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Opinion: Utility Rate Setting: How Your Bills Are Determined and Your Voice Matters
California's dual system puts residents at the table for both investor-owned and municipal utilities as Proposition 218 ensures transparency and public participation.
We all pay for a range of utilities in our homes and businesses, but how are the rates the utilities charge us set—and by whom?
First, there are two types of utilities: investor-owned utilities like Southern California Edison, Southern California Gas Company, and AT&T, and not-for-profit “governmental agency” utilities like Riverside Public Utilities and Western Municipal Water District.
The California Public Utilities Commission (CPUC) sets rates for investor-owned utilities. The CPUC has a detailed ratemaking process where a utility must show what its ongoing costs are and list the capital projects they intend to develop with money from the current rate case. The CPUC holds a number of hearings and workshops on each rate case and invites public participation by letter, email, and testimony at hearings.
Governmental utilities like RPU and Western set their own rates following a process set out in Proposition 218. This begins with the utility laying out its ongoing costs (labor, commodity purchases like the product they provide, fuel, electricity, etc.), maintenance, and new capital improvement projects like water or electric lines, water pumping, or electric substations. Proposition 218 specifies that the utility cannot charge more than the actual cost of service and that no class of ratepayers may subsidize another class of ratepayers.
Governmental utilities must produce a Rate Study that explains in detail all the utility’s projected costs and anticipated revenue over the timeframe of the rate adjustment being considered. That timeframe may be a single year or multiple years. Both RPU and Western use a multi-year rate adjustment process. The difference between the utility’s anticipated costs and anticipated revenue under existing rates is the amount that is proposed in new rates.
Proposition 218 specifies a minimum process for sharing the rate study with the public, allowing public comment and formal objection to the proposed rate adjustment, and holding at least one formal hearing to consider adopting, modifying, or rejecting the rates proposed in the Rate Study. Many utilities, including RPU and Western, work hard to provide more information to the public and to seek input from the public.
In the case of RPU, there are a series of hearings and workshops before the Board of Public Utilities—a board of citizens appointed by the Mayor and City Council—and at least one more hearing by the City Council to affirm or deny the proposal put forth by the Board of Public Utilities.
Western Water is just beginning a rate adjustment process that will affect those customers who receive water and/or sewer service from Western. There have been two public board workshops to educate the Board on the rate adjustment proposal and the factors driving proposed increases. Every Western customer will receive a mailing that explains the proposed increases that affect them, how they can participate in the decision-making process, how to get more information, when workshops and hearings will occur, and how to file a formal objection to the proposed rate adjustment.
If you are a Western water or sewer customer, I urge you to visit westernwater.gov to learn more about the proposed change in rates, how you can learn more, and how you can share your opinion or file a formal objection.
RPU customers have similar opportunities to participate and influence the RPU rate adjustment through the RPU website.
The concept of formal objection is important because under Proposition 218, if a majority of ratepayers object to a proposed rate change, it cannot go forward.
Every utility ratepayer should take the opportunity to learn about any proposed change in rates. Find out why the change is proposed and decide for yourself whether it is reasonable. Ask questions. Share your opinion.
No one likes the idea of paying more for necessities, but sometimes it is necessary and fair. You can help shape a rate adjustment proposal. Learn what is proposed and why, and express your opinion. Believe it or not, your opinion does count. It may or may not prevail, but it is valued and will be considered.
A Riverside resident of 50+ years, Mike served on the City Council for 12 years, 11 years on the State Seismic Safety Commission, and is currently on the Western Municipal Water District Board.
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