Council Resolution 31351
sets the general policy framework for City Light rates. City Light sets rates by first figuring out how much it costs to serve each rate class. This gives us a target revenue amount to collect for each rate class. We then use what we know about the typical energy consumption levels for each rate class to design rates that we forecast will collect that amount of revenue.
Rate policy structure issues concern how much revenue to collect with each type of charge. Because the target revenue is set for each class, making one charge higher will mean another charge will be lower. This will impact different customers in different ways. Changing rate structures will cause some customer bills to go up and others to go down. Some example policy issues include:
- What is the right amount of energy each residence should get in the low-price first block, and how low should that price be? Does the second block price send an appropriate price signal to encourage energy conservation?
- Should all classes have a base service charge? What kinds of utility costs should that charge cover?
- Should City Light implement time-of-use rates for smaller customer classes too?
- Are demand charges high enough? Is maximum kW use the right metric for demand charges?