&E and an average of .28 cents/kwh. Going solar makes sense. However, SDG&E is proposing & likely will ultimately get a 2 tier rate structure of .17 & .22 for the 2 tiers. No solar installer I can find will give me any advice on how that affects my payback period (obviously it will take longer than my current .28 cents per kwh).

So I made myself a spreadsheet and used an average of .20 cents per kwh (kind of in the middle between .17 and .22) and also assumed 5% SDGE rate increase per year (most solar installers use 6%, but I want to be more conservative). What do you think about these assumptions to help me figure out my payback period?

[J.P.M.]

I live in San Diego and use an ave of 900 kwh per month (pool, hot tub, and AC when it's hot during day for my wife and 2 babies). I've usually end up in tier 4 of SDG&E and an average of .28 cents/kwh. Going solar makes sense. However, SDG&E is proposing & likely will ultimately get a 2 tier rate structure of .17 & .22 for the 2 tiers. No solar installer I can find will give me any advice on how that affects my payback period (obviously it will take longer than my current .28 cents per kwh).

So I made myself a spreadsheet and used an average of .20 cents per kwh (kind of in the middle between .17 and .22) and also assumed 5% SDGE rate increase per year (most solar installers use 6%, but I want to be more conservative). What do you think about these assumptions to help me figure out my payback period?

Some of your #'s are a bit off on the low side as is your timeline (maybe) and looks like you could use a little accurate information on other things going on.

At 10,800 kWh/yr. you're PROBABLY close to the usage where the upcoming rate reform may well have sort of a neutral outcome for you, for the near term.

The jury is still out as to what the situation will be which is probably got something to do with why vendors are mum: They don't know because stuff isn't very firm yet. That "stuff" may affect your "payback" period in unknown ways. Some clarity in the situation may appear around mid year, hopefully sooner, but don't hold your breath for sooner.

Depending on your tariff, location and situation, your current rates are probably closer to approx. $0.18 or so for tiers 1 & 2, so you appear close on that, but ~ $0.38 for tiers 3 & 4. Root around on the SDG & E website for tariffs and proposals before the CPUC as to when 4 tiers down to 2 and leveling of rates might be expected. I believe current proposals, among many things, propose the realignment of rate to be gradual through 2018 - again, not codified yet.

On rate escalation: more of the same. However, that 5% figure your using isn't as conservative as you think. Vendors will tell you 6%/yr. and that's mostly B.S. at least around here. It's probably closer to somewhere between 3-4%, and I say maybe, because - dirty little secret - the size of an annual historic rate increase for residential users is a function of how much they use and has been that way since about 2001 or before. Most people believe their rate increase has been higher for them than actual because, in spite of some well intentioned but mostly feel good efforts at conservation, their annual usage has crept up and that increased usage has been at least disproportionately, or largely billed at the higher tiers. So, the bills go up, users don't realize they are using more and blame all the increase in their bills on increase rates. Solar peddlers tout inaccurate and high annual electric rate increases to oversell and overprice solar PV, increasing their bottom line. BTW, some annual increases in rates since 2001 have been negative for most residential users. Honest.

Some part of AB 327 - the rate reform act, wants to gear annual rate increase to something like the rate of general inflation + something like 0.75%/yr. Again, to be firmed up and hammered out.

I'd respectfully suggest getting the latest tariff sheets applicable to your situation from the SDG & E website and your bills, and spend some time getting familiar with how your bill is constructed. At this time it appears you're working with incomplete and some inaccurate information.

Take what you want of the above. Scrap the rest.

[Alan007]

Some of your #'s are a bit off on the low side as is your timeline (maybe) and looks like you could use a little accurate information on other things going on.

At 10,800 kWh/yr. you're PROBABLY close to the usage where the upcoming rate reform may well have sort of a neutral outcome for you, for the near term.

The jury is still out as to what the situation will be which is probably got something to do with why vendors are mum: They don't know because stuff isn't very firm yet. That "stuff" may affect your "payback" period in unknown ways. Some clarity in the situation may appear around mid year, hopefully sooner, but don't hold your breath for sooner.

Depending on your tariff, location and situation, your current rates are probably closer to approx. $0.18 or so for tiers 1 & 2, so you appear close on that, but ~ $0.38 for tiers 3 & 4. Root around on the SDG & E website for tariffs and proposals before the CPUC as to when 4 tiers down to 2 and leveling of rates might be expected. I believe current proposals, among many things, propose the realignment of rate to be gradual through 2018 - again, not codified yet.

On rate escalation: more of the same. However, that 5% figure your using isn't as conservative as you think. Vendors will tell you 6%/yr. and that's mostly B.S. at least around here. It's probably closer to somewhere between 3-4%, and I say maybe, because - dirty little secret - the size of an annual historic rate increase for residential users is a function of how much they use and has been that way since about 2001 or before. Most people believe their rate increase has been higher for them than actual because, in spite of some well intentioned but mostly feel good efforts at conservation, their annual usage has crept up and that increased usage has been at least disproportionately, or largely billed at the higher tiers. So, the bills go up, users don't realize they are using more and blame all the increase in their bills on increase rates. Solar peddlers tout inaccurate and high annual electric rate increases to oversell and overprice solar PV, increasing their bottom line. BTW, some annual increases in rates since 2001 have been negative for most residential users. Honest.

Some part of AB 327 - the rate reform act, wants to gear annual rate increase to something like the rate of general inflation + something like 0.75%/yr. Again, to be firmed up and hammered out.

I'd respectfully suggest getting the latest tariff sheets applicable to your situation from the SDG & E website and your bills, and spend some time getting familiar with how your bill is constructed. At this time it appears you're working with incomplete and some inaccurate information.

Take what you want of the above. Scrap the rest.

Thank you, JPM for your input. SDGE is in fact proposing that by 2018 tier 1 at $.17 and tier 2 at $.22 (and no tier 3 or 4). They say their average cost to deliver electricity is $.205 and that's what they are trying to go for. SDGE also wants everyone to pay a $10/mo fixed fee regardless. So I'm just trying to figure out which numbers to plug in to my assumptions for 2018 in essence for my average cost per kWh by sdge (so far I'm estimating/predicting about $.205 if I don't go solar). If their top tier (#2) is going to be $.22 (in 2018 as proposed) then it sounds like to me that my electric bill which currently averages $.28 (on the current 4 tier structure with $.38 being the top tier #4) will go down.

Hmm, that's interesting about tying the rate increase to inflation. I think I would generally predict about 3% for inflation if I had to make a best guess so perhaps I should use 4% max for my spreadsheet assumption for sdge future rate increase average?

Thoughts?

[sensij]

I think that what rates will be a few years from now is still wide open. Although SDG&E has a nice bill insert <marketing document> showing the rates close to what you mentioned, without specifying the season for which they apply, if you look at their filing on April 1, you can see that any number of possibilities are still on the table.

This page is one to watch for new information, but I think it will a few months before we know which scenario will apply.

[J.P.M.]

Alan: A real swag based on what info you've provided makes me guess that @ current tiered rates, your AVERAGE cost/kWh might be something like ~ $0.24 -$0.27/kWh. on a yearly basis. I'd need 1 yr. of usage by month, your billing cycle #, climate zone and whether you're all electric or not for a better SWAG.

As Sensij & I both wrote, the future is still uncertain on rates, and likely to stay that way for some indeterminate amount of time. There are other things changing in your bill as a result of rate reform that will PERHAPS increase your bill in spite of a lowering of the upper tier rates. As I wrote, at your 10,800 kWh/yr. you may be close to keeping ABOUT the same bill for awhile, but no promises. Keep your ear to the ground.

[sensij]

Looks like some new information is available from the CPUC. I think there is still some wiggle room, but this appears to be the new best guess as to what the future will bring, at least for summer rates.

From here:


SDGE.JPG

[J.P.M.]

Looks like some new information is available from the CPUC. I think there is still some wiggle room, but this appears to be the new best guess as to what the future will bring, at least for summer rates.

From here:


[ATTACH=CONFIG]6511[/ATTACH]

Probably as good a SWAG as any at this time. I intend to use a version of the above but still, keep in that things from the CPUC aren't final yet.

ADD: Perhaps one of the not so bright spots: Looks like the monthly payment for those large users who lease has a real chance of exceeding what their non solar bill would be had they not leased.

[The Green Guy101]

Hi Alan

Probably as good a SWAG as any at this time. I intend to use a version of the above but still, keep in that things from the CPUC aren't final yet.

ADD: Perhaps one of the not so bright spots: Looks like the monthly payment for those large users who lease has a real chance of exceeding what their non solar bill would be had they not leased.

After reading all this, sounds like you have done a lot of research. I do agree with the assumption that it is probably logical to assume that your bill will be slightly less at best with a two tier rate change. I'm sure you have also seen other factors that can make a difference but are unknown as far as the specifics but are none the less still being proposed and discussed, for example time of use. I say all that to remind you of one thing, which is that these changes are going on because SDG&E is complaining they are loosing money. As you said they are claiming it cost them 20.5 cents per kilowatt to service a customer, so just remember the real objective of SDG&E is to create more profitability for the company. This is not because they are trying to take care of tier 3&4 customers, this is because they are LOOSING tier 3&4 customers daily to solar panels. Remember San Diego is the second biggest solar energy city in the nation. There's a reason for this, which is that we have had some of the highest prices in the nation for energy and that solar panels are more efficient then they have ever been, because of the incentives and competition it's also priced at an all time low.

Now with that being said, you also have to remember that there is a new bill that allows you to go solar with 0 down and attach it to your property taxes. This will allow you to write off some of your payment as a tax write-off. So that would also be something to factor in on top of the rebate that the federal government gives. Also you said that you get to tier 4 often, remember solar is just a product and offered in several different ways by several companies in San Diego. One company might say that your bill needs to be $150/monthly to qualify, another $120/monthly, and the third a small local company, like my buddies, that has a cut-off of $80/monthly. Certainly the payback will be quicker with a company that has an $80 cutoff rather than one with an $150. So i think its definitely beneficial to go solar in San Diego over staying with an electric company or even leasing but its all about finding the right company. You said you were having trouble getting someone to go over possible scenarios or comparisons for the future, if you'd like i can give my buddy a call and see if he would be willing to discuss this with you if you would like.

[sensij]

...these changes are going on because SDG&E is complaining they are loosing money. ...

No, these changes are occurring because they are mandated by AB327.

[The Green Guy101]

No, these changes are occurring because they are mandated by AB327.

That is correct but AB327 was mandated due to the utility companies complaints of loosing money from the lower tiers and tier 3 and 4 users over paying due to the lower tiers being frozen for over a decade. This was in the same article that SDG&E sent out that Alan found it cost them 20.5 cents to service a home. I believe I have the article in my email still if you would like me to attach it. So they say that they want to stop over charging tier 3 and 4 users but everyone knows tier 3 and 4 users have bills of around 150 or higher. These are the same people that have made San Diego the number 2 city in the nation. At the same time these same people have taken the most money out of SDG&E's pocket. So yes you can say it's about AB327 but the deeper reason of why AB327 came about is to even out the pricing so SDG&E can compete with solar.

[J.P.M.]

Green Guy:

You sound like a solar peddler.

Opinions are yours. Fine to me but you seem a bit mis/uninformed. Opinions may not always reflect reality. I'd suggest you get the history of why AB 327 came into existence, read up, and see if you have the same opinion(s) about rate reform when you're done.

FWIW: I could construct an argument that the POCOs, while not evil ogres and robber barons, had at least something to do with the push for AB 327, but solar was actually not the main reason and perhaps no more than a side issue or an afterthought - sort of like icing on the cake. We'll probably never know.

Regardless of the reasons why it came into existence, as Sensij wrote, the AB 327 legislation is the reason the IOU's in CA are undergoing rate reform. One of the initial and major (given) reasons it came about was due to the historical skewing of rates that the energy "crisis" of 2001, the legislative/rate trail left behind, and to a large degree, it's effect on folks in the central valley in the summertime. Net metering and other solar related issues, while not an afterthought of the legislation, were not the main thrust.

If POCO's are losing higher tier customers its because the prices are too high. People are knee jerking those prices by using PV as a quick and shortsighted fix to those high prices. Solar doesn't put that big a dent in the energy mix (yet).

Solar is a (largely) peddler manipulated solution to perceived high prices, not the other way around.

As an aside, I find it ironic that some folks who claim that solar users are being subsidized by non solar users and are being forced to do so in an inordinately large and unfair way, also seem to beat the drum the loudest that solar is now and ever shall be a very small part of the energy mix to the point of being insignificant. I'm not sure both or either of those statements reflect much more than hyperbolic rhetoric. However, to viscerally claim both seems inconsistent and illogical.

As in: How can something be insignificant and at the same time burdensome and unfair ?

As for time of use: It is much discussed, but at this time affects far fewer residential customers than you, or most others might think. Slightly more than 3% of PG & E cust. are on T.O.U. That # is about 0.6% for SDG & E and about 0.5% for SCE. Those will probably go up some in the future, but still has a long way to go. In the future there will be a default opt in, but not a mandate to T.O.U. billing.

Of course SDG & E (and all the other POCOs) are complaining about losing money - Do you expect them to say they're rolling in dough ?

As for San Diego being a healthy solar climate - I appreciate your vague remainder. I think I've got that one down. However, the way you reference the abundant solar climate seems to me to be more hype than useful information. That's also one of the big reasons why there's more solar PV here - IT'S SUNNIER !

Rates have something to do with it, but the lazy sheeple-monkey see/monkey do attitude of throwing expensive solar at an electric bill has more impact on solar utilization than pricing alone. If it didn't, people would first be using less power, then sizing arrays properly and really saving money.

I'd not be surprised if the IOU's in CA are somewhat happy for this rate reform in the sense that it will allow them a way to blunt some of the incentive that makes solar a more cost effective for large (and usually more affluent) users while at the same time allowing, actually legislatively mandating, that the rate reform be revenue neutral. In a way, this is a great deal for the POCOs: Stick a thumb in solar's eye, keep the revenue stream, get rid of an anachronistic PITA - the skewed rates, and put the blame on politicians. HMMM ?

Get your facts straight on the HERO program. It can be good, but it has drawbacks as well.