Residential Rates: A Balancing Act
Illustration of a man on a tightrope.

Most Southern California Edison residential customers are charged for energy use under a tiered structure in which the more electricity they use, the more they pay for each kilowatt hour. On April 1, the number of tiers was reduced from five to four as part of a continuing effort to spread the cost of electricity more fairly across all customers.

W h a t    i s    t h e    T i e r    S y s t e m ?

Each SCE residential customer is allocated a certain amount of low-cost electricity, called the baseline allowance, for daily household activities such as lighting, heating and running a refrigerator. Baseline allowances are required by law and administered by the California Public Utilities Commission, which regulates investor-owned utility services in California. As customers use more electricity beyond this amount, they’re charged progressively more. For instance, in tier one (the baseline allowance), one kilowatt hour of electricity costs 13 cents, but in tier three, it costs 27 cents.

In 2001, to keep electricity affordable for residential customers, the California legislature put a cap on the rates that investor-owned utilities could charge in the bottom two tiers. Because those rates are still restricted, about two-thirds of all residential energy use is still priced about the same as it was more than 12 years ago. “While those rates have remained largely unchanged, SCE’s costs have increased,” said Pricing Design & Research Director Russ Garwacki. “Clean, renewable power and building grid infrastructure to ensure reliability cost money, and all customers who benefit from these investments should help pay for them.” Per state law, these costs have been collected mostly from rate increases to the upper tiers, so customers who use more electricity—for instance, homeowners who live in hot inland regions and frequently use their air conditioners—shoulder a disproportionate amount of the financial burden and essentially “subsidize” customers who pay only the lower tier rates.

R e s t o r i n g    B a l a n c e

On April 1, several changes went into effect to help correct this within the confines of existing law. With the CPUC’s approval, SCE reduced the number of tiers in its residential rate structure from five to four, making the cost difference between the bottom and top tiers less dramatic (see the illustration below). It also reduced the baseline allowance, spreading higher electricity costs more equally across all customers.

SCE is working with other California utilities to support legislation in Sacramento that would enable the CPUC to make the residential rate structure more equitable. “The ultimate goal is to ensure balance in rates,” said Akbar Jazayeri, SCE’s vice president of Regulatory Operations. “We want to make sure that all our customers pay a fair rate for the valuable electric services they receive.”

Finding Tier Information on Your SCE Bill

SCE customers can find details about how much energy they're using on www.sce.com/myaccount. Log in and click "How is this calculated?" under the Projected Next Bill heading to see a dynamic view of your tier kilwatt-hour allocation, costs and projected crossing points.

Take Action

SCE provides tools to help residential customers keep their electricity bills down. My Account displays usage information for each billing cycle. Budget Assistant lets you set monthly spending goals, track your progress and get automated alerts. Home Energy Advisor provides customized recommendations for how to save. Find out more at www.sce.com/summer.

Aerial view of a residential neighborhood.
Illustration of the five-tier and four-tier residential rate systems.
Under the new four-tier system, Southern California Edison will collect the same amount of total revenue from ratepayers, but less of it will come from the company's highest-use customers.
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15 comments
It would be helpful to see the "break points" in kilowatt usage - above which the customers pay the next higher Tier rate.
Is there no longer a summer/winter rate? Also the tariff lists tier 4 as 201% - 300% of Baseline. What is the rate above 300% of baseline?
I agree with the two comments below. Without knowing the break points for each tier, the above chart is not very useful. The water company in San Clemente has reduced the first tier to such a small amount, that most homeowners can not stay in it. The water company also eliminated the summer increase in the first tier usage quantity when everybody with outside landscaping has to water more. So the rates and tier break points should encourage conservation, but make people that do not attempt to oonserve pay a lot more. People living in hot weather areas should get larger Tier 1, Tier 2 and Tier 3 usage quantities during the summer.
Great questions! According to our subject matter experts, baseline allowances are based on kilowatt hours used per day and differ among customers depending on region, season and the home's source of energy (electricity only, or a combination of electricity and gas). Tier 1 includes 0-100 percent of a customer's baseline allowance, tier 2 is 101-130 percent, tier three is 131-200 percent and tier four, which replaces the old tiers four and five, is 201 percent and up. More info about baseline allowances is available at https://www.sce.com/wps/portal/home/residential/rates/residential-plan. -- Inside Edison editors
I have an old house with many upgrades and a pool in 2006, Am I still under the baseline from 1967 or when did my baseline change? How do I know if my baseline is to small and I'm getting ripped off ?? Who and what makes up the baseline?
It's great that Edison is making all of these changes, doing what makes sense and re-examining the best way to do things.
where can i locate the tier ranksing/threshold between the different tiers?
This seems to be a fair way of doing it and not by what time that you use it. Get rid of the smart meters and bring back the people that you have layed off
Great to hear this! Way to keep our customers happy.
This illustration is confusing. Tiers 1 and 2 pay what they did before, every other customer pays less. This does not make sense unless the width of the tiers has changed such that there are less customers in Tiers 1, 2, and 3. All of SCE's rhetoric suggests that they only care abour their uppermost tier, but those in other tiers have concerns and interests in what will happen to them, and ignoring them is, well, insensitive.
thank you.. with a pool in our backyard and a round the clock security system, children etc.. our energy bill runs over $120 every month on average. I was shocked to see the most recent bill come in at only $83.. thank you for making that adjustment.
My partner is unemployed and my income is the sole income coming in.. I barely make enough and I am constantly making payment arrangements.

Every little bit helps...
There are two main issues with SCE's Logic

First, the coastal communities are already at lower tier levels of use, about half of the inland areas. That means the coastal areas pay more sooner than the inland areas. The coast areas tier one level are rated at about 256 kilowatt usage while the inland area, Region 14 tier one level is about 450 kilowatt hours.

Secondly, the coastal areas allocated use is lower than the inland areas. That means that the coastal areas hit their tiers quicker and pay more to support the rates for inland use. The daily allocation of use for the coastal area is 9.4 to 9.8 kilowatts per hour while the inland area is allocated 10.6 to 15.5 (summer) per day.

The bottom line is that the coastal areas are and have been paying more than the inland areas and now they want to raise the rates more to help offset the power the inland areas use.

All of this information is available on the SCE website but they make it very hard to find. You can call SCE and ask them to verify this information.
energy savings and times of day to use less energy?
No way possible for a senior living in a mobile home park to calculate if we are being charged correctly, so sad.

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