USA – CALIFORNIA Law and Practice Contributed by: Nora Sheriff, Gwenneth O’Hara, Samir Hafez, Antonio Carrejo and Elisa Rivas, Buchalter
their designated areas (often city or district boundaries) from local governmental powers, and relevant state laws governing their forma- tion and operation. While the CPUC does not regulate POU rates, it does have safety jurisdic- tion over certain POU operations. Notably, though the distribution of electricity remains a largely monopolistic function, Cali- fornia has introduced competition in other seg- ments of the electricity market, such as gen- eration and retail electricity supply (through mechanisms including community choice aggre- gation and limited direct access). 5.6 Electricity Distribution System Charges and Terms of Service In California, the CPUC is responsible for over- seeing and establishing the IOUs’ electricity distribution charges and terms of service. POUs establish their charges and terms through their respective governing bodies. Regulatory Principles and Process Under California Public Utilities Code Sec- tion 451, the CPUC must ensure that all utility charges and rules pertaining to utility service are “just and reasonable”. This includes ensuring adequate, efficient and safe service. Section 453 requires that a public utility’s rates and terms of service must also be non-discriminatory, mean- ing customers receive service under similar terms and conditions without undue preference or prejudice. The CPUC establishes distribution system charges under a cost-of-service model. Under this model, the following applies. • The CPUC determines the utility’s revenue requirement, which is the total amount of money that the utility is authorised to collect
from customers to cover its operational costs (eg, maintenance, administration) and provide an opportunity to earn a reasonable rate of return on its capital investments (rate base – the value of infrastructure such as poles, wires, etc). • This revenue requirement is typically exam- ined and set every few years in a formal pro- ceeding called a General Rate Case (GRC). The GRC involves public hearings, input from stakeholders (including consumer advocates), and review of the utility’s expenses and investment plans. • Once the revenue requirement is approved (Phase I of a GRC for large IOUs), the costs are allocated among different customer classes (residential, commercial, industrial, agricultural), and specific rates are designed to collect the allocated revenue from each class (Phase II of a GRC). Rates often include fixed charges, volumetric charges (per kWh), and, for some customers, demand charges (per kW). Distribution terms of service are typically reviewed, established or modified within formal CPUC proceedings; this can occur concurrently with rate-setting in GRCs or separately in specif- ic rule-makings dedicated to particular aspects of service (such as net energy metering or inter- connection). Appeals and Complaints IOUs and other parties to the proceeding in which a CPUC decision was adopted have a right to appeal the CPUC decision. Parties must first file an “application for rehearing” with the CPUC itself, outlining the alleged legal error. If the rehearing application is denied, or if it is granted but the decision remains unsatisfactory, the applicant may then file a petition for a writ of review with the California Court of Appeal or the
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