Comments On The Straw Proposal

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)