How Rates Are Set

With customers become more aware of the value (and cost) of energy, we frequently receive questions about how, and by whom, rates are set. Here are simplified answers about where your rates come from.   

What's in a Rate?

  • SDG&E bills for the cost of the electricity itself, plus the infrastructure that delivers the energy to you (wires, transformers, power plants and other things).
  • There are also charges that include taxes, fees, and public programs.
  • SDG&E does not make money on the commodity cost of the energy, only on the delivery infrastructure we build and other operating costs to deliver the energy.

Who Sets the Rates?

  • The California Public Utilities Commission (CPUC) sets a monthly baseline level for residential customers. This baseline represents how much electricity a customer would need for basic living: heating, cooking, lighting, refrigeration, etc.
  • Under this system, the more you use, the more you pay: if you use more electricity than the baseline amount, your price goes up.
  • The electricity you use in a month is broken up into two tiers, or usage levels. As you use electricity during the month, you move up from one tier or usage level to the next your price goes up.

How Your Baseline is Set

There are three main factors that affect your electric rates:

  1. Which one of SDG&E’s four different climate zones you live in. Each climate zone is assigned different daily baseline allowances. Baseline allowances are set between 50%-60% of the electricity the average residential customer uses in each territory.

SD Zones

2.  Which season it is (for our purposes, summer runs from June 1 to October 31, and winter runs from November 1 to May 31.

3. Customers who receive both electric and natural gas service will have different baseline allowances (basic service baseline allowances) than customers with all electric service (all electric baseline allowances).

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