1. Electricity’s High CostsAnd High Prices John A Bohn California Public Utilities Commission For Presentation to the NCPA January 24, 2007

2. California’s IOU Customers FaceHigh Rates For Electric Service • Prior to the crisis, residential rates were “only” about 60% higher than the national average. • Now, California’s electric rates for residential service are large multiples of the national average.

3. Example: PG&E’s Residential Rates The so-called “Good Old Days” Two-tier tariff prior to the crisis Cents / kWh 13.3 1.6 X 11.6 8.24 National average rate in 2000 100 130 200 300 Percent of Baseline Quantity (kWh)

4. Example: PG&E’s Residential Rates 36.4 Today’s steep tiered tariff 31.7 Cents / kWh 22.7 3.8 X 3.3 X 2.4 X 12.9 11.4 9.45 National average rate in 2005 100 130 200 300 Percent of Baseline Quantity (kWh)

5. Why Such High Rates? • High Resource Costs • Very little Coal (dirty and inexpensive) • Much Natural Gas and Renewable Sources (cleaner and more costly) • Very Costly Clean-Up from the Crisis • Fixed Baseline Rates force up other residential rates • Mandates, mandates, mandates. All for the good, but at what cost?

6. Mandates • Subsidies to Low-Income Customers • Subsidies to Low-Use Customers • Renewable Portfolio Standard – toughest in the nation • California Solar Initiative • Efficiency RDD&D • Greenhouse Gas – Procurement Rules

7. One Man’s Conclusions • California electric service customers are paying very high prices • Every new mandate costs money • Cause and effect not always clear • Unintended consequences • We should be aware of costs in decisions “Please don’t improve my life any more; I can’t afford it.”