Commission Issues Final Decision 22-08-023 Implementing the Affordability Metrics

Summary:

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The PD makes technical refinements to Section 2 of the Implementation Staff Proposal (found in Appendix B) and recommendations on integrating the affordability framework into Commission practice. The PD also solicits additional feedback after parties have hands-on experiences with the tools and methodologies.

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Background:

• Decision 20-07-032 adopted three metrics, the Affordability Ratio, Hours-at-Minimum-Wage ("HM"), and SocioEconomic Vulnerability Index ("SEVI"), by which the California Public Utilities Commission would assess the relative affordability of essential utility service across industries and proceedings, including examination of how different geographic areas of California are impacted.
• In addition, with D.20-07-032, the Commission initiated (1) implementation of the metrics in ratesetting proceedings generally; (2) annual production and interpretation of updated metrics in a Commission-sponsored annual Affordability Report; and (3) submission and development of an electric Cost and Rate Tracking Tool (Tracker).
• The Affordability Ratio and the HM can be understood as California-specific variants of the more commonly known “energy burden.” Energy burden is the percentage of income spent on energy.
• The Affordability Ratio displays the impact on a representative household at two different resource levels: (1) Affordability Ratio 50 ("AR50"): affordability ratio for a representative hypothetical household in the middle, resource-wise, compared to others in a community; and (2) Affordability Ratio 20 ("AR20"): affordability ratio for a representative hypothetical household at the lower-end, resource-wise, compared to others in a community.
• The HM displays an affordability impact for households by referencing a third resource level: any household that earns the minimum wage of their community. The HM may be understood as representing a “community” of those who earn minimum wage, regardless of the affluence of where they reside.
• The third metric, the SEVI, measures community-level, not household level, resources and is a variant of the CalEnviroScreen tool already in use in California to designate DACs.

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Implementation of Staff Proposal - Technical Refinements:

• An itemized list and tally of all revenues pending incorporation into current rates, whether approved or requested, and recently implemented revenues, is required to be made public quarterly concurrent with submission of the Energy and Water Trackers.
• To score and rank census tracts for the third metric, rely on the most recent version of the CalEnviroScreen tool and CalEPA’s definition of DACs instead of the SEVI, which is an extract of the CalEnviroScreen tool.
• Staff proposes releasing the AR Calculator in conjunction with the annual Affordability Report.
• This decision allows stakeholders to develop and introduce additional essential usage bills specific to certain populations but does not adopt staff production of these variations.
• The Commission staff will continue to annually produce and publish the HM, but will not forecast changes to the minimum wage. Stakeholders may update or forecast the minimum wage, or generate the HM for differing levels of usage or rates at their discretion.
• This decision finds that replacing the SEVI index with the CalEnviroScreen tool will allow the Commission to leverage a more consistent designation of DAC, minimize complexity and confusion, and serve a similar purpose within the affordability framework.
• For certain energy GRCs and other ratesetting applications, the Implementation Staff Proposal characterizes the Energy Tracker as one option, but not the required model, by which the utilities may model the essential usage bills, current and proposed, as the input to the affordability metrics and framework. Concurrent with the utility submissions of Trackers to the Commission, the IOUs shall itemize and tally, by proceeding, all revenues approved but not yet implemented, as well as revenue requests pending. Additionally, the IOUs shall also itemize and tally all revenue requirements in current effective rates and implemented during the prior twelve months. Such lists shall correspond to the revenues modeled in the Trackers.
• The Commission will sponsor an annual refresh of data included with the annual Affordability Report. In addition, the requirement for utilities to introduce the metrics associated with applications for new revenue is likely to generate updates between the annual update, as the introduction of metrics in individual proceedings requires a comparison of bills currently in effect to impact of the new request on bills.
• Furthermore, as revenue changes impact affordability metrics, this decision’s requirement for water and energy utilities to quarterly update cumulative revenue requests will provide additional insight into affordability changes between updates.

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Implementation in Annual Affordability Report and Introduce Metrics in Commission Proceedings:

• Use the CalEPA most recent designation of DAC instead of the SEVI-DAC to highlight community-level affordability concerns.
• The first electric IOU GRC Phase 2 proceeding to begin subsequent to the issuance of this decision, currently scheduled to be SDG&E’s 2024 GRC Phase 2, shall introduce the affordability metrics.
• Regarding updating metrics introduced in individual GRC proceedings, instead of requiring energy and water utilities to update metrics in Opening Comments to Proposed Decisions, this decision requires the metrics be updated concurrent with the update of authorized revenue and rates for inclusion in a Proposed Decision, by the entity responsible for calculating the updated metrics.
• A Commission-sponsored forecast of cumulative revenue, rate, and bill impacts and associated affordability metrics will be tested in the 2020 annual Affordability Report.
• Iterative feedback on implementation will be solicited and considered annually for a two-year assessment period.

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Revisions to PD on July 28, 2022

All orders will now become effective 30 days after the issuance of this decision.

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Final Decision Issued on August 8, 2022