Presented to: CPUC Workshop Balanced Rates Rulemaking (R.) 11-11-008

The Bonbright principles of rate design

  • Economic efficiency
  • Revenue recovery and stability
  • Rate and bill stability
  • Rate attributes: simplicity, understandability and acceptance
  • Customer satisfaction

There is a misalignment between rate structure and cost structure in current rates

Cost structure

  • Fixed costs represent about 70% of total costs
  • Variable costs represent about 30% of total costs

Rate structure

  • Fixed charges represent about 30% of total revenues
  • Variable charges represent about 70% of total revenues

This misalignment leads to economic inefficiency

A solution, consistent with the principle of gradualism, is to move toward a more balanced rate structure (shown in the following slides)

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