Utility Rates and Your Bill
If you have ever tried to "decipher" your electric bill you know it is not easy.  The tiered rate structure is a little complicated, but the way they put it on you electric bill makes it downright confusing.  Today, I will be discussing the "DR" rate or tariff, because this is the rate most homeowners use.  DR means "Domestic Rate". 

There are also the "DRTOU" rate which is "Domestic Rate Time-of-Use" rate and "DRSES" rate which is "Domestic Rate Solar Electric System" rate.  Usually, the regular DR rate works best for most homeowners, even people who own solar electric systems.  I will save discussing these other rates and commercial rate structures to a later date.  Commercial rates have additional complications like "demand charges".

Basic Idea of Tiered Electric Rates
The basic idea is this:  the more electricity you use the more you are charged per unit of electricity.  The basic unit of electricity you are charged for is the Kilowatt-Hour or kWh.  The utility company is trying to get you to conserve by charging a lot more if you use a lot or waste a lot of electricity.  Low energy users pay less per kWh than high energy users.  The idea is:  if you use a lot of electricity then you pay more for your share than if you were a lower consumption user

Here in San Diego Gas & Electric (SDG&E) territory there are 4 tiers for the rates you are charged for electricity. 

Tier 1 - The first tier is called "baseline". 
Tier 2 - The next tier is 100% to 130% of the baseline amount. 
Tier 3 - The next tier is 130% to 200% of the baseline amount. 
Tier 4 - The next tier is 200% and up of the baseline amount. 

The baseline is an amount of electricity measured in kilowatt-hours and you are charged one rate for this electricity.  Then when your usage goes over this "baseline" amount and up to 130% of it (Tier 2) you are charged a slightly higher rate.  Then when your usage goes over 130% of this "baseline" amount (Tier 3) you are charged a significantly higher rate.  And similarly for when you go over 200% of the "baseline" amount (Tier 4).  

Large Difference in Electric Rates Between Lower and Upper Tiers
The Tier 1 and Tier 2 are supposed to be the average electrical usage for the entire territory.  These rates are held artificially low.  The bottom line is that the prices/rates for these two tiers are fairly low.  And when a rate hike is announced it is loaded more onto the Tier 3 & Tier 4 rates.  What this means is a 6% rate hike will typically be substantially more than a 6% increase in the Tier 3 & Tier 4 rates.

The other very noticeable part of this rate structure is that the first two tiers are substantially less expensive than the upper two tiers.  Roughly, the price is more than double for the upper two tiers.  This is a strong reason to conserve power and generate solar electricity.  Conservation and solar electricity generation "shave off" the electricity you pay for in the upper two tiers FIRST!  Let me repeat that, the part of your electric bill that is removed first is from the top tiers so your savings is more substantial. 

Baseline Electric Rate
The baseline amount of electricity varies by several factors.  These factors are: 

• Summer vs. Winter (rates can also change by Summer vs. Winter)
• The region you live in (coastal, inland, mountain, or desert as defined by SDG&E)
• If you are an all electric household 

And to make it more complex; usually twice a year you get a bill that straddles between summer and winter so your baseline and tiers change in the middle of the billing cycle.  Yes, it's complicated.  Fortunately, you don't have to do the calculations.  Your utility company does that for you. 

Electricity Charge vs Distribution Charge
Now, as if this were not confusing enough.  They also break the charges down into: 

• Utility Distribution Company (UDC) Charges  or  Distribution Charges
• Electric Energy Charge / Commodity / Electricity Generation / Consumption / Usage Charges

The "distribution charges" are for the infrastructure that gets the electricity to your home.  This includes things like the power lines and transformers.  These are the rates that vary quite a bit by usage tiers discussed above.  The "electric energy charges" are for the actual electricity itself.  This rate does not vary by tiers, but they still break it out by tiers.  There is also a DWR bond charge added in there.  

Then at the end of your bill there are an assortment of charges that are explained on the back of your bill. 

Total Electric Rate for Each Tier
To get your total electric rate in each tier you have to add up all these charges to figure out what you are paying.  Confused yet?  It's not easy.  Just remember, what is important is:  The more electricity you use the higher your rate goes.  Conserving electricity and making your own from a solar power system can significantly reduce this impact. 


Robert Morse
BSEE, MSEE
SunCal Solar, Incorporated
www.SunCalSolar.com