R2207005-Joint Large IOU Testimony (4.7.23)

Proceeding.: R.
22-07-005
Exhibit No.: Joint IOUs-01
Witnesses: See Table of Contents
Joint Testimony of Southern California Edison

Company, Pacific Gas and Electric Company, and
San Diego Gas & Electric Company (the Joint IOUs)
Describing Income-Graduated Fixed Charge
Proposals
Joint IOUs’ Exhibit 1, addressing:
- Policy
- Rate Design
- Income Verification
- Implementation
- Marketing
- Cost Recovery
Before the
Public Utilities Commission of the State of California
April 7, 2023
Testimony Describing Joint IOUs’ Income-Graduated
Fixed Charge Proposals
Table Of Contents
Section Page Witness
I. POLICY .......................................................................................................1 M. Backstrom

A. Introduction ......................................................................................1
B. The Joint IOUs’ Residential Rate Proposals Comply with
Assembly Bill 205............................................................................2
1. Benefits of the Joint IOUs’ Proposals Compared
to Current Residential Rates ................................................6
a) Improving Equity by Bringing Rates Closer to
Cost of Service. ............................................................... 6
b) Addressing Affordability and Protecting Low-
Income Customers. ......................................................... 8
c) Encouraging Beneficial Electrification. ........................ 10
d) Promoting Bill Stability and Maintaining
Strong TOU Price Signals............................................. 14
2. The Joint IOUs’ Proposals Will Apply to All
Residential Rate Schedules ................................................15
3. The Joint IOUs’ Proposals Are Consistent with
Rate Design Principles. ......................................................16
C. The Joint IOUs’ Proposals Should be Adopted as Soon as
Possible. .........................................................................................18
D. Income Verification Should Be Performed By State
Agencies and Not The IOUs ..........................................................18
E. Robust Marketing, Education, and Outreach Will be
Required .........................................................................................20
F. Conclusion .....................................................................................21
II. RATE DESIGN .........................................................................................22 G. Morien
R. Thomas
C. Kerrigan
A. Introduction ....................................................................................22
1. Summary of Proposals .......................................................22
B. Background ....................................................................................24
1. Recent Rate Design Policy Issues ......................................24
2. Next 10 Research on Potential Fixed Charges ...................28
3. The Joint IOUs’ Proposals Align with
Modernized Rate Design Principles...................................32
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Table Of Contents
C. Basis for the Average IGFC Level.................................................34

1. Methodology for Determining Average Fixed
Charge Level ......................................................................34
D. Income Graduated Fixed Charge Discount Levels ........................42
1. Summary ............................................................................42
a) Lower Average Monthly Bills for Low-
Income Customers ........................................................ 43
E. Impact of the IGFC on Rates and Other Rate Design
Issues ..............................................................................................44
1. Impact of the IGFC on Volumetric Rates ..........................44
2. Adjusting the IGFC Over Time for Revenue
Requirement Changes ........................................................45
3. IGFC Review and Assessment Over Time ........................46
4. CARE Discount Structure Changes ...................................47
5. FERA Interaction with IGFC .............................................49
6. Implementation of the IGFC on Non-Default
Residential Rates................................................................50
7. Size Differentiation ............................................................51
8. Elimination of Minimum Bills ...........................................53
B. Calibration Mechanism for Structure Revisit ................................53
C. Public Tool Results ........................................................................54
III. INCOME VERIFICATION .......................................................................55 R. Alvarez
C. Coughlan
M. Fischlein
A. Introduction ....................................................................................55
1. Income Assignment and Verification - Objectives
and Evaluation Criteria ......................................................55
D. Stakeholder Input ...........................................................................58
1. Key Stakeholder Input .......................................................58
E. Income Definition ..........................................................................58
F. Household Income Brackets ..........................................................59
G. Income Verification Options Evaluated by the Joint IOUs ...........60
1. Introduction ........................................................................60
2. Using Current Program Information ..................................61
3. Using Available State Processes ........................................62
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Table Of Contents
a) DSS’s “CalFresh Confirm” Data .................................. 62

b) CPUC/ Third Party LifeLine Low Income
Program for Telecom Utilities ...................................... 64
4. Using Credit Agency Data .................................................65
5. Using Customer Stated or Verified Income Data ..............68
6. IOU Developed Data Model ..............................................73
7. Key Findings on Evaluated Options ..................................74
8. Recommendation ...............................................................76
H. Income Verification and Appeals Process .....................................78
1. Income Verification Ownership and
Implementation ..................................................................78
2. High Level Utility Process Overview ................................82
a) Initial Income Bracket Assignment .............................. 82
b) Appeals Process and Customer-Initiated
Income Updates ............................................................ 85
c) Periodic Refresh............................................................ 89
I. Currently Projected Costs of Joint IOUs’ Proposal .......................89
J. Anticipated Costs for CPUC-Supervised Third Party
Income Verification .......................................................................90
1. High-Level Cost Estimates for the Other Major
Scenarios Evaluated but not Recommended – In-
House IOU Income Verification ........................................93
K. Timeline for Implementation of Third-Party Income
Verification ....................................................................................94
IV. IMPLEMENTATION ................................................................................96 N. Kane
M. McCutchan
E. Molnar
A. Introduction ....................................................................................96
B. Implementation Objectives and Plan Overview ............................97
C. Billing Information Technology System Changes .........................98
1. Implementation Timing ...................................................100
2. Approach to Transitioning Customers .............................102
3. Updates to Current Customer-Facing Tools ....................103
4. New Tools ........................................................................103
D. Coordination with Community Choice Aggregators ...................104
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Table Of Contents
E. Customer Support Resources - Contact Centers ..........................104

F. Costs.............................................................................................105
1. Implementation Costs ......................................................105
2. Measurement and Evaluation ...........................................107
G. High-Level Estimates of Timing and Cost for Other
Anticipated Proposals ..................................................................107
V. MARKETING EDUCATION & OUTREACH ......................................109 A. Bernhardt
B. Kopec
E. Wasmund
A. Introduction ..................................................................................109
B. Research Insights .........................................................................109
1. PG&E ...............................................................................109
a) Stimuli ..............................................................................110
b) Key Findings ....................................................................111
2. SDG&E ............................................................................113
3. SCE ..................................................................................113
C. Joint IOU ME&O Proposal’s Objectives .....................................114
D. Lessons Learned from Residential Time-of-Use
Transition Inform IGFC Outreach Strategies ..............................115
E. Plans to Refine Outreach Plans Based on Findings from
Additional Research .....................................................................117
F. Target Audiences .........................................................................117
G. Rollout and Implementation ........................................................118
H. Messaging Phases and Customer Journey ...................................120
I. Integrated Campaign Tactics .......................................................122
J. Community Outreach Tactics ......................................................125
1. Community Based Outreach (CBO) ................................125
2. Joint IOU Employee Outreach .........................................126
3. External Stakeholders: .....................................................126
K. Metrics and Tracking ...................................................................126
L. Budget ..........................................................................................126
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Table Of Contents
VI. COST RECOVERY .................................................................................128 R. Madsen

G. Morien
E. Pulgar
A. Introduction ..................................................................................128
B. Cost Recovery and Rate Making Proposal ..................................130
1. Cost Recovery Advice Letters Filings .............................130
2. Income Graduated Fixed Charge Balancing
Account (IGFCBA) ..........................................................131
1. Recovery of the IGFCBA Via the PPP Rate
Component .......................................................................134
2. Recovery of Income Verification Costs through
State Funding ...................................................................134
C. Recovery of Authorized Costs via the IGFC ...............................135
D. IGFC Calibration Mechanism ......................................................136
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Testimony Describing Joint IOUs’ Respective Income-Graduated
List Of Tables
Table Page
Table I-1 Illustrative Proposed IGFCs ..............................................................................................5

Table II-2 Illustrative Proposed IGFCs............................................................................................24
Table II-3 Illustrative Summary of Impacts to Default Rates..........................................................24
Table II-4 PG&E Default Rates Compared to Marginal Cost Metrics ............................................35
Table II-5 Illustrative Fixed Cost Revenue Requirement Categories in the
Public Tool ($/month charge) – Residential Non-CARE Customers ............................37
Table II-6 Revenue Requirement Categories Underlying the Joint IOUs’
Proposed Fixed Charges and Resulting Reductions in the Volumetric Rate Component
........................................................................................................................................38
Table II-7 IOUs’ Volumetric Rate Adjustment Methodology by Rate Schedule ............................44
Table II-8 SDG&E Illustrative CARE Bill Comparison .................................................................48
Table II-9 SCE Illustrative CARE Bill Comparison........................................................................48
Table II-10 PG&E Illustrative CARE Bill Comparison ..................................................................48
Table III-11 Joint IOUs Percentage of Residential Customers by Income Brackets .......................60
Table III-12 Summary of Each Joint IOU’s Internal Costs to Support our
Recommended CPUC-Supervised Third-Party Approach to IGFC Income Verification
........................................................................................................................................90
Table III-13 Comparison of Third Party Income Verification Implementation Costs ....................92
Table IV-14 Joint IOU Residential Rates Impacted by IGFCs........................................................99
Table IV-15 Implementation Milestones ........................................................................................102
Table IV-16 Estimated Implementation Costs by IOU...................................................................106
Table V-17 Useful Lessons from Residential Default TOU Transition to Inform IGFC ...............116
Table V-18 Joint IOUs’ Proposed Phased IGFC Communication Sample ....................................120
Table V-19 Initial Estimates of ME&O Costs, by IOU ..................................................................127
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Testimony Describing Joint IOUs’ Respective Income-Graduated
List Of Figures
Table Page
Figure I-1 Residential Rate Design Across the U.S..........................................................................8

Figure I-2 Average Annual Percent Difference by Income Bracket................................................10
Figure I-3 California’s Decarbonization Accomplishments and Future Goals ...............................11
Figure I-4 Current California GHG Emissions Inventory Data .......................................................12
Figure I-5 SCE Example: Non-CARE Inland Income Bracket 3 Customer Energy
Burden Comparison .......................................................................................................14
Figure II-6 2021 Next 10 Report Theoretical Fixed Charges - PG&E ............................................30
Figure III-7 Proposed High Level Chart of Entities Involved In Administration
and Implementation of Income Bracket Assignment and Appeal Process ...................81
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1 I.
2 POLICY
3 A. Introduction
4 Current residential rate structures based primarily on volumetric rates do not reflect cost
5 of service, are not equitable, and do not send appropriate price signals to encourage broader
6 adoption of greenhouse gas (GHG) reducing technologies. The artificially high volumetric rates
7 in existing residential rate structures pose affordability challenges for many lower- and
8 moderate-income customers, very high bills for larger users, and monthly bill volatility.
9 In contrast, the Joint IOUs’ proposals to combine an Income Graduated Fixed Charge
10 (IGFC) with lower volumetric rates on all residential rate schedules will improve equity. Our
11 proposals will bring customers’ rates closer to the cost to serve them, result in greater month-to-
12 month bill stability, and provide low-income customers with bill reductions, on average, relative
13 to the current rate structure. The lower volumetric rates will also encourage decarbonization by
14 making transportation and building electrification more affordable. More cost-based electricity
15 prices will compare more favorably to prices of gasoline and natural gas. As detailed in the
16 remainder of this chapter, these reformed residential rate structures are urgently needed to
17 support achievement of the state’s decarbonization goals.
18 The Joint IOUs’ proposals are designed to support the policy goals discussed, and since
19 customer acceptance of rate reform is key, continued customer research and marketing,
20 education, and outreach (ME&O) is needed to ensure customers have a positive experience. The
21 Joint IOUs’ proposed outreach and communication will make the reformed rate structures
22 transparent and understandable to customers and explain the expected overall benefits.
23 An important part of the Joint IOUs’ proposal is the recommendation that income
24 verification for purposes of assigning customer households to the appropriate IGFC level be
25 administered by a Third Party contractor supervised by the California Public Utilities
1
1 Commission (CPUC or Commission), as is done for the LifeLine program for
2 telecommunication companies.1 The Joint IOUs today perform a limited form of income
3 verification in the narrow context of opt-in discount programs such as the California Alternate
4 Rates for Energy (CARE) program (where customers agree in their application to provide
5 requested income information, in order to qualify). However, the process of assigning all of
6 California’s residential electric customers to income categories is unprecedented, and requires
7 capabilities and processes that are best administered by a state agency – and are far beyond prior
8 utility experience and capabilities. Adding the resources and systems necessary for the energy
9 utilities to perform such income validation would not be cost effective. Doing so also raises
10 sensitive issues of consumer privacy, cybersecurity, and utility-customer relations. For these
11 reasons, as described in Chapter 3 of this Exhibit, income verification should be overseen by a
12 state agency, such as the CPUC, and likely conducted by a qualified third party that would apply
13 the necessary protocols to ensure a fair and positive customer experience.
14 B. The Joint IOUs’ Residential Rate Proposals Comply with Assembly Bill 205
15 In mid-2022, the California legislature, through Assembly Bill (AB) 205, removed the
16 statutory language requiring default residential rates to be almost exclusively charged on a

17 volumetric basis and provided a framework to make the residential electricity rate structure more
18 equitable. That bill’s amendments to Public Utilities Code § 739.9 now allow the CPUC to take
19 the next step in needed residential electric rate reforms, by collecting through a set IGFC costs
20 that do not vary volumetrically or are more equitability collected in a fixed charge. A fixed
21 charge alone results in volumetric rates more in line with cost of service, which help to control
22 high bills and bill volatility associated with event-driven higher usage, and greatly enhance the
23 widespread electrification efforts needed to achieve our state’s GHG reduction goals. AB 205
24 aims to offer all customers better price signals while also providing additional affordability
1 See R.22-07-005, Phase 1 Track A: Income-Graduated Fixed Charge Guidance Memo at p. 9.
2
1 protections for low-income customers through the IGFC. The Joint IOUs and other parties have
2 already briefed the CPUC on statutory interpretation issues relating to AB 205. Because the
3 CPUC has not yet ruled on those AB 205 legal issues, each party was directed to assume that its
4 own brief’s recommended interpretation of the statute is adopted. That directive was followed
5 herein as well as in each of the Joint IOUs’ individual rate calculations.
6 The Joint IOUs have developed a common, modernized rate design structure that
7 balances several key objectives, including supporting increased affordability for lower- and
8 moderate-income customers while also helping the state achieve its decarbonization goals in a
9 more equitable and affordable manner relative to the status quo.
10 The Joint IOUs have worked together, in collaborative discussion with a wide range of
11 other parties (including through Energy Division workshops) to carefully consider a range of
12 potential IGFC approaches. While each IOU is separately providing individual Rate Design
13 Exhibits based on its unique revenue requirements, customer distributions, and service options,
14 all proposals are guided by the following key principles:
15  Provide a better aligned cost-based residential rate structure that collects costs in a
16 more equitable manner from all customers through an IGFC;
17  Support a more progressive residential rate structure for customers that matches
18 income ranges with the level of monthly fixed charge each customer pays, providing
19 affordability and bill relief for vulnerable lower income customers through lower
20 volumetric rates and the IGFC;
21  Encourage electrification by reducing volumetric rates for all customers, providing a
22 stronger economic basis in electric rates for customers to adopt cleaner electrification
23 technologies;
24  Provide increased bill stability for customers because a portion of a customer’s bill
25 will remain flat and predictable from month to month; and
3
1  Maintain strong price signals during critical energy and grid hours through time-of-
2 use (TOU) rate differentials that encourage customers to save by shifting use out of
3 these high-cost hours.
4 Today, lower- and moderate-income customers, on average, pay a greater percentage of
5 their income towards their electricity bill relative to higher income customers.2 The Joint IOUs’
6 proposals result in meaningful bill savings for these customers, with no change in usage. (See
7 Figure I-2 below.) As customers adopt environmentally-beneficial electrification technologies in
8 accordance with state policy, the Joint IOUs’ proposals significantly reduce volumetric rates and
9 make these new technologies more financially attractive.3 Importantly, these rates would be
10 technology-agnostic, making them more flexible and available for all customers. The Joint
11 IOUs’ proposals also consider how best to balance competing considerations to make income
12 verification as accurate as possible, while also aiming for a cost-effective implementation of a
13 major structural change for all residential customers.
14 As described in the previously submitted briefs, the Joint IOUs interpret AB 205’s “no
15 fewer than three income thresholds” language to mean there must be at least three Income
16 Brackets. The Joint IOUs are proposing four household Income Brackets to achieve greater
17 progressivity by offering further relief to the most economically vulnerable households with the
18 highest energy burdens – those with incomes less than or equal to 100% of the Federal Poverty
19 Level (FPL). This strikes an appropriate balance, implementing a progressive IGFC structure
20 while minimizing the operational challenges inherent in having too many income brackets.
21 Specifically, the Joint IOUs propose the following four household Income Brackets:
22  Bracket 1 – CARE customers with incomes less than 100% of FPL;
2 Next 10 and Energy Institute at Haas, University of California, Paying for Electricity in California:
How Residential Rate Design Impacts Equity and Electrification (hereinafter Next 10, Paying for
Electricity in California) (Sept. 2022), available at https://www.next10.org/sites/default/files/2022-
09/Next10-paying-for-electricity-final-comp.pdf.
3 See Chapter 2 (Rate Design) for impact to volumetric rates.
4
1  Bracket 2 – Remaining CARE and Family Electric Rate Assistance (FERA) enrolled
2 customers;
3  Bracket 3 – Non-CARE or FERA customers with incomes up to or equivalent to
4 650% of FPL; and
5  Bracket 4 – Non-CARE customers with incomes above 650% of FPL.
6 While it is important to maintain affordability for the most vulnerable low-income
7 customers, it is also imperative that the overall average fixed charge across all four income
8 categories be sufficient to enable meaningful reductions in volumetric rates that incentivize
9 customer electrification efforts. Because each of the Joint IOUs has its own, CPUC-adopted,
10 marginal costs of service, the application of the proposed basic rate design structure described
11 here results in differing calculations of each Joint IOU’s specific fixed charges by household
12 Income Bracket. The illustrative proposed IGFCs for each of the Joint IOUs are shown in Table
13 I-1 below and the appendices to this Joint Testimony present the individual rate designs for each
14 IOU’s residential rate schedules.
Table I-1
Illustrative Proposed IGFCs
Income Criteria PG&E SDG&E SCE
Bracket IGFC IGFC IGFC
($/month) ($/month) ($/month)
Average Fixed Charge $53 $74 $49
1 CARE (<= 100% FPL) $15 $24 $15
2 All Other CARE/FERA $30 $34 $20
3 Non-CARE/FERA <= 650% $51 $73 $51

FPL
4 Non-CARE/FERA >650% FPL $92 $128 $85
5
1 1. Benefits of the Joint IOUs’ Proposals Compared to Current Residential
2 Rates
3 The Joint IOUs’ proposals provide several benefits compared to the current, primarily
4 volumetric, rate structures for the IOUs’ residential electric customers. These are described in
5 the sections below.
6 a) Improving Equity by Bringing Rates Closer to Cost of Service.
7 While the energy environment in California continues to evolve rapidly, the residential
8 rate structure for investor-owned, regulated utilities has become outdated and misaligned with
9 the new energy landscape. Unlike many utilities nationwide, and publicly-owned utilities within
10 California,4 nearly all of the Joint IOUs’ costs to serve their residential customers are collected
11 through cent-per-kilowatt hour (kWh) volumetric rates, even though approximately two-thirds of
12 these residential costs are either fixed or do not fluctuate as customer usage increases or
13 decreases.5 CPUC-approved residential rates also differ markedly from the rate schedules that
14 the Commission has approved for the Joint IOUs’ non-residential customers, which almost
15 universally include a separate fixed charge component to recover fixed costs on a non-volumetric
16 basis.
17 Existing residential rate design policies are under review in this proceeding, as they were
18 based on priorities that do not sufficiently align with a focus on improving the affordability of
19 electric service and more equitably recovering fixed costs, as the state seeks to expand beneficial
20 electrification. Whereas in the past, state law encouraged the CPUC to land on the side of rate
21 design resulting in higher volumetric rates, now the CPUC is required to balance, providing
22 appropriate price signals, both energy use reduction and energy use increases where such
4 For example, the Sacramento Municipal Utility District (SMUD) charges a $23.50 monthly fixed
charge on both Rate Schedule R (Fixed Rate) and Rate Schedule R-TOD (Residential Time-of-Day
Service). See https://www.smud.org/en/Rate-Information/Residential-rates.
5 Fixed revenue requirements as a portion of total residential revenue requirement, averaged across
IOUs.
6
1 increases would support GHG emissions reductions. This statutory change endorses the end of
2 the longstanding presumption that costs should be predominantly recovered through volumetric
3 rates for most residential customers. Instead, the priority is that volumetric price signals should
4 enable customers to make decisions that are better aligned with the State’s climate goals.
5 As the Joint IOUs continue to build and maintain necessary critical infrastructure to help
6 enable California’s energy transition, collecting residential customers’ fixed costs through
7 volumetric rates unfairly shifts fixed costs from lower to higher-use customers and
8 disincentivizes beneficial uses of electricity. Because nearly all the Joint IOUs’ fixed costs are
9 recovered through such volumetric prices, the price customers pay when they turn on their lights
10 is substantially higher than the marginal cost of providing that electricity. A recent paper from
11 the Energy Institute at Haas, UC Berkeley and Next 10 highlights that volumetric electricity rates
12 in California are two to three times the marginal cost of providing electricity.6 Indeed, this
13 heavily volumetric residential rate design is a significant outlier when looking at residential rate
14 design across the U.S. as shown in Figure I-1 below.
6 Next 10 and Energy Institute at Haas, Designing Electricity Rates for an Equitable Energy Transition
(Feb. 2021), available at https://haas.berkeley.edu/wp-content/uploads/WP314.pdf.
7
Figure I-1
Residential Rate Design Across the U.S.7
1 Fixed and mandated public policy costs should be collected in fixed charges. The Joint
2 IOUs’ proposals address the inequity currently embedded in a primarily volumetric residential
3 rate structure, through the introduction of the IGFC. The proposed fixed charge levels in each
4 household Income Bracket have been set to yield an overall average fixed charge across all
5 household income levels that provides meaningful volumetric rate reductions while including an
6 appropriate portion of fixed system costs in the charge. The resulting IGFC revenues bring
7 volumetric rates closer to the actual cost of providing service to customers8 – and provide relief
8 from high summer bills for high-usage households living in hotter climates. As described below,
9 lower volumetric rates also will be vital to enabling electric appliances/equipment/vehicles to
10 better support the transition to a decarbonized economy.
11 b) Addressing Affordability and Protecting Low-Income Customers.
12 Introducing even a traditional non-income-graduated fixed charge coupled with lower
13 volumetric rates would support California’s GHG policy goals and recover costs more equitably
7 Borenstein and Bushnell, National Bureau of Economic Research, Do Two Electricity Pricing
Wrongs Make a Right? Cost Recovery, Externalities, and Efficiency (Rev. Sept. 2018), available at
https://www.nber.org/papers/w24756.
8 See Chapter 2 Joint Rate Design Chapter.
8
1 than today’s rate structure, including producing lower bills for high users and higher bills for low
2 users, independent of their household income levels. However, the progressive nature of the
3 IGFC, mandated by AB 205 – with higher-income customers paying higher monthly fixed
4 charges than lower-income customers – also mitigates the adverse bill impacts that a traditional
5 fixed charge might have on lower-usage low-income customers. In particular, creating four
6 household Income Brackets, as opposed to three, allows the Joint IOUs to create an Income
7 Bracket available to our most economically vulnerable customers (those who fall under 100% of
8 the FPL), who will pay very modest monthly fixed charges while further benefitting from
9 significantly lower volumetric charges.
10 While the Joint IOUs have proposed to substantially reduce volumetric electricity rates
11 for all residential customers, the proposals also recognize many customers may not be able to
12 electrify in the near term. A key priority of the Joint IOUs’ proposals is to provide bill savings
13 for customers in Income Brackets 1-3 today. The IGFC proposals provide annual bill savings for
14 these customers, on average, without changing their energy consumption.
15 As shown in Figure I-2, on average, the Joint IOUs’ customers in Income Brackets 1-3
16 (lowest to moderate household income) are estimated to save between 4% to 21% per year, or
17 $89-$300 respectively, based the results of the E3 Public Tool (Public Tool) provided by the
18 Energy Division as part of this proceeding.
9
Figure I-2
Average Annual Percent Difference by Income Bracket
1 The Joint IOU proposals can achieve these savings for customers in Income Brackets 1-3
2 through the difference in the IGFC paid by Income Bracket 4 customers relative to Income
3 Bracket 1-3 customers. All customers can benefit from the lower volumetric rates but Bracket 1-
4 3 customers pay a lower IGFC, allowing them to see immediate savings, on average, versus the
5 current status quo. In Income Bracket 4, customers with higher usage, such as that resulting
6 from electrification adoption, will also have lower bills than they would under today’s rate
7 structure, on average.
8 c) Encouraging Beneficial Electrification.
9 While California has made great strides in reducing GHG emissions in recent years, the
10 state must decarbonize twice as fast over the next two decades to meet its 2045 goals, as shown
11 in Figure I-3.
10
Figure I-3
California’s Decarbonization Accomplishments and Future Goals9
1 Widespread electrification of customer homes and vehicles will be critical in accelerating
2 the pace of decarbonization. As shown in Figure I-4 below, based on 2020 emissions data, these
3 two sectors –-- transportation and buildings (residential and commercial) – represent nearly 50%
4 of California’s GHG inventory as reported. Customer adoption of beneficial electrification
5 technologies is essential to effectively reduce the greenhouse gas emissions currently associated
6 with these two sectors.
9 See California Air Resources Board (CARB) 2000 – 2020 GHG Inventory (2022 edition, by
economic sector), MMTCO2e = Million metric tons of carbon dioxide equivalent.
Historical rate of reduction calculated from 2010 – 2020.
11
Figure I-4
Current California GHG Emissions Inventory Data10
2 Powered by increasingly clean electricity, electrification will help replace traditional
3 fossil fuel technologies and their emissions with more climate-friendly, decarbonized
4 alternatives. Electric technologies produce fewer emissions than alternatives powered by fossil-
5 fuels such as petroleum and natural gas; this environmental advantage of electricity will continue
6 to grow as greater amounts of carbon-neutral electric generation resources are added to the grid,
7 in compliance with state law.

8 As California looks to encourage customers to efficiently use more electricity, volumetric
9 rates that are significantly higher than the actual cost of providing that electricity create an
10 economic disincentive for the adoption of electrification technologies.11 A fully electrified
10 See CARB, Greenhouse Gas Emission Inventory - 2022 Edition. Building represents both
Commercial and Residential sectors. Other includes High Global Warming Potential Gases and
Recycling & Waste, available at https://ww2.arb.ca.gov/ghg-inventory-data.
11 Inclining-block tiered rates are especially problematic in this regard, charging artificially inflated
rates for usage in the upper tiers – precisely the tiers that customers who substitute electric appliances
for those powered by fossil fuels are likely to end up in.
12
1 home12 is estimated to increase a customer’s electricity usage by at least 70% per month relative
2 to their prior usage. 13 While such increased usage reduces net greenhouse gas emissions, when
3 coupled with some of the highest volumetric rates in the U.S., a customer’s monthly electric bill
4 under current default residential rate designs would dramatically increase. Without reform, the
5 current volumetric rate design will jeopardize the state’s ability to decarbonize rapidly and could
6 put the achievement of our GHG reduction goals at risk.
7 In contrast, by significantly reducing volumetric electric rates – and thus the incremental
8 electric costs to customers due to installing clean electric appliances – the Joint IOUs’ proposals
9 will spur electrification adoption by making such appliances and electric vehicles (EVs) more
10 affordable versus the status quo rate structure. For example, when purchasing an EV, a critical
11 consideration is the electric rate the consumer would pay to charge it. Lower per-kWh rates have
12 been found to increase electric vehicle adoption.14 Specifically, a 1 cent per kilowatt-hour
13 decrease in electric rates has been found to lead to about a 2 percent increase in electric vehicles
14 sales.15 Similarly, lower electric rates have been correlated with higher electric heating adoption.
15 In fact, by lowering the volumetric rate to the marginal cost of energy, home heating
16 electrification was predicted to increase by one-third in California.16
17 The Joint IOUs’ proposals make electrification more attractive than the status quo by
18 helping incentivize adoption through lower volumetric rates, while also avoiding cross subsidies
19 for those unable to adopt new technologies. As illustrated in Figure I-5, a Bracket 3 customer
12 A fully electrified home is assumed to have heat pump water heater, heat pump for space heating and
cooling, fully electrified appliances, and one EV.
13 The increase in electricity usage for a fully electrified home is calculated from the Public Tool
comparing a fully electrified home with one EV to a mixed-used fuel home with one gasoline
powered vehicle for a SCE Inland customer.
14 A. Soltani-Sobh, K. Heaslip, A. Stevanovic, R. Boswarth , D. Radivojevic, Analysis of the Electric
Vehicles Adoption over the United States, (2017), available at
https://www.sciencedirect.com/science/article/pii/S235214651730162X.
15 J. Bushnell, E. Muehlegger, D. Rapson, Do Electricity Prices Affect Electric Vehicle Adoption?,
(May 2021), available at https://escholarship.org/uc/item/5f80503b.
16 Next 10 Paying for Electricity in California, at p. 21.
13
1 can expect to have a $1,614 annual savings relative to adoption of the same electrification
2 technologies under the current rate structure. For PG&E and SDG&E these savings would be
3 $1,771 and $1,929, respectively.
Figure I-5
SCE Example: Non-CARE Inland Income Bracket 3 Customer Energy Burden
Comparison
6 d) Promoting Bill Stability and Maintaining Strong TOU Price Signals.
7 With their reliance almost entirely on volumetric rates for recovering the costs of
8 providing service to residential customers, the Joint IOUs’ current residential rate structures have
9 an inherent challenge of causing month-to-month bill volatility.17 But the Joint IOUs’ proposal,
17 This is particularly true if those rate schedules include tiered rates. With an inclining-block tiered rate
structure, an increase in a customer’s summer usage from June to July due to hotter July temperatures
14
1 by collecting a significant portion of residential revenue in fixed charges that do not vary by
2 month, will reduce this volatility. With lower volumetric rates, a customer’s bill increases from
3 one month to another due to a significant increase in usage (e.g., home cooling due to an extreme
4 weather event) will be much smaller. Similarly, the customer’s bill decreases from one month to
5 another due to a decrease in usage will be smaller as well. Thus, the Joint IOUs’ proposals will
6 lead to more stable bills as a result of collecting a greater portion of fixed costs in fixed charges
7 unaffected by usage swings.
8 The Joint IOUs’ proposals are designed to implement IGFCs in some way on all of their
9 residential rate schedules, including their TOU rates. While under the Joint IOU proposals, as
10 detailed in each IOU’s individual Rate Design Exhibits, average volumetric rates are
11 dramatically reduced over their current levels, robust differentials will remain between TOU
12 periods. This will continue to incentivize customers to shift load out of critical, higher-price
13 hours of the day through demand response, technology adoption such as battery storage, or other
14 energy efficiency efforts.
15 2. The Joint IOUs’ Proposals Will Apply to All Residential Rate Schedules
16 If the IGFC is applied unevenly, where default rate schedules have an IGFC while
17 existing electrification rates do not, it would likely lead to rate self-selection that would
18 compromise the benefits achieved by the IGFC. Specifically, it would set up an arbitrage
19 opportunity through which customers who would be adversely impacted on schedules with
20 IGFCs could, instead, switch to one of the optional rates without an IGFC to avoid paying their
21 share of fixed costs. This would undercut the IGFC’s goals of equity and rate affordability,
22 especially for the most economically disadvantaged customers.
23 It is still permissible under AB 205 for the Commission to adopt different sets of income-
24 graduated fixed charges for different residential rates. For example, the Commission might
can easily lead to disproportionately larger increases in the customer’s bill due to usage moving from
a lower-price tier to a higher-priced one.
15
1 approve somewhat higher IGFCs for the current electrification rates that already have some level
2 of fixed charge, than it adopts for other more standard rates because doing so would better
3 support the state’s decarbonization efforts. Therefore, the Joint IOUs’ proposals recommend that
4 all of their residential rates, including TOU rates, must have at least the same IGFC as the default
5 rates. The IGFCs will not adversely affect the price signals customers see, to inform them of the
6 varying costs during different periods of the day – they merely reduce the total revenue collected
7 from volumetric charges but can still be designed to maintain cent per kWh price differentials
8 between peak and off-peak periods that appropriately reflect underlying marginal costs and
9 continue to incentivize load shifting.
10 3. The Joint IOUs’ Proposals Are Consistent with Rate Design Principles.
11 While the revisions to the CPUC’s rate design principles (RDPs) had not been finalized at
12 the time this testimony was written,18 the draft of such revisions (with which the Joint IOUs
13 largely agree) affirm that significant changes in residential rate design are necessary, including to
14 reflect the addition of decarbonization through electrification as a major state policy goal for
15 achieving GHG reductions. The Joint IOUs intend to provide a full assessment of all proposals,
16 according to the final rate design principles, in Reply Testimony, but some changes to the RDPs
17 appear to already be certain enough to warrant comment now.
18 In particular, the change in RDP 4 to “Rates should encourage economically efficient (i)
19 use of energy, (ii) reduction of GHG emissions, and (iii) electrification”19 reflects a major shift in
20 rate design priorities. In prior rate designs, the reduction of electricity use through conservation
21 and energy efficiency was prioritized regardless of whether that was environmentally
22 responsible. The percentage of non-GHG emitting resources in the current statewide generation
18 On March 17, 2023, the assigned ALJ issued the Proposed Decision Adopting Electric Rate Design
Principles and Demand Flexibility Design Principles (RDP Proposed Decision). The Proposed
Decision included Attachment A, the Electric Rate Design Principles, Demand Flexibility Design
Principles, and explanations for each.
19 RDP Proposed Decision, Attachment A, p. 2.Q.
16
1 mix is much higher now, over 52%20 non-GHG emitting (i.e., carbon free) resources, compared
2 to 2011 when the current rate design principles were adopted. The state’s renewables policies
3 ensure that this trend will only continue. The driving force of state policy now points to
4 increased electric use through beneficial electric technologies (like EVs, heat pump space
5 cooling and heating, heat pump water heaters, induction ranges, and battery storage). This shift
6 has major ramifications for rate design by shifting its emphasis from the efficient use and
7 conservation of electricity to the efficient increased use of electricity in order to facilitate the
8 energy transition, while improving affordability of household energy consumption. The
9 proposed revision to the language in RDP 2, (“Rates should be based on marginal cost”)21) and
10 RDP 8 (“Rates should be technology-neutral and avoid cross-subsidies, unless the cross-
11 subsidies appropriately support explicit state policy goals”)22 indicate that rates should provide
12 volumetric price signals as close to marginal costs as possible, while balancing other rate design
13 principles. Today’s rates feature volumetric price signals that are significantly higher than the
14 marginal costs in low-cost hours, as shown in the Rate Design chapter (Table II-4), which can
15 discourage the voluntary adoption of electrification technologies. The shift towards more fixed
16 cost recovery through fixed charges can bring residential rates to a point where technology-
17 neutral rates that avoid or minimize cross-subsidization are achievable.
18 Additionally, just as advancements in technology and policy have led the reformed rate
19 design principles expected in this proceeding, updated principles should include the ability to
20 adapt to continuous changes as California’s landscape evolves.
20 California Energy Commission, Annual Power Content labels for 2021 available at
https://www.energy.ca.gov/programs-and-topics/programs/power-source-disclosure/power-
content-label/annual-power-content-2.
21 RDP Proposed Decision, Attachment A, p. 1.Q.
22 RDP Proposed Decision, pp. 2-3.Q.
17
1 C. The Joint IOUs’ Proposals Should be Adopted as Soon as Possible.
2 California’s current residential rate design must be updated as soon as possible. This is
3 because the Joint IOUs’ lowest income customers are experiencing affordability challenges
4 today through volumetric electricity rates. Approximately two-thirds of costs serving residential
5 customers that are collected in volumetric rates today do not fluctuate as customer usage
6 increases or decreases, resulting in volumetric rates that are significantly higher than the
7 marginal cost to serve customers. The result is a regressive structure where lower-income
8 households contribute a much larger share of their income than higher income customers. As the
9 Joint IOUs continue to build and maintain the necessary infrastructure to green the grid,
10 collecting these fixed costs through volumetric rates will further exacerbate these affordability
11 and equity issues.
12 Further, high volumetric rates increase the cost of electrifying customer homes and
13 vehicles, a critical change that must occur for the state to meet its aggressive, but necessary,
14 climate mandates. As stated above, the State must decarbonize faster than it has over the past
15 decade, but the current outdated default rate structure is an impediment to achieving these goals.
16 Due to these reasons, the Joint IOU proposals should be implemented as soon as practicable
17 through the Joint IOUs’ implementation plan described in Chapter 4.
18 D. Income Verification Should Be Performed By State Agencies and Not The IOUs
19 The Joint IOUs have long administered programs like CARE and FERA, which provide
20 discounts to low-income customers. However, these are opt-in programs where eligible
21 customers voluntarily give the IOUs information regarding income. This income is not verified
22 but is subject to a potential audit.
23 The IGFC will be fundamentally different. The Joint IOUs are not aware of any other
24 fixed charge that is income differentiated based on all levels of household income and that is
25 mandatory for all. Consequently, millions of households will need to be categorized into fixed
26 charge income brackets based on household income and verified to ensure accuracy and billing
18
1 integrity. Successful implementation will require customer trust and assurance of confidentiality
2 in the process.
3 As discussed more fully in Chapter 3 (Income Verification), a state agency, potentially
4 with the assistance of a Third-Party administrator, would be best situated to take on the complex
5 income verification and bracket assignment work that will be necessary to implement the IGFC.
6 The Joint IOUs believe the Commission is the state agency likely in the best position to take on
7 this role, overseeing a Third Party. The Commission has experience in a somewhat similar role
8 in relation to the California LifeLine program, for which a “TPA” (Third-Party administrator)
9 has performed income verification/eligibility certification under the Commission’s supervision.23
10 A state agency like the Commission is in a much better position to access the financial data
11 necessary for Income Bracket placement, as well as to manage ongoing updates, customer
12 appeals, and other implementation issues. The Commission is also well-placed to perform this
13 role because it is giving the Joint IOUs direction in this proceeding and AB 205 specifically tasks
14 the Commission with authorizing the residential income-graduated fixed charge.
15 In contrast, the Joint IOUs are not well-situated to perform income verification.
16 Verifying the state’s ~12 million electricity customers served by the Joint IOUs would require a
17 significant and costly business expansion for each IOU to separately build out new capabilities.
18 Building processes and adding resources to perform a wholly new set of functions as well
19 handling any customer appeals relating to income level placement, would impose substantial
20 administrative burden and cost on the Joint IOUs, ultimately paid by our customers.
21 Moreover, income verification also implicates cybersecurity, customer privacy and

22 consumer protection issues. California law includes significant privacy protections,24 including
23 See D.05-04-026, p. 26 (concluding that income certification/verification for Lifeline Program should
be performed by a TPA “under the direction of a state agency, namely the Commission”).
24 See, e.g., Civ. Code 1798.1 (“the right to privacy is a personal and fundamental right protected by
Section 1 of Article I of the Constitution of California and by the United States Constitution and [] all
individuals have a right of privacy in information pertaining to them).”
19
1 through the California Consumer Privacy Act of 2018 (CCPA).25 The Commission also has
2 endorsed privacy protections in its decisions.26 Privacy and data protection concerns have
3 increased among the public at large given large data breaches in recent years, among other
4 events. Additionally, processes will need to be established to access various sources of income
5 data among state agencies, to maximize reliable household income data for these purposes.
6 In light of these complexities and challenges for income verification, a state agency
7 (potentially with Third Party support) leveraging and building upon existing capabilities and
8 experience will be best positioned to effectively manage needed income verification for the
9 IGFC. The Joint IOUs thus propose a framework modeled on the structure of the
10 telecommunications LifeLine program’s Third Party administration with CPUC supervision, so
11 that income verification is performed through a state agency, without undermining rate
12 affordability. Additionally, if authorized by legislation, it would be most appropriate for income
13 verification activities to be funded by the state rather than electricity customers, consistent with
14 funding provided for other societally beneficial activities administered by state agencies.
15 E. Robust Marketing, Education, and Outreach Will be Required
16 The IGFC rate structure will substantially shift how residential customers pay for
17 electricity service in the future. A robust ME&O plan will be required to provide customers with
18 early awareness of the change, help customers understand bill impacts, and highlight why reform
19 is needed. The Joint IOUs will use various customer communication channels to form a holistic,
20 integrated education and outreach campaign to support IGFC implementation. Channels
21 envisioned include direct-to-customer messaging, broad customer outreach, IOU-owned and paid
25 The CCPA (Civ. Code §§ 1798.100–1798.199.100) provides for various rights, including the rights
to: know about personally identifiable information (PII) a business collects and how it is used and
shared; delete personal information (with some exceptions); opt-out of the sale or sharing of personal
information; correct inaccurate personal information; and limit the use and disclosure of sensitive
personal information.
26 See, e.g., D.11-07-056, at p. 130, Finding of Fact 1 (FOF) (endorsing Fair Information Practices
(FIPs) including “data minimization” principle).
20
1 channels, and community outreach. The Joint IOUs’ education materials will be informed by
2 customer research. We expect it will focus on how the IGFC will make rates more equitable
3 overall while supporting the State’s goal of making beneficial electrification technologies more
4 affordable, by lowering volumetric rates. The Joint IOUs recognize additional customer input
5 will be needed to properly meet customer education needs. The Joint IOUs plan to conduct
6 additional research in 2023 to continue to learn from customers the preferred and most effective
7 messaging and approach to IGFC education. The Joint IOUs’ detailed ME&O plan is discussed
8 in more detail in Chapter 5 included in this testimony.
9 F. Conclusion
10 While California’s energy environment has changed rapidly in recent decades, its
11 residential rate design continues to collect the majority of fixed and variable utility costs through
12 volumetric rates. As a result, electricity rates are substantially higher than the marginal cost of
13 providing that electricity. The Joint IOUs’ proposals modernize California’s residential rate
14 structure by providing a more affordable and equitable path forward. The chapters that follow
15 explain how the Joint IOUs’ proposals accomplish these goals and we respectfully encourage the
16 Commission to accept these proposals to ensure the transition to income-graduated residential
17 fixed charges is as smooth and successful as possible.
21
1 II.
2 RATE DESIGN
3 A. Introduction
4 1. Summary of Proposals
5 The Joint IOUs propose to add Income Graduated Fixed Charges (IGFCs) to all of their
6 residential rate schedules, with limited exceptions.27 Most of the Joint IOUs’ residential
7 schedules will receive the same, four-bracket fixed charges, with the low-income fixed charges
8 set at the household Income Brackets shown in Table I-2. For policy reasons, the IOUs’
9 proposed fixed charge Income Brackets do not encompass all of each utility’s respective fixed
10 costs. By carving out an amount of the total fixed costs from the current artificially high
11 volumetric rates, the California Public Utilities Commission (Commission or CPUC) will make
12 significant progress to support affordability and increased bill stability. It also supports
13 decarbonization by removing the disincentive for residential customers to add beneficial electric
14 end-uses needed to meet the state’s greenhouse gas (GHG) reduction goals.
15 The Joint IOUs’ IGFC proposals are intended to maintain customer choice and improve
16 equity, while providing greater bill stability and promoting beneficial electrification. The Joint
17 IOUs’ Illustrative IGFC proposed fixed charges and rates are shown below on Tables I-2 and I-3.
18 In this proposal, the Joint IOUs are seeking approval of:
19  Fixed cost categories, which result in class average monthly28 fixed charges of:
20 o PG&E: $53/month
27 All residential whole-home rate schedules should have at least the same level of IGFC in order to
avoid customer rate switching and IGFC avoidance through rate arbitrage. However, non-IGFC fixed
charges for separately metered EV rates may be appropriate and are addressed in IOU specific Rate
Design testimony exhibits.
28 Operationally, these fixed charges would be charged to customers on a dollar-per-day basis.
However, the IOUs are presenting these fixed charges on a per-month basis for reference.
22
1 o SDG&E: $74/month, including approval of its new proposed rate component, the
2 Electrification Incentive Adjustment (EIA)
3 o SCE: $49/month;
4  IGFCs on the following residential rate schedules:
5 o PG&E rate schedules: E-1, E-TOU-C, E-TOU-D, EV2-A, E-ELEC
6 o SDG&E rate schedules: DR, TOU-DR1, TOU-DR2, EV-TOU-2, DR-SES, EV-
7 TOU-5, TOU-DR, and TOU-ELEC
8 o SCE rate schedules: TOU-D 4-9, TOU-D 5-8, Schedule D
9  Considerations for including higher IGFCs for certain residential rate schedules that
10 currently have fixed charges:
11 o PG&E’s Schedule E-ELEC
12 o SDG&E’s Schedules EV-TOU-5 and TOU-ELEC;
13 o SCE’s Schedule TOU-D-PRIME
14  Reduction of non-CARE average volumetric kWh rates as described in individual
15 IOU exhibits:
16 o PG&E: From $0.34/kWh to $0.22/kWh
17 o SCE: From $0.36/kWh to $0.24/kWh
18 o SDG&E: From $0.47/kWh to $0.27/kWh
19  Elimination of the Minimum Bill.
23
Table II-2
Illustrative Proposed IGFCs
Table II-3
Illustrative Summary of Impacts to Default Rates29
1 B. Background
2 1. Recent Rate Design Policy Issues
3 The impetus for Track A (IGFC) of this proceeding stems from Assembly Bill (AB) 205,
4 which was passed on June 29, 2022, and chaptered after being signed into law by Governor
5 Newsom on June 30, 2022. The Commission has previously considered but declined to adopt
6 fixed charges for residential customers, and instead, required the three electric IOUs to
7 implement residential minimum bills. The Joint IOUs provide a brief history of how the
8 Commission’s thinking on residential fixed charges has evolved over time and emphasize the
29 Status Quo rates are the model calculated counterfactual rates, not current actual rates.
24
1 importance of adopting IGFCs that apply equitably to all customers and meaningfully reduce
2 volumetric rates in the instant proceeding. Substantive rate reform is critical for California to
3 reach its GHG reduction and climate goals.
4 From 2013 until AB 205 was passed, the previous statute (Public Utilities Code Section
5 739.9) included a cap that limited residential fixed charges to approximately $10/month for non-
6 CARE customers and $5/month for CARE customers.30 AB 205 removed this cap and required
7 the CPUC to approve a compliant IGFC structure for default residential rates by July 1, 2024.31
8 The Commission has previously considered default residential fixed charges in various
9 proceedings but the Energy Division IGFC Guidance for this proposal states that parties are not
10 bound by these prior Commission decisions.32
11 Nonetheless, as a foundation, the Joint IOUs provide a brief background of the history of
12 residential fixed charge proposals in California and the Commission’s current direction regarding
13 historical determinations about residential fixed charges. The Joint IOUs proposed fixed charges
14 approximately ten years ago in the Residential Rate Reform Rulemaking (R.) 12-06-013
15 (RROIR). While Decision (D.) 15-07-001 set a multi-year glidepath to consolidate and narrow
16 the tier differentials in effect at that time, the Commission declined to adopt a default residential
17 fixed charge, stating that it was not appropriate to adopt a fixed charge at the same time as
18 residential customers were being defaulted to time-of-use (TOU) rates.33 The Joint IOUs were
19 directed to concurrently file rate design window (RDW) applications by January 1, 2018, which
20 could include proposals for default residential fixed charges.34 D.15-07-001 additionally stated
21 that the Joint IOUs should, separately from the Residential Rate Reform OIR (R.12-06-013,
30 AB 327 (Reg. Sess. 2013-2014), Pub. Util. Code § 739.9(f), which also provided for an annual
Consumer Price Index increase to these base capped fixed charge levels, starting in 2015.
31 AB 205 (Reg. Sess. 2021-2022).
32 Administrative Law Judge’s Ruling Providing Guidance for Phase 1 Track A Proposals and
Requesting Comments on a Consulting Services Proposal (Jan. 17, 2023), Attachment 1, R.22-07-
005, Phase 1 Track A: Income-Graduated Fixed Charge Guidance Memo.
33 D.15-07-001, at p. 328, Conclusion of Law (COL) 17.
34 D.15-07-001, at p. 327, Ordering Paragraphs (OP) 9-11.
25
1 RROIR), “in their individual GRC Phase 2 proceedings, … work to identify customer-related
2 fixed costs for purposes of calculating a fixed charge.”35
3 Within PG&E’s 2017 GRC Phase 2,36 the Commission established a separate track
4 (Fixed Charge Track) to adopt categories of fixed costs that could be included in a residential
5 default fixed charge. The final decision in the Fixed Charge Track, D.17-09-035, adopted an
6 extremely narrow definition of what costs could be included in the default residential fixed
7 charges proposed in A.17-12-011.37 That narrow definition38 would have limited the Joint IOUs’
8 non-CARE fixed charges to approximately $7.10/month for PG&E,39 $8.84/month for
9 SDG&E,40 and $6.68/month for SCE.41 Using such a definition today would do little to reduce
10 volumetric rates and incentivize beneficial electrification because volumetric rates would be
11 reduced by less than $0.02/kWh.
12 In 2021, the Commission adopted a final decision in PG&E’s 2020 GRC Phase 2 (A.19-
13 11-019) that reversed its stance on categories of costs that may be recovered in default residential
14 fixed charges and wipes the slate clean when considering the appropriate manner for designing
15 residential fixed charges.42 In D.21-11-016, the CPUC also adopted PG&E’s new optional
16 “electrification” rate (E-ELEC), finding that: (1) “[t]he findings and conclusions in D.17-09-035
17 should be applied only in the context of A.16-06-013”43, and (2) “any future proposals for a
35 Id., at p. 6.
36 A.16-06-013, Application of Pacific Gas and Electric Company to Revise its Electric Marginal Costs,
Revenue Allocation and Rate Design.
37 Administrative Law Judge’s Ruling Consolidating Proceedings (Jan. 25, 2018), consolidated A.17-
12-011, A.17-12-012, and A.17-12-013.
38 D.17-09-035 would have limited costs recovered in a fixed charge to certain marginal customer
access costs using the “minimum cost approach”, which includes costs for only the “smallest” type
customer. See, D.17-09-035, at p.33.
39 See, PG&E Rate Design Window 2018 Supplemental Testimony, Fixed Charge Proposal in Phase III,
A.17-12-012, at p. 1-4.
40 See, SDG&E Prepared Supplemental Testimony of Jeff P. Stein, A.17-12-013, at p. JS-3.
41 See, SCE Amended Supplemental Testimony on Impact of Federal Tax Legislation on Proposed
Rates and Fixed Charges, A.17-12-011, at p. 2.
42 D.21-11-016, at p. 113.
43 D.21-11-016, at p. 165, COL 32.
26
1 default residential fixed charge or optional residential fixed charge (as in this case) should be
2 able to proceed without the need to comply with cost category and EPMC [Equal Percent of
3 Marginal Cost] determinations made in a since-closed proceeding that failed to make a
4 determination concerning a residential fixed charge on the merits.”44 Additionally, it is worth
5 noting that the Commission determined the adopted settlement on PG&E’s new E-ELEC
6 (“Electric Home”) rate, which included a residential fixed charge, was “intended to further state
7 policy goals related to decarbonization and therefore has a particular policy purpose that may
8 justify any dissonance with previous Commission decisions regarding the application of EPMC
9 to residential fixed charges.”45
10 With these findings in mind, there is no reason to limit fixed charges to a certain level or
11 hold to prior precedent. While parties may look to previous Commission decisions for reference
12 and historical context, party proposals that cite to D.17-09-035 as a reason to limit fixed charges
13 to a certain level should be dismissed, as the Commission has stated that D.17-09-035 does not
14 hold precedential value outside of A.16-06-013.46 Basing IGFC proposals on D.17-09-035
15 would make little sense in this context anyway, as the average IGFC must be large enough to
16 result in a sufficiently lower volumetric energy rate, and D.17-09-035 would limit volumetric
17 rate reduction to approximately $0.02/kWh.
18 It is important that an IGFC floor apply to all customers. Application of the IGFC to all
19 residential rates, including optional “electrification rates” currently offered by each large IOU,
20 will ensure fair treatment for all customer types and provide equal incentive for all customers to
21 electrify. If the IGFC were instead applied selectively, where some residential rate schedules
22 would have a fixed charge while others did not, this would provide an opportunity for customers
23 who would be adversely impacted on schedules with IGFCs to instead take service on one of the
24 optional rates without an IGFC, to avoid paying the IGFC.
44 Id., at p. 114.
45 D.21-11-016, at p. 114.
46 Id.
27
1 It is still permissible under AB 205 for the Commission to adopt different sets of IGFC’s
2 for different residential rates. For example, the Commission might approve somewhat higher
3 IGFCs for PG&E’s Schedule E-ELEC, SCE’s TOU-D-PRIME, or SDG&E’s EV-TOU-5 and
4 TOU-ELEC rates than it adopts for other more standard rates, because doing so would better
5 support the state’s decarbonization efforts. Therefore, the Joint IOUs’ proposals recommend that
6 all residential rates, including optional rates, must have at least the same minimum IGFC Income
7 Brackets as the default rates.
8 The Commission should adopt appropriate fixed charges for all residential customers, and
9 not delay implementing an IGFC for certain rate schedules, because doing so would result in a
10 loophole that could allow higher income customers to receive a lower fixed charge if they mass
11 migrate to rates with delayed (or no) IGFCs. Although simultaneous implementation across rates
12 might take more up-front time, it avoids the pitfalls of mass voluntary migration to the lowest
13 possible fixed charge.
14 2. Next 10 Research on Potential Fixed Charges
15 Academic research by Next 10 Research and the Energy Institute at the UC Berkeley
16 Haas School of Business (Next 10/Berkeley Haas) played a key role in inspiring the conceptual
17 development of AB 205. Specifically, two Next 10/Berkeley Haas reports released in 2021 and
18 2022, detail concerns about the inequity of the current residential rate structure. These reports
19 suggest several methods of reform that would: (1) improve customer equity by making rates
20 more progressive, and (2) more closely align volumetric rates with marginal costs, which would
21 serve to incent widespread adoption of beneficial electrification technologies needed to achieve
22 decarbonization that meets state climate and GHG reduction goals. The Joint IOUs describe
23 these two reports in detail below.
28
1 On February 23, 2021, Next 10/Berkeley Haas released a report titled “Designing
2 Electricity Rates for An Equitable Energy Transition” (2021 Report).47 This report used
3 historical data from the Joint IOUs to show that the price of electricity in the Joint IOUs’ service
4 territories is two to three times higher than the actual cost to produce and distribute the electricity
5 provided, and this results in electricity rates that disproportionately harm lower income
6 electricity customers.48
7 The 2021 Report opines that recovery of fixed costs within the volumetric charge is
8 “quite regressive” and suggested options for reducing the volumetric rate, including non-income
9 differentiated fixed charges or shifting cost recovery of programs and policies to the state budget.
10 It acknowledges that even a non-income differentiated fixed charge would bring significant
11 efficiency benefits.49 However, given potential concerns with both approaches, the 2021 Report
12 recommends a progressive fixed charge structure for residential customers.50 The 2021 Report
13 determined that “[a]n economically efficient volumetric price will recover some amount of
14 revenue, but it will be substantially less than the total revenue requirement for the California
15 IOUs.”51 It also considered what electricity rates might look like if their structure were as
16 progressive as California's income tax and sales taxes, and recommended structures in which
17 low-income customers would not be made worse off by rate reform. It further recommended that
18 the state, not the utilities, be the income verifying entity, as the state already has income tax
19 information. The 2021 Report also acknowledged that the utilities do not have the infrastructure
47 Next 10 and Energy Institute at Haas, Designing Electricity Rates for An Equitable Energy Transition
(hereinafter Next 10, 2021 Report), (Feb. 23, 2021), available at
https://www.next10.org/sites/default/files/2021-02/Next10-electricity-rates-v2.pdf.
48 Next 10, 2021 Report, at p. 4.
49 Next 10, 2021 Report, at p. 3. While the report also expresses concern that a non-income
differentiated fixed charge would also be regressive, even in a pre-AB 205 context any fixed charge
implemented by the IOUs would at least include income differentiation through the existing CARE
and FERA programs.
50 Next 10, 2021 Report, at pp. 30-34.
51 Next 10, 2021 Report, at p. 35.
29
1 in place to verify incomes of all residential customers and that any utility-run income-
2 verification system without direct cooperation from other state agencies would be problematic.52
3 The 2021 Report discussed a theoretical structure, stating that the dollar amount of a
4 uniform fixed charge necessary to fully eliminate the cost recovery gap (if all account holders
5 were charged the same monthly fee, based on 2019 rates), would be $74.02 for PG&E, $58.80
6 for SCE, and $70.07 for SDG&E.53 Rates have increased since 2019, so the Report’s monthly
7 figures would have been higher had they been based on 2023 effective rates. Figure II-6 below
8 shows theoretical 2019 fixed charges for PG&E if the structure were as progressive as income
9 tax or sales tax.54 Under the 2021 Report's illustrative structure, households making greater than
10 $150,000 annually would be required to pay fixed charges of $150 per month or higher.
11
Figure II-6
2021 Next 10 Report Theoretical Fixed Charges - PG&E
12
52 Next 10, 2021 Report., at p. 38.

53 Id., at p. 40.
54 As stated in the Next 10/Berkeley paper, although sales tax applies equally to purchases made by
customers of any income level, wealthier customers typically pay more sales tax because they make
more purchases.
30
1 On September 22, 2022, Next 10/Berkeley Haas released a follow-on report titled
2 “Paying for Electricity in California: How Residential Rate Design Impacts Equity and
3 Electrification” (2022 Report).55 This second report, which built on the 2021 Report, and
4 continued to use historical IOU data determined that the costs of programs and policies that go
5 beyond the cost of producing and distributing electricity are now the main driver of retail
6 electricity price increases. These added costs, which drive up the price per unit of volumetric
7 energy, threaten the state’s climate goals by disincentivizing electrification of buildings and
8 vehicles. In other words, separating out fixed costs from the currently combined, artificially high
9 volumetric rate, and instead recovering them in a separate fixed charge line item removes a
10 disincentive to electrification by reducing customers’ volumetric electric rate component. The
11 2022 Report also explored in detail how these higher costs disproportionately affect lower-
12 income households, as higher energy bills in a lower-income household are a higher percent of
13 total income. Next 10/Berkeley Haas calculated what they refer to as “residual cost burden,” or
14 the difference between the amount the customer pays on their bill and the incremental cost to the
15 utility of providing that household with power.56 The 2022 Report concluded that recovering
16 this residual cost burden in volumetric rates raises the annual operating cost of electrification
17 technologies, referred to as the “electrification cost premium.” The current structure of
18 recovering non-incremental costs in higher retail electricity rates significantly increases
19 operating costs of EVs and electric heating.57
20 Both the 2021 and 2022 Reports were instrumental in conceptualizing how an IGFC
21 might be envisioned for California. The influence of Next 10/Berkeley Haas’ work is apparent
22 in the text of AB 205, which requires no fewer than three income thresholds, so that a low-
55 Next 10, Paying for Electricity in California.

56 Id., at p. 4.
57 Id., at pp. 19-21.
31
1 income ratepayer in each baseline territory would realize a lower average monthly bill without
2 making any changes to their usage.58
3 While these two Next 10/Berkeley Reports helped conceptually spur adoption of an IGFC
4 approach in AB 205, there are many practical operational issues that require consideration when
5 actually designing and implementing an IGFC that complies with the conceptual guidance in AB
6 205. The Joint IOUs’ proposal maintains compatibility with current operational and data
7 capabilities, and achieves an equitable, reasonably progressive structure that improves
8 affordability for low-income customers and incentivizes electrification.
9 3. The Joint IOUs’ Proposals Align with Modernized Rate Design Principles
10 The Commission is in the process of modernizing the Rate Design Principles (RDPs) in
11 Track B of this proceeding.59 A Proposed Decision was issued on March 17, 2023, with a final
12 decision targeted for the CPUC’s April 27, 2023, business meeting. Therefore, the current
13 procedural schedule for submittal of Track A IGFC Opening Testimony on April 7 cannot
14 precisely reflect the Final Decision on modernized RDPs. Nonetheless, the Proposed Decision
15 for modernized RDPs provides general directional guidance that can help inform parties’ initial
16 IGFC proposals. First, the Proposed Decision indicates that parties should not prioritize energy
17 efficiency and conservation over beneficial electrification, consistent with AB 205.60 The Joint
18 IOUs’ proposals seek to reflect, as much as possible, key elements of the recent Proposed
19 Decision recommending modernized RDPs, while aligning with AB 205’s requirements.
20 Although prior Commission decisions had expressed concern that fixed charges would
21 likely not encourage additional conservation,61 the average kWh rate levels resulting from the
22 Joint IOUs’ proposed IGFCs (approximately 22-27 cents/kWh) are similar to the volumetric rate
23 levels at the time of Mass TOU Default, when the Commission concluded that the impact of a
58 Pub. Util. Code § 739.9(e)(1).

59 Rulemaking 22-07-005 Assigned Commissioner’s Scoping Memo and Ruling, p. 4.
60 PD, p. 14.
61 D.15-07-001, at p. 214.
32
1 fixed charge on conservation is likely to be small.62 Under the recent Proposed Decision, the
2 term conservation is no longer used; rather the proposed revised RDP 4 states that “[r]ates should
3 encourage economically efficient (i) use of energy, (ii) reduction of greenhouse gas emissions,
4 and (iii) electrification.” In addition, RDP 5 states “rates should encourage customer behaviors
5 that improve electric system reliability in an economically efficient manner” (which seem to
6 effectively include conservation). Thus, the CPUC will have to balance the clear goals of
7 beneficial electrification from AB 205 with the other elements of the RDPs, while it decides how
8 to make future rates compliant with AB 205 so as not to inhibit beneficial electrification.63
9 The recent Proposed Decision also emphasizes that “[r]ates should avoid cross subsidies
10 that do not transparently and appropriately support explicit state policy goals. Similarly, the
11 recent Proposed Decision’s RDP 9 would provide that “[r]ate design should not be technology-
12 specific and should avoid creating unintended cost-shifts.” The Joint IOUs’ proposed IGFCs
13 will also provide customers with bill stability through reduced month-to-month bill volatility, to
14 help customers manage their bills, as well as to encourage economically efficient decision
15 making
16 Additionally, the Joint IOUs’ proposed IGFCs take into account the Proposed Decision’s
17 RDP 7, on customer understandability. The four household Income Bracket approach balances
18 customer understandability with a meaningful fixed charge to encourage beneficial
19 electrification. If the CPUC’s final decision on RDPs were to differ significantly from the
20 Proposed Decision, the Joint IOUs reserve the right to consider whether revised Joint IOU IGFC
21 proposal might be warranted, and work with the Commission and other parties on how best to
22 accomplish that, if needed.
62 Id.
63 Track B of this proceeding is considering changes to the RDPs.
33
1 C. Basis for the Average IGFC Level
2 The sections below describe in detail the multi-step process the Joint IOUs utilized in
3 designing proposed IGFCs. In sum, the first step is to determine the overall proportion of
4 residential revenue requirements that should be collected through the fixed charge instead of
5 volumetric rates. Second, once the average fixed charge Income Bracket has been determined, it
6 must be established how the volumetric rate design is impacted. Then, after volumetric rate
7 levels are calculated, the third and last step is to determine what discount or surcharge levels are
8 appropriate to result in a graduated, progressive fixed charge level for each successive income
9 “bracket.” The same generic methodology was used by each of the Joint IOUs to develop each
10 IOU’s average fixed charge and average volumetric rate.
11 1. Methodology for Determining Average Fixed Charge Level
12 The top priority and guiding principle of the fixed charge is to bring volumetric rates
13 closer to cost basis. As seen in Table II-4 below, today’s default utility rates64 are far higher than
14 marginal costs as measured by both :(1) recent PG&E GRC Phase II marginal costs, and (2) the
15 CPUC’s 2022 version of the avoided cost calculator (ACC). This disconnect has the
16 consequence of discouraging additional beneficial use of electricity, both for electrification but
17 also for home health and safety.
64 AB 205 mandated the CPUC “shall” authorize IGFCs at least for the IOUs’ “default residential rate”
and “may” adopt IGFCs for other rate schedules. For PG&E, the default residential rate is E-TOU-C,
for SCE the default rate is TOU-D 4-9, and SDG&E’s default residential rate is TOU-DR-1.
34
Table II-4
PG&E Default Rates Compared to Marginal Cost Metrics
*65
**66
1 The Next 10/Berkeley research suggested that a fixed charge be implemented at a level
2 such that volumetric rates are approximately aligned with marginal costs.67 As shown in Table
3 II-4, achieving this would require average fixed charges over $100 for non-CARE customers,
4 varying by what definition of marginal costs is used and what marginal cost categories are
5 defined as “fixed costs.” While the Joint IOUs have opted to propose fixed charges somewhat
6 lower than these benchmarks, the values required to reduce volumetric rates to marginal cost
7 form at least one “bookend” to illustrate the highest level of the average fixed charge possible
8 (which would result in the greatest reduction in the volumetric charge and thus best support
9 electrification goals) and encouraging economically efficient use of energy.
10 Another way to evaluate what could be considered the upper end of the range of possible
11 average fixed charges would be to determine which portion of utility revenue requirements do
12 not vary with usage and what fixed charge level would be required to collect those costs, leaving
65 Includes all 2022 Avoided Cost Calculator Categories – Energy, Cap and Trade, GHG
Adder/Rebalancing, Generation Capacity, Distribution Capacity, Transmission Capacity, Ancillary
Services, and Methane Leakage.
66 Includes all PG&E Marginal Costs used in cost-of-service study (MEC, MGCC, MDCC (Primary,
New Business, Secondary)). Excludes transmission marginal cost. MDCC values presented on $/kWh
basis for comparison purposes only.
67 Next 10 2022 Report: at p. 28.
35
1 only costs that do vary with usage still collected in the volumetric rate. Table II-5 below shows,
2 for non-CARE customers, what fixed charge level would collect the entirety of the fixed cost
3 revenue requirement categories identified in the Public Tool,68 by utility.
68 The final version of the Public Tool was made available for public use on March 23, 2023.
36
Table II-5
Illustrative Fixed Cost Revenue Requirement Categories in the Public
Tool ($/month charge) – Residential Non-CARE Customers
*69 ***71
**70 ****72
1 Of these, the Joint IOUs include certain categories in their respective proposed IGFCs. In
2 the textual discussion further below, we provide additional detail on why a given category of
3 fixed costs would be appropriate to collect through the IGFC, or not. Also, Table II-6 below
4 provides a summary of the proposed components in the cumulative fixed charges and cumulative
5 volumetric rate reduction that results from each component.
69 The value of $7.88/mo. represents a settled marginal cost value used for revenue allocation purposes
in SCE’s 2021 GRC Phase 2 Proceeding. SCE’s filed marginal customer costs based on the RECC
methodology is $10.94/month.
70 Includes Distribution Primary New Business for PG&E.
71 Varies by IOU but includes all NBCs other than PPP and PCIA listed on Revenue Allocation Tabs.
72 For PG&E, based on bundled customer-months billing determinant. For SCE and SDG&E, based on
the Public Tool calculated total generation revenue on “Rate Design Detail” tab, Cell F380, divided
by total residential customer count, then ratioed to calculate non-marginal generation costs.
37
Table II-6
Revenue Requirement Categories Underlying the Joint IOUs’ Proposed Fixed Charges
and Resulting Reductions in the Volumetric Rate Component73
1 Marginal Customer Access Costs (MCAC): MCACs represent the incremental costs of
2 connecting an additional (i.e., marginal) customer to the grid that are not driven by volumetric
3 energy usage or demand. The two cost components of MCACs are: 1) the marginal customer
4 equipment costs (MCEC) consisting of final line transformer, service line drop, and meter costs,
5 and 2) the ongoing and variable Revenue Cycle Service (RCS) costs associated with keeping
6 customers connected to the grid, such as customer billing, meter reading, and credit and
7 collections. This category should be collected through a fixed charge.
8 Marginal Distribution Demand Costs: Marginal distribution demand costs measure the
9 cost of serving an additional unit of customer kilowatt (kW) demand on the electric distribution
10 system. Distribution demand costs reflect the costs to deliver electricity from the substation to
11 the customer’s premise based on the customer’s maximum kW demand and consist of substation
12 and circuit facilities costs and applicable operations and maintenance (O&M) costs. Each utility
73 Table values calculated by dividing associated revenue requirements by customer-months and kWh
billing determinants used in the Public Tool. Totals differ from class average fixed charge due to
effects of the CARE discount.
38
1 defines these marginal costs slightly differently, and we therefore defer additional discussion to
2 each IOUs’ separate rate design exhibit.
3 Non-Marginal Distribution Costs: The Joint IOUs propose to collect all non-marginal
4 distribution costs through the fixed charge, as these do not vary with the volume of electricity
5 consumed. There are many costs recovered through distribution rates that are not directly linked
6 to marginal costs. The Joint IOUs recover the costs of wildfire mitigation and vegetation
7 management, reliability improvements, safety and risk management distribution costs, ongoing
8 distribution operations and maintenance, many regulatory balancing accounts, and various
9 programs and policy mandates through its distribution rates. These costs are not driven by a
10 customer’s usage, and therefore should be collected through the IGFC.
11 Transmission and Reliability Services: Transmission costs and retail rate design fall
12 under the jurisdiction of the Federal Energy Regulatory Commission (FERC), and therefore do
13 not fall within the scope of a CPUC proceeding setting the Joint IOUs’ retail IGFC rate
14 component. Conceptually, many of the costs to operate and maintain the transmission system do
15 not vary with usage, and in theory could be considered appropriate for inclusion as a fixed
16 charge. However, due to the jurisdictional boundary in this CPUC proceeding, the Joint IOUs
17 are not proposing that the IGFC be authorized to collect any transmission costs.
18 Public Purpose Programs (PPP): The PPP charge funds essential programs such as
19 energy efficiency and CARE discounts that have no relationship to the volume of electricity
20 consumed by customers and are explicitly authorized by AB 205 to be collected through a fixed
21 charge. These critical public policy programs should be funded through the intentionally
22 progressive mechanism of the income-based fixed charge because continuing to include them in
23 a flat volumetric rate can have regressive effects contrary to equity goals. In the Public Tool,
24 this category is split into three subcategories (Non-CARE Exempt, Self-Generation Incentive
25 Program (SGIP), and Residential CARE contribution). All three subcategories are appropriately
26 recovered through the IGFC.
39
1 Other Non-bypassable Charges: All non-bypassable charges (NBCs) would
2 theoretically be better collected through an IGFC than volumetric rates, given that the underlying
3 revenue requirements do not vary with customer usage. However, as discussed in the Joint
4 IOUs’ Briefs on AB 205 statutory interpretation, the Wildfire Fund Charge, Competition
5 Transition Charge, and prospective charges for continued operation of Diablo Canyon likely
6 cannot be collected through the IGFC due to statutory restrictions. Further, there are other
7 charges that lack such statutory restrictions, but nonetheless have contractual restrictions,
8 including the Wildfire Hardening Charge and the Recovery Bond Charge/Credit. Remaining
9 non-bypassable charges that should be collected through a fixed charge are the current Nuclear
10 Decommissioning Charge (ND) and New System Generation Charge (NSGC)/Local Generation
11 Charge (LGC). The ND funds the decommissioning of nuclear power plants that have already
12 been built; changes in customer usage will have no impact on the level of these costs. Likewise,
13 NSGC/LGC funds essential generation reliability resources procured per state policy
14 requirements.
15 Marginal Energy Costs (MEC): MECs are those costs necessary to procure a marginal
16 amount of energy; MECs reflect a combination of wholesale market prices and costs of meeting
17 renewable portfolio standard requirements. Since MECs are tied directly to wholesale electricity
18 market prices, these costs are appropriately recovered through volumetric rates.
19 Marginal Generation Capacity Costs (MGCC): MGCCs reflect changes in generation
20 capacity costs that are associated with usage coincident with peak demand. These generation
21 capacity costs do not include the cost of energy itself, as such costs are instead captured by the
22 MEC calculation. Instead, MGCCs look at the cost of the physical capability to generate
23 electricity, which usually consists of costs to construct a new power plant and its associated
24 operation and maintenance costs. While MGCCs do not strictly vary according to volumetric
25 usage, they are more appropriately recovered through time-varying rate designs. How this aspect
26 of rate design should be altered is being appropriately addressed in other phases of this
27 proceeding.
40
1 Power Charge Indifference Amount (PCIA): The PCIA is a charge to ensure that both
2 IOU customers and those who have left IOU service to purchase electricity from other providers
3 pay for the above market costs for electric generation resources that were procured by the IOU
4 on their behalf. “Above market” refers to the difference between what the utility pays for
5 electric generation and current market prices for similar resources. While traditionally
6 denominated as a $/kWh charge, the underlying costs recovered through the PCIA do not vary
7 with volumetric usage. Much of PCIA reflects early investments in high cost GHG free
8 resources to grow the clean energy industry, not to meet least cost procurement needs. As such,
9 it could be argued that these costs would be better recovered through a progressive cost recovery
10 mechanism, such as the IGFC. Nonetheless, the Joint IOUs are not proposing to recover PCIA
11 costs through the IGFC at this time.
12 Non-Marginal Generation Costs: This value is residually calculated by subtracting
13 MEC, MGCC, and PCIA from the total generation revenue requirement, and reflects the degree
14 to which present procurement costs exceed the marginal costs estimated in the most recent GRC.
15 The Joint IOUs do not propose to collect these costs through the IGFC.
16 Electrification Incentive Adjustment: To reach a volumetric rate that is more
17 accurately cost-based and more effectively incentivizes electrification and the transition to
18 carbon-neutral energy, SDG&E is proposing a new rate component, the Electrification Incentive
19 Adjustment (EIA) rate. Because PG&E’s and SCE’s proposed fixed charges result in an average
20 volumetric rate that is $0.25/kWh or lower, PG&E and SCE are not proposing an EIA rate
21 component that would act as a policy adder to the fixed charge. The purpose of this rate
22 component for SDG&E is to collect more revenue in a fixed charge and in real time return that
23 same revenue through a credit to the volumetric rates. The concept is similar to the Conservation
24 Incentive Adjustment/Total Rate Adjustment Component (CIA/TRAC), which functionally
25 collects more revenues from higher usage customers and returns that revenue in real time as a
26 discount to Tier 1 (baseline) rates based on a specified differential. The EIA charge would
27 collect more funding through a $/month fixed charge and reduce $/kWh rates than would
41
1 otherwise be possible under the Joint IOUs’ determination of costs that should be collected from
2 the IGFC at this time. This charge is a transparent way of increasing the fixed charge to a level
3 that will allow for enough volumetric rate reduction to incentivize beneficial electrification. The
4 EIA is discussed in more detail in SDG&E’s rate design testimony (Exhibit SDGE-01). SDG&E
5 is also requesting a two-way balancing account to track this new rate component, which is also
6 discussed in Exhibit SDGE-01.
7 D. Income Graduated Fixed Charge Discount Levels
8 1. Summary
9 The Joint IOUs’ proposed IGFC structure will include four household Income Brackets
10 (or levels) at the household74 level, with the lowest two brackets consisting of CARE and FERA
11 customers. The upper Income Brackets would apply to all non-CARE/FERA customers, with
12 the highest bracket representing approximately 20-25% of the residential population, based on
13 each utility’s respective population as represented in the Public Tool. As discussed in more
14 detail in the Joint Income Verification Chapter, the Joint IOUs’ proposed Income Brackets are
15 designed to leverage existing household income data from the CARE and FERA programs and
16 utilize Federal Poverty Levels (FPL) for Income Bracket 3 (moderate-income) and Income
17 Bracket 4 (higher-income), consistent with how CARE and FERA program eligibility is
18 currently determined. The Joint IOUs are not proposing to verify customer incomes, and instead
19 use a CPUC-administered process for reasons described in the Joint Income Verification and
20 Policy Chapters. With this framework, the Joint IOUs are not required to collect household
21 income, anew, on their entire respective customer bases, but rather focus on an evolutionary
22 income verification process in the non-CARE/FERA segments. The Public Tool does not
74 “Household” means customers, consistent with the definition of “low-income electric and gas
customers” used in Section 739.1 with respect to the CARE program, which defines such customers
as those with “annual household incomes that are no greater than 200 percent of the federal poverty
guideline levels.” A “household” should be defined as the persons residing in the home. Joint
Utilities Opening Brief on Statutory Interpretation Questions, at p. 20; Joint Utilities Reply Brief on
Statutory Interpretation Questions, at p. 11.
42
1 provide income data stratified by FPL, but the ALJ Ruling Providing Additional Guidance for
2 Track A Proposals and Staff Guidance Memo on Using the E3 Fixed Charge Tool to Prepare
3 Opening Testimony75 provides guidance on how to use the Public Tool to model FPL thresholds.
4 The Public Tool provides CARE/FERA information and non-CARE/FERA customer data in
5 increments that correspond to FPL, which allows for grouping of customer populations into
6 brackets that correspond to FPL when assuming a household size of three as required by the Staff
7 Guidance Memo. The Joint IOUs’ proposals for Income Brackets thresholds are based on the
8 data in the Public Tool, and therefore, may need to be adjusted once customer incomes are
9 verified, if the percent of customers falling in one bracket produces disproportionate impacts on
10 the population in a given Income Bracket. The Joint IOUs propose the following household
11 Income Brackets:
12  Bracket 1 – Extra Discounted Fixed Charge (applicable to a subset of the lowest
13 income CARE customers) with household income of up to 100% of Federal Poverty
14 Level.
15  Bracket 2 – Discounted Fixed Charge (remaining CARE and FERA customers that do
16 not fall in Bracket 1).
17  Bracket 3 – Fixed Charge for Non-CARE/FERA customers with household income
18 up to or equal to 650% of Federal Poverty Level.
19  Bracket 4 – Fixed Charge for Non-CARE/FERA customers with household income of
20 greater than 650% of Federal Poverty Level.
21 a) Lower Average Monthly Bills for Low-Income Customers
22 AB 205 requires that the fixed charge discount be set “so that a low-income ratepayer in
23 each baseline territory would realize a lower average monthly bill without making any changes
75 ALJ’s Ruling Providing Additional Guidance for Track A Proposals, Staff Guidance Memo on Using
the Public Tool to Prepare Opening Testimony (Mar. 23, 2023), at p. 5.
43
1 in usage.”76 As discussed in the Joint IOUs’ Statutory Interpretation Brief, we interpret this to
2 mean that the average low-income customer in all baseline territories must realize at least some
3 bill savings as a result of the IGFC implementation relative to current rate design. In practice,
4 this means that the required discount level is informed by the amount of bill savings realized by
5 low-income customers in the lowest baseline usage territory. Each IOU’s specific Rate Design
6 Testimony exhibit discusses this requirement in more detail.
7 E. Impact of the IGFC on Rates and Other Rate Design Issues
8 1. Impact of the IGFC on Volumetric Rates
9 The Joint IOUs propose to reduce volumetric rates consistent with current rate treatment.
10 For PG&E and SDG&E, as presented in Table II-7, below, this means the revenue from the
11 IGFC would be applied as an equal cents per kWh reduction in the underlying volumetric rate, as
12 none of the costs proposed to be collected through the fixed charge are currently time-
13 differentiated on these rates. For SCE, this means applying the volumetric reduction based on
14 the System Average Percent Change (SAPC) methodology consistent with the method used to
15 perform revenue requirement adjustments for all rate classes. However, certain rates require
16 additional consideration, as displayed in Table II-7 and outlined in section II.E.6, below.
Table II-7
IOUs’ Volumetric Rate Adjustment Methodology by Rate Schedule
Volumetric Methodology PG&E SDG&E SCE

Standard Rate Schedules: Equal E-1 DR Domestic
Cents per kWh or SAPC E-TOU-C TOU-DR1 TOU-D (4-9)
E-TOU-D TOU-DR2 TOU-D (5-8)
E-ELEC DR-SES
TOU-DR
TOU-ELEC
Other Rate Schedules: IOU EV2 EV-TOU TOU-D-PRIME
Specific EV-TOU-2
EV-TOU-5
76 AB 205 and Cal. Pub. Util. Code § 739.9(e)(1).
44
1 Each of the Joint IOUs’ respective inclining block tier non-TOU rates, as well as their
2 respective default TOU rates, currently include two tiers, with all Tier 2 rates (or “above-
3 baseline” rates) set 25% higher than Tier 1 (“baseline”) rates, per the CPUC’s residential rate
4 reform tier flattening glidepath decision.77 For PG&E and SCE, this is implemented in the
5 underlying tariffs as the CIA component, while for SDG&E it is implemented as the TRAC
6 component. The Joint IOUs do not propose to change the 1.25:1 tier ratio in existing tiered rates.
7 However, the overall reduction in volumetric rates that results from addition of the IGFC will
8 result in an overall decrease in the $/kWh difference between Tier 1 and Tier 2 rates.
9 2. Adjusting the IGFC Over Time for Revenue Requirement Changes
10 The Joint IOUs propose that, between their respective GRC Phase II proceedings, each of
11 their IGFC rate components, as adopted in the Demand Flexibility OIR, should be updated to
12 follow changes in the underlying revenue requirements. This means that if an IOU’s distribution
13 revenue requirement were to go up or down by 5%, its IGFCs would each change by that same
14 amount. This contrasts with how fixed charges have previously been implemented for the Joint
15 IOUs, where a given fixed charge did not vary when the underlying revenue requirements
16 changed, rather, the difference was made up with other rate components. SCE has already
17 transitioned its TOU-D-PRIME to use the same treatment proposed here. Under the new context
18 here, where the fixed charge rate component must be used as a mechanism to ensure volumetric
19 rates do not inhibit state decarbonization policy, fixed charges must be allowed to change over
20 time. Further, the fixed charge proposals parties are making in this proceeding are distinct from
21 other existing fixed charges for non-residential rates in that they collect more than just a portion
22 of distribution costs; pursuant to AB 205, the Joint IOUs propose that the entirety of several non-
23 bypassable charges be collected through the fixed charge, all of which have varying revenue
24 requirements over time.
77 D.15-07-001, at p. 330, COL 37.
45
1 3. IGFC Review and Assessment Over Time
2 The knowledge of historical performance will not be available to the Joint IOUs when
3 initially setting rates with an IGFC. Over time the IGFC may require adjustments to its structure
4 and method of service as real-world data associated with revenue recovery, customer
5 participation, and equity of rates is obtained. The Joint IOUs propose the following review and
6 assessment process to determine the ongoing success of the IGFC structure.
7 The Joint IOUs propose to conduct the review and assessment process in each of their
8 respective GRC Phase II proceedings. In this manner, the review and assessment will be
9 performed in an already scheduled CPUC proceeding where interested parties are convened to
10 examine the utilities’ marginal cost and rate designs broadly. Including the IGFC structure
11 within these proceedings is an efficient use of resources and will align any changes to the IGFC
12 with changes to the underlying marginal costs and related rate elements, such as time-of-use
13 differential and volumetric rate designs. The GRC Phase II calendar provides an adequate time
14 interval (i.e., four-year cycles) for any changes to take hold before the next assessment, and also
15 allows for mid-cycle Rate Design Window Applications in the event a more immediate
16 adjustment is necessary.
17 The review and assessment of time-of-use pricing periods is conducted in a similar

18 manner. In each GRC Phase II proceeding, the Joint IOUs submit a prescribed78 study to assess
19 if the existing time-of-use pricing periods are still applicable given changes to the underlying
20 costs drivers being evaluated in the GRC Phase II. Parties to the proceeding can then offer
21 supporting or opposing positions through the various vehicles available to them in the regulatory
22 process. An independent evaluation of the arguments presented by parties is then conducted by
23 the CPUC’s Energy Division.
24 The primary metrics to be considered in the assessment relate to revenue recovery and
25 operational requirements. With respect to revenue recovery, the assessment will determine the
78 D.17-01-006.
46
1 effectiveness of the IGFC structure in recovering the design level of revenue in each of the
2 attrition years. Here parties will examine inputs to rate setting and customer activities to help
3 determine the causes of any deviations, and the methods used to adjust rates in the attrition years.
4 For this purpose, parties will review forecasts of customer distributions across Income Brackets;
5 counts of customers who successfully appeal an Income Bracket placement, and allocation of
6 overall low-income rate benefits.
7 4. CARE Discount Structure Changes
8 AB 205 changed the methodology for determining CARE discounts. Current law
9 requires the “average effective CARE discount…not reflect any charges for which CARE
10 customers are exempted, discounts to fixed charges or other rates paid by non-CARE customers,
11 or bill savings resulting from participation in other programs…79” In addition, current law
12 maintains that the overall average effective CARE discount should be no less than 30% and no
13 greater than 35%. Previously, the CARE discount had been applied on a line-item basis to non-
14 exempt billed charges, with an overall bill-to-bill difference relative to a non-CARE bill that
15 reflected an average effective CARE discount of 32.5% for SCE, 35% for PG&E, and 35% for
16 SDG&E. For each of the Joint IOUs, the average effective bill-to-bill CARE discount falls
17 within the statutory guidelines.
18 Consistent with the current language in Public Utilities Code Section 739.1, the Joint
19 IOUs propose a CARE discount structure in which the required 30% to 35% discount limit is
20 applied to non-exempted volumetric charges. Under this construct, the overall CARE customer
21 benefit would include CARE discounted volumetric rates, the low-income fixed charge discount
22 relative to the average fixed charge amount, and exemptions from specific charges to include the
23 CARE surcharge, SGIP, and the DWR Wildfire Fund. Since the IGFC discount required by AB
24 205 exceeds the 35% limit, we propose that only a portion of the IGFC discount be considered
25 part of the CARE program, such that the overall CARE surcharge amount remains unchanged,
79 Pub. Util. Code § Section 739.1(c)(1).
47
1 with the remainder of the IGFC discount funded within the IGFC. This approach ensures that
2 implementation of the IGFC maintains existing interclass revenue allocations. For an average
3 CARE customer, the sum of benefits would provide an average 45-50% bill-to-bill difference
4 relative to a non-CARE bill, as shown in Tables II-8-10 below.
Table II-8
SDG&E Illustrative CARE Bill Comparison
Average Non- Average CARE/ Effective
Monthly Bill Charge
CARE/ FERA FERA Discount (%)
Fixed Charge $91 $30 (67)%
80
Volumetric Charges $109 $71 (35)%
Total Bill $200 $100 (50)%
Table II-9
SCE Illustrative CARE Bill Comparison
Average Non- Average CARE/ Effective
Monthly Bill Charge
CARE/ FERA FERA Discount (%)
Fixed Charge $60 $18 (70)%
81
Volumetric Charges $106 $74 (30)%
Total Bill $166 $92 (45)%
Table II-10
PG&E Illustrative CARE Bill Comparison
Average Non- Average Effective

Monthly Bill Charge
CARE/ FERA CARE/ FERA Discount (%)
Fixed Charge $65 $23 (65%)
82
Volumetric Charges $104 $65 (37%)
Total Bill $168 $118 (48%)
80 Assumes 400 kWh of usage.

48
1 5. FERA Interaction with IGFC
2 The Family Electric Rate Assistance Program (FERA), as currently implemented, has a
3 statutory 18% line-item discount on non-CARE rates (meaning FERA rates are 82% of non-
4 CARE rates).83 To be eligible for FERA, a customer household must be three or more
5 individuals with a combined income from 200% FPL up to 250% FPL. While the statutory
6 language for the CARE program was revised in AB 205 to make it explicitly compatible with the
7 IGFC also required by AB 205, no such changes were made to the statutory language for FERA.
8 Therefore, there is some ambiguity how the FERA program should interact with the IGFC. The
9 Joint IOUs propose that FERA participants be considered part of the second income category
10 along with CARE customers with incomes greater than 100% of FPL. Since the fixed charge in
11 this category is less than 82% of the mid-income bracket fixed charge, let alone 82% of the high-
12 income bracket fixed charge, the Joint IOUs propose that this fixed charge discount supersede
13 the 18% discount these customers are entitled to under FERA. FERA participants will continue
14 to receive an 18% discount on non-CARE volumetric rates. The default version of the Public
15 Tool calculates FERA bills using non-CARE fixed charges, rather than the second income
16 bracket fixed charge as proposed by the Joint IOUs. As a result, the bill impacts from the default
17 version of the Public Tool do not reflect the utility proposal. The Joint IOUs also present
18 alternative results using a modified version of the Public Tool that does set all FERA fixed
19 charges at the intended level. Because the Public Tool is not designed to adjust all other rates in
20 response to the reduction in fixed charges paid by FERA customers, this technically understates
21 the rate levels of non-CARE customers. However, the small volume of FERA customers means
22 this has a de minimis impact – for example, only 0.06% less residential revenue is collected for
23 SCE.
83 PU Code Section 739.12.
49
1 6. Implementation of the IGFC on Non-Default Residential Rates
2 Parties have already submitted legal briefs on statutory interpretation of AB 205. With
3 the exception of the Solar Energy Industries Association (SEIA), all parties’ statutory
4 interpretation briefs appeared to agree that, as both a practical and policy matter, the IGFC must
5 be implemented on all rates. Besides the exceptions outlined below and in individual utility
6 testimony, the IGFC on default rates should be mirrored on all optional rates. To do otherwise
7 would enable higher income customers to easily evade the higher IGFC levels they are intended
8 to pay by switching to a rate without an IGFC (or with a lower IGFC). The impact of the IGFC
9 should be as consistent across rate schedules as possible while allowing some adjustments for
10 pro-electrification policy purposes.
11 There are three general exceptions to this policy:
12 First, the Joint IOUs may each have rates scheduled to be eliminated (for example,
13 PG&E’s EV-A and E-TOU-B rates will be eliminated in 2025). In the interest of simplicity,
14 these rates should retain their existing rate design if they do happen to have any overlap with
15 general IGFC implementation. These specific exceptions are described in more detail in the
16 individual IOU Rate Design chapters.
17 Second, the Joint IOUs’ separately metered EV rates should not have an additional full
18 IGFC, so long as, at the customer’s primary meter (for non-EV household electric usage), takes
19 service on a rate that does have a full IGFC.84 The Joint IOUs’ separately metered EV rates
20 should mirror the overall rate levels of the non-submetering versions of the EV rates, which
21 would include the effects of the fixed charge. However, the separately metered EV rates may
22 still feature fixed charges to recover incremental billing and metering costs, while excluding
23 other costs in the customer charge.
84 SCE TOU-D-PRIME separately metered option will continue to reflect a credit for the final line
transformer and final line drop costs that are shared with the primary meter.
50
1 Third, existing optional residential rates with fixed charges (e.g., PG&E’s E-ELEC
2 (Electric Home) rate, which already has a $15 fixed charge, SDG&E’s Schedules EV-TOU-5
3 and TOU-ELEC, which have $16 fixed charges, or SCE’s TOU-D-PRIME rate) may need to
4 have higher overall fixed charges than the default rate’s IGFCs. If the Joint IOUs’ proposals are
5 accepted, there is no need for these rates to have higher fixed charges than the default IGFC.
6 However, if the CPUC were instead to opt for a set of IGFCs lower than the Joint IOUs’
7 proposals, these optional rates should always at least collect current levels of distribution fixed
8 charges. For example, if the default rate IGFC collected $10 of NBCs and $7 of distribution
9 costs from non-CARE customers, the E-ELEC fixed charge should be $8 higher to account for
10 the current $15 distribution fixed charge. This will ensure the relative benefit of these optional
11 rates as being more pro-electrification than standard rates is retained until default rate design
12 evolves to more closely match the designs of these optional rates.
13 7. Size Differentiation
14 The Joint IOUs do not propose that the fixed charge be explicitly differentiated by
15 customer size, to avoid undue complexity of the initial IGFC rates. The Joint IOUs understand
16 that Public Utilities Code section 739.9(d)(1) requires that any approved fixed charge
17 “reasonably reflect an appropriate portion of the different costs of serving small and large
18 customers.” This language was added in 2013 through AB 327 and was not modified by AB
19 205.
20 Working with Energy Division, the ALJ’s December 9, 2022 Ruling (requiring legal
21 briefs on legislative intent) hypothesized a potential bundled fixed charge that might be
22 comprised of two elements: first, a set monthly basic service fee that is income graduated, with a
23 possible second “demand charge” element that meets the requirements of the fixed charge
24 definition in 739.9(a) which requires any fixed charge not to vary based on month-to month
25 changes in a customers’ kWh usage, a requirement that might be satisfied if the demand charge
26 were preset using another factor such as maximum amperage.
51
1 While in theory, the idea of a hybrid IGFC (e.g., with a residential demand charge or
2 other element to reflect size of kW demand), could have merit, there are several difficulties with
3 doing something like that now. The IGFC is already complex given the addition of income
4 graduation, and layering on any size differentiation would make the hybrid fixed charge concept
5 overly complex and more difficult for customers to understand. Thus, the Joint IOUs do not
6 support such a hybrid structure at this time.
7 Our proposed IGFCs nonetheless reflect the same underlying statutory intent. The
8 portion of distribution costs that most clearly vary with the demand of individual customers
9 (MDCC- Primary and Secondary for PG&E, Distribution Design Demand MC for SCE, MDDC
10 for SDG&E) will continue to be collected through volumetric rates, as will all transmission and
11 generations costs. Further, home size is presumably correlated with household income. As such,
12 the income differentiation inherent in the IGFC can (and should) be deemed to be a reasonable
13 proxy for the differing costs of serving large and small customers. This proxy approach avoids
14 adding further complexity, while still accomplishing the overall intent of the statute.
15 However, if the CPUC instead wishes to explore a different approach that adds an
16 express size differentiation component to rates (other than $/kWh charges and the IGFC as a
17 proxy for size), then it should do so in the broader context of demand charge reassessment in
18 Track B of the DFOIR proceeding. That said, regardless of the venue for such a decision, the
19 Joint IOUs do not support the use of either housing type (e.g., single family vs. multifamily) or
20 home electric panel amperage as a basis for such a charge. Either approach presents significant
21 data challenges in that billing quality data is not readily available for either of these two
22 characteristics. Developing billing quality data and reprogramming the billing systems to update
23 such data fields would require additional costs and likely be error-prone. Given that
24 implementation of the basic IGFC will be complex, the CPUC should not compound these
25 difficulties by requiring establishment of other novel billing determinants at this time.
26 As an alternative, the Joint IOUs suggest that the CPUC could explore the concept of a
27 threshold-based demand charge. This concept would involve a demand charge that would only
52
1 apply to demand beyond a specific level. Such a demand threshold level could be set either
2 based on population statistics of demand levels to ensure relatively few customers are exposed to
3 such a charge, or based on end-use specific load data to ensure the threshold does not expose
4 most customers adopting building/transportation electrification technologies to a demand charge.
5 If the threshold were set at 12 kW (e.g., a 5 kW house load plus a 7 kW level 2 EV charger), a
6 customer with a demand of 15 kW would only be assessed a demand charge on 3 kW. This
7 alternative approach could mitigate some of the traditional concerns with implementing a
8 demand charge on residential rates.
9 8. Elimination of Minimum Bills
10 The Joint IOUs propose to eliminate minimum bills. In R.12-06-013, the CPUC
11 authorized the application of minimum bills to residential customers and approved an amount of
12 $10 for non-CARE customers and $5 for CARE customers.85 Because of the all-volumetric
13 design of residential rates, the minimum bill or minimum charge was instituted as a billing
14 mechanism applied to customers whose monthly usage fell below a minimum amount deemed
15 necessary to support the recovery of costs for power delivery and customer billing. In this
16 proceeding the Joint IOUs’ proposal to set fixed charges at a level to reasonably recover a
17 portion of delivery related costs, customer related costs, and certain public policy costs, at a
18 minimum, negates the need to assess a minimum charge or minimum bill on residential
19 customers.
20 B. Calibration Mechanism for Structure Revisit
21 As discussed in the Cost Recovery Chapter, the Joint IOUs are proposing a calibration
22 mechanism in the event that actual revenue collection from the IGFC varies significantly from
23 forecasted collections. This is discussed in more detail in the Joint IOU Cost Recovery Chapter.
85 D.15-07-001, at pp. 283-284, 291.
53
1 C. Public Tool Results
2 The Joint IOUs have included the “Printable Results” tab from the Public Tool as
3 Appendix B, as required by the Staff Guidance Memo on March 23, 2023.86 Individual IOU
4 results are discussed in each IOU’s Rate Design Testimony.
86 Administrative Law Judge’s Ruling Providing Additional Guidance for Track A Proposals, March 23,
2023.
54
1 III.
2 INCOME VERIFICATION
3 A. Introduction
4 This Chapter covers the Joint IOUs’ assessment of and proposals for how to accomplish
5 verifying customers’ household incomes, as required to implement the IGFC’s that AB 205
6 directed the CPUC to adopt in this proceeding.
7 Verifying customers’ household incomes will present new challenges for both IOUs and
8 customers. The Joint IOUs explored multiple options with the goal of minimizing anticipated
9 customer pain points, while also maximizing accuracy of the initial income bracket assignment.
10 Many options proved to have challenges of being administratively burdensome, costly, and
11 having unclear levels of accuracy. The Joint IOUs’ proposal aims to reduce these barriers
12 through the use of real, accurate data with a single statewide Third Party implementor.
13 Specifically, the Joint IOUs propose that the income verification process (including the initial
14 Income Bracket placement, customer appeal process, and periodic updates to income bracket
15 assignment) is conducted by a Third Party under the supervision of the CPUC, using a data
16 model that has access to Franchise Tax Board (FTB), Department of Social Services (DSS), and
17 census block data to place customer households in the correct Income Bracket. However,
18 regardless of the adopted approach, all parties should anticipate that due to the newness of the
19 process there will undoubtedly be unforeseen challenges, and possibly high levels of customer
20 resistance despite planned outreach and education, during the initial years of implementation.
21 1. Income Assignment and Verification - Objectives and Evaluation Criteria
22 The primary objective of an income assignment and verification process is to assign
23 customers to the correct Income Bracket based on household income. Secondarily, a further
24 process should be provided to allow any customer to appeal their assignment, as well as a longer-
25 term process for periodically monitoring the ongoing accuracy of the household’s assigned
55
1 Income Bracket. The Joint IOUs recommend that initial income bracket assignments, customer
2 appeals and periodic updates be conducted by a Third Party under contract and supervision of the
3 CPUC. Among other benefits, the Third Party will ensure statewide consistency so that all
4 electric IOUs (small and large) can benefit from economies of scale. Specifically, the Joint IOUs
5 recommend the CPUC overseeing a Third Party, similar to how the CPUC administers income
6 verification for the telecommunication utilities’ LifeLine program utilizing the best available
7 data, including data from the FTB and DSS, to most accurately assign customer to household
8 Income Brackets.
9 Selecting an appropriate process for IGFC income assignment and verification involves
10 competing considerations which must be carefully balanced. These considerations include: (1)
11 customer impact and acceptance, (2) accuracy, (3) cost to implement, (4) complexity, (5)
12 implementation timing, and (6) an accessible and understandable appeals process if a customer
13 seeks a reassessment of their household income bracket assignment. To develop a proposal that
14 meets these objectives and balances these considerations, the Joint IOUs identified multiple
15 evaluation criteria, through input from stakeholder workshops as well as subsequent research and
16 collaborative discussions. The Joint IOUs’ IGFC income verification evaluation criteria are
17 listed below:
18  Customer Impact and Acceptance
19 o Minimize customers’ privacy concerns about this new collection and use of
20 household income data
21 o Build trust in the income verification process
22 o Enable ease of required customer actions
23 o Facilitate customer understanding and awareness of the new fixed charge rate
24 component, as well as the income verification and appeals process
25 o Enable the income assignment process to be as transparent as possible while
26 protecting privacy
27 o Facilitate a positive and consistent statewide customer experience
56
1  Accuracy
2 o Make the process as effective and efficient as possible, including for:
3 o Resolving customer appeals claiming an incorrect household income
4 assignment, and
5 o Periodically refreshing household income categorizations for all customers
6 o Minimize free ridership as well as potential impacts to other IOU programs with
7 self-certification enrollment
8 o Minimize inadvertently mis-categorizing low-income customers into other
9 income groups due to verification challenges that low-income customer may face
10 o Select a data source (or sources) that is comprehensive while also simple and
11 cost-effective
12  Cost
13 o Minimize initial start-up costs to implement
14 o Minimize ongoing operating, labor, communications, data storage and
15 maintenance costs
16  Complexity
17 o Avoid requiring unduly complex systems
18 o Minimize manual processes
19 o Limit the resource burden and cost of ongoing maintenance
20 o Minimize the number of customer appeals
21 o Make the appeals process simple to implement and easy to access
22  Time to Implement
23 o Balance expediency of implementation with accuracy of income bracket
24 assignment and degree of effectiveness
25 o Consider timing effects of either complying with existing statutes or seeking
26 possible legislative amendments that may be needed for the most optimal
27 approach
57
1 o Availability of information for and speed of placement of new California
2 residents in the correct Income Bracket
3 D. Stakeholder Input
4 1. Key Stakeholder Input
5 The Joint IOUs sought feedback from a diverse group of stakeholders regarding income
6 verification process options. To this end, PG&E requested an IOU-facilitated follow-up
7 workshop noticed to all parties, which was held on December 21, 2022. One key insight gained
8 from this workshop was that a consistent approach is needed across the small and large IOUs that
9 could leverage existing data to the maximum extent possible. Some stakeholders also noted that
10 the IOUs may not be the best choice to conduct income verification. As presented in Chapter 5
11 of this exhibit, marketing research has already revealed that customers do not want their IOU to
12 collect their income.
13 E. Income Definition
14 The Joint IOUs recommend that the definition of qualifying income that has already been
15 established for the CARE program (e.g., Wages, Social Security, Pensions, Child Support)
16 should be used as the starting point for identifying the fixed charge Income Bracket into which
17 low-income customers should be placed. By doing so, a consistent definition of “income” would
18 be used across the CARE program as well as the new IGFC rate component’s household Income
19 Brackets. The CARE program is an opt-in program with an application through which
20 customers self-certify that their income is within the qualifying threshold (or by self-certifying
21 that they qualify through categorical eligibility by participating in one of several listed
22 programs). Because the definition of qualifying income was first established through the Low
23 Income proceeding, the Joint IOUs recommend that further discussion or review of the definition
24 of qualifying income be conducted in that proceeding. The Joint IOUs recommend that the time
25 component of qualifying income be aligned with calendar year.
58
1 F. Household Income Brackets
2 As discussed in the Rate Design chapter of this exhibit, the Joint IOUs recommend four
3 fixed charge household Income Brackets. The Joint IOUs developed their recommended Income
4 Bracket proposal by, first, creating two low-income brackets, namely: (1) Income Bracket 1
5 (extra discounted) for CARE customers with household incomes of 100% FPL and below, and
6 (2) Income Bracket 2 (discounted) for CARE customers with household incomes greater than
7 100%, plus FERA enrolled customers. Sub-dividing the group of low-income customers into
8 two brackets allows the most economically vulnerable households to receive a lower fixed
9 charge than that which would result from blending these two subcategories into a single
10 category.
11 Next, the Joint IOUs divided the Non-CARE/FERA households into the third and fourth
12 household Income Brackets: (3) Non-CARE/FERA customers with household income up to or
13 equal to 650% of Federal Poverty Level, and (4) all remaining Non-CARE/FERA households,
14 with incomes starting at 650% FPL. Providing two Income Brackets above the two lowest
15 brackets provides some relief for moderate-income households while carrying out AB 205’s
16 intent that low-income customers pay “a smaller fixed charge and high-income customers pay a
17 higher fixed charge.”87 By providing two levels of progressively higher non-low-income fixed
18 charges, the Joint IOUs are balancing the desire for simplicity with equity concerns. This
19 proposed design results in an equitable distribution of IGFC impact among very low, low,
20 moderate- and higher-income households.
21 The proposed household Income Brackets and estimated number of customers in each
22 bracket are shown in the Table III-11.
87 Pub. Util. Code § 739.9(e)(2).
59
Table III-11
Joint IOUs Percentage of Residential Customers by Income Brackets
Income Income Bracket Eligibility Estimated Percentage of Total Residential
Bracket Customers88
PG&E SDG&E SCE
1 CARE Customers
13% 12% 11%
0% to 100% FPL
2 CARE/FERA Customers
15% 15% 15%
> 100% FPL
3 Non-CARE/FERA Customers
47% 50% 55%
<= 650% FPL
4 Non-CARE/FERA Customers
25% 23% 19%
> 650% FPL
1 G. Income Verification Options Evaluated by the Joint IOUs
2 1. Introduction
3 The Joint IOUs investigated methods for determining and verifying customer household
4 income for the purpose of assigning a monthly fixed charge, including:
5 (1) using currently available income data from the income qualified programs
6 administered by the Joint IOUs,
7 (2) leveraging available state processes such as the CalFresh Confirm process or the
8 CPUC-administered LifeLine (TelCom low-income) Program89,
9 (3) partnering with consumer credit reporting companies to access and match household
10 income data,
11 (4) using customer stated or verified income data, and
12 (5) using an IOU-developed data model to verify income data.
13 All of these methods have significant hurdles that would need to be overcome to
14 effectively verify income for the purpose of assigning a monthly fixed charge. This discussion is
88 Using the data in the Public Tool.

89 As suggested in the Energy Division’s Income Graduated Fixed Charge Guidance Memo issued
January 17, 2023.
60
1 intended to serve as a list of the most thoroughly investigated proposals but does not represent an
2 exhaustive list of all ideas considered.
3 2. Using Current Program Information
4 Currently, the Joint IOUs receive customer-supplied income data to verify eligibility for
5 income qualified opt-in programs including CARE/FERA, and Energy Savings Assistance
6 (ESA).
7 For the ESA program, participation is temporary because energy efficiency services
8 occur at a single point in time. Accordingly, ESA applicants provide qualifying income
9 information when they apply to participate. While this income data is eventually verified during
10 the enrollment process, such a process would not be useful for assessing an ongoing fixed charge
11 because: (1) the income information is only provided as part of initial enrollment and (2)
12 applications for these programs are handled by contractor networks that could not scale to handle
13 the full residential customer population.
14 In contrast, CARE and FERA are ongoing opt-in income-qualified programs, which
15 allow customers to continue to participate year-over-year as long as they remain eligible.
16 Initially, CARE/FERA eligibility is determined during enrollment through self-reported data that
17 customers include in their application. The initial CARE/FERA self-certified information
18 includes: (1) household size and (2) either proof of (a) their participation in one or more public
19 assistance programs or (b) their household income90 and income sources. Every year, each large
20 IOU validates a sample of its CARE/FERA-enrolled customers through a Post-Enrollment
21 Verification process through which SCE, PG&E, and SDG&E validate approximately 7%, 8%,
22 and 6% of enrolled customers, respectively. The Joint IOUs do not collect income data from
90 The SCE and SDG&E CARE/FERA applications have a “fill in the blank” question for customer
income level. The PG&E CARE/FERA application includes a selection of income ranges and asks
the customer to “check a box”. As a result, SCE and SDG&E have information on a customer’s
specific income level while PG&E currently has a customer’s income range. PG&E will begin
collecting specific income information in mid-2023 for new CARE applicants and customers
undergoing recertification.
61
1 customers for purposes other than enrollment in income qualified programs. Also, because that
2 information only covers a subset of the residential population and is (a) only verified once during
3 enrollment (in the case of ESA and similar programs) for all applicants, and (b) re-verified on an
4 irregular basis for some (not all) CARE/FERA-enrolled customers, this process is not robust
5 enough to be appropriately relied upon for determining the level of a mandatory monthly income
6 graduated fixed charge on a long-term basis. Further discussion about the challenges of building
7 on the CARE/FERA processes to expand to income verification or stated income collection to
8 customers of all income levels can be found further below, in the “Using Customer Stated or
9 Verified Income” section (III.E.5).
10 3. Using Available State Processes
11 a) DSS’s “CalFresh Confirm” Data
12 The Joint IOUs also investigated whether the DSS’s CalFresh Confirm process might be
13 a useful means of income verification for the IGFC. The Joint IOUs reviewed documentation on
14 CalFresh program eligibility and income verification methods and also spoke with program
15 administrators from the DSS as well as one of the data providers for the CalFresh verification
16 program.
17 The CalFresh Confirm process could enable verification that a customer is a CalFresh
18 recipient, and therefore has a household income <200% of the FPL. However, the Joint IOUs
19 determined that the CalFresh Confirm system has several significant limitations, most notably
20 that it does not match the Joint IOUs’ proposed household Income Brackets. It only confirms
21 whether the information entered matches the information for an individual CalFresh recipient,
22 which would only be partially useful in trying to validate whether the total household income
23 makes that residential account eligible for either Income Bracket 1 or 2. However, income
24 verification for customers with low incomes who are not CalFresh recipients, as well as
25 moderate- and higher-income customers, cannot currently be accomplished by CalFresh. In
26 general, the CalFresh program in its current form would not be immediately transferrable to
62
1 income verification for the purposes of the IGFC, since it uses only a single income cut-off that
2 does not match the proposed total household cut-offs for establishing two low income-graduated
3 fixed charge brackets. It is conceivable that a Third-Party verification process could be built
4 using the same underlying data but including additional income cut-offs. However, the Joint
5 IOUs understand that at least one of the data-sources underlying CalFresh is credit agency data
6 that requires affirmative customer consent to complete the verification, which poses significant
7 administrative challenges for the IGFC. In this situation, affirmative customer consent would
8 have to be collected from each and every one of the Joint IOUs’ 10.8 million residential
9 customer accounts. This would not just have to be done once during the initial deployment, but
10 repeatedly, as individual as well as household income varies over a person’s lifetime.91 In
11 addition, consent would have to be obtained for each new account turn-on, from both the named
12 customers on the account as well as every other individual in their household. The repeated,
13 large-scale collection of such consent documentation would be costly and would impose a
14 significant burden on customers (as well as dilute the IGFC’s benefits for electrification if
15 verification costs were included in rates). Further, it is likely many customers would not
16 respond.92 Under this kind of verification model, non-respondents may have to be placed on a
17 higher ‘default’ Income Bracket, which could cause equity concerns for customers who are
18 legitimately eligible for a lower fixed charge but failed to respond.
91 Year over year income variation reached 25 percent or more for a quarter of households between
2004 and 2005. Congressional Budget Office, Recent Trends in the Variability of Individual
Earnings and Household Income (June 2008), available at
https://www.cbo.gov/publication/41714?index=9507.
92 Section E.5 of this exhibit discusses available information on customer response rate to the CARE
Post Enrollment Verification process, which can be used as a proxy to indicate customer likelihood to
respond to consent requests.
63
1 b) CPUC/ Third Party LifeLine Low Income Program for Telecom
2 Utilities
3 The Joint IOUs also reviewed the Telecommunications’ LifeLine program’s income
4 verification process, to see if a similar process could be used to verify income for the IGFC. The
5 LifeLine income verification program is administered through a CPUC interagency contract with
6 a Third Party, an organization called Maximus. The LifeLine process requires customers to go
7 through an income verification process at the time of enrollment as well as automated
8 recertification. The LifeLine program primarily uses enrollment in CalFresh (51%) or MediCal
9 (43%) as a proxy to confirm LifeLine eligibility, but also accepts enrollment in other programs,
10 or proof of Federal/State income or Supplemental Security Income (SSI).93 The LifeLine
11 program, which serves approximately 1.3 million households,94 currently costs $46 million for
12 the three years between October 2022 - October 2025 to administer (including enrollment of
13 applicants, verification of Income Brackets, operation of information technology systems,
14 operation of a call center, and database management).95 The Joint IOUs have not been able to
15 determine what portion of program funding is used to verify customer income but note that even
16 its current steady state cost of approximately $11.80 per customer per year is significant,
17 especially given that 94% of eligibility is being verified through enrollment in other state
18 programs. In addition, CPUC decisions show that the LifeLine program initially had significant
19 challenges that required adjustments resulting in today’s program.96 Thus, LifeLine’s current
93 Consensus and Collaboration Program and Institute for Social Research, California State University,
Sacramento, California LifeLine Program Assessment & Evaluation(May 2022), at p. 38 available at
https://docs.cpuc.ca.gov/PublishedDocs/Efile/G000/M478/K367/478367564.PDF.
94 Id., at p.18.
95 See Administrative Law Judge’s Ruling Providing Guidance for Phase 1 Track A Proposals and
Requesting Comments on a Consulting Services Proposal (Jan. 17, 2023), Attachment 1, R.22-07-
005, Phase 1 Track A: Income Graduated Fixed Charge Guidance Memo, at p. 10. This $46 million
over three years comes out to an average of 15.3 million per year for 1.3 million households, or about
$11.80 per household per year.
96 The Joint IOUs would appreciate assistance from Energy Division in researching what the earlier
costs were for the LifeLine programs’ income verification administration by the CPUC, which would
be more comparable to the start-up nature of the IGFC.
64
1 costs are not directly transferable for IGFC income verification because the majority of IOU
2 customers have household incomes above LifeLine requirements or do not otherwise qualify for
3 income-qualified public assistance programs that could be used as a proxy. Customer
4 households with incomes above the LifeLine income requirements will instead require income
5 verification through more complex means, such as review of tax records or income statements,
6 which is likely to be more costly than using a proxy as is done for 94% of LifeLine customers.
7 Furthermore, whereas 98% of LifeLine applicants verify income in person through the direct
8 application process,97 it is unlikely that a similar process would scale to meet the income
9 application needs of the Joint IOUs’ approximately 10.8 million residential electric customers.
10 For these reasons, the Joint IOUs conclude that though the LifeLine program provides an
11 example of a centralized CPUC managed Third Party income verification process, its processes
12 and current costs are not likely to be a direct indicator of the structure or costs of the type of
13 Third Party administered income verification needed to support an IGFC. Like CARE/FERA,
14 the LifeLine program is a discount program for low income households, and its income
15 verification requirements put the onus on a customer to seek enrollment and prove income
16 eligibility by way of documentation or enrollment in another income-qualified program.
17 Nevertheless, the LifeLine income verification process provides a workable example for having
18 a Third Party administrator handle income verification under the Commission’s direction.
19 4. Using Credit Agency Data
20 The Joint IOUs investigated whether a Third Party could partner with consumer credit
21 reporting agencies to access and match household income data for IGFC household bracket
22 assignments, appeals, and periodic refreshes. The Joint IOUs found that existing products
23 provided by credit agencies, such as Experian’s “Income Insight,” and Equifax’s “Work
24 Number” are not designed to be the sole source of data for decision making to determine income
Sacramento, California LifeLine Program Assessment & Evaluation (May 2022), at p. 38, available
at https://docs.cpuc.ca.gov/PublishedDocs/Efile/G000/M478/K367/478367564.PDF.
65
1 categorization98, as discussed below. Rather, they were developed to 1) provide information
2 useful for marketing products to a specific income segment, or 2) serve as a check against
3 income information that has already been received from a potential customer. The Joint IOUs
4 understand that Equifax’s “Work Number” product is used to verify eligibility for several state-
5 level social programs such as Medicaid, Supplemental Nutrition Assistance Program (SNAP),
6 Public Housing, and for child support enforcement, but it requires affirmative customer consent.
7 In addition, the Joint IOUs found that these types of products primarily source their income
8 information from payroll reporting data but contain only limited or no data on other sources of
9 income (such as pensions, investments, rental income, child support, etc.), and similarly require
10 customer consent to access.
11 When considering the Joint IOUs’ use case of assigning an IGFC using income data
12 models, the contacted credit agencies relayed that this was not the intended use of their product,
13 would violate the terms of use, and may be inconsistent with the Fair Credit Reporting Act
14 and/or other credit laws. When presented with an alternative use case of placing all customers
15 into the highest Income Bracket and allowing customers to apply for a lower bracket, credit
16 agencies responded that their products could be used to corroborate a customer’s stated income
17 as long as in the case of a mismatch between the customer’s income statement and the credit
18 agency data, the customer retained the option to verify their income with documentation. While
19 this use case is allowable, the Joint IOUs do not find it feasible because 1) it would require
20 defaulting customers to the highest household Income Bracket which would result in customers
21 being assigned a fixed charge that is potentially higher than appropriate for their actual income;
22 2) these products mostly rely on payroll data which will leave significant gaps for customers
23 whose income is not based on reported payroll wages; 3) it would be burdensome to require the
24 majority of customers to contact the Joint IOUs and provide consent for Joint IOUs to use credit
98 Credit agencies the Joint IOUs spoke with relayed that their products could not be used in ways that
would result in adverse action against a customer, and placing customers in different price levels
could be construed as adverse action.
66
1 data to confirm their income and assign them to the correct Income Bracket; 4) it would result in
2 operational impacts such as high call volumes, and frequent Income Bracket changes; and 5) it
3 does not provide a pathway for the Joint IOUs to update income data for a customer except with
4 customer consent, which means the Joint IOUs would have to rely on stale data or receive a new
5 customer permission each time to check their stated income against a credit agency product.
6 Across the US, several government programs rely on the “Work Number” product by
7 Equifax for verification of income eligibility, for social programs such as Medicaid, SNAP,
8 Public Housing, or for child support enforcement. This product contains income data provided
9 by employers and payroll providers. This product has the advantage of covering nationwide
10 payroll data and eliminates the need for manual verification of payroll income. However, while
11 the “Work Number” product provides a high level of confidence for a portion of payroll data it
12 does not provide data on other sources of income; thus, it would not provide an accurate
13 estimation of actual household income information. A process would still have to be devised to
14 handle customers without a match in these income databases (including but not limited to new
15 U.S. residents with no prior income record, young customers with no prior income record, and
16 non-person account owners (such as businesses which hold accounts on residential rates).
17 Simply defaulting such customers to the highest bracket of the IGFC would be financially
18 impactful to many legitimately lower income customers. For example, a student moving away
19 for college and with no prior income record would be assessed the highest fixed charge, even if
20 they legitimately have no income. In addition to customers without a match, payroll data may
21 also underestimate total income for certain customers. A shortcoming of payroll data is that it
22 does not capture data from income sources other than payroll records, which would significantly
23 underestimate real household income for certain segments of the population, e.g., those with
24 investment income, such as seniors who may be living on a fixed income such as a pension plus
25 social security, but whose total net worth is quite high. Based on IRS data for federal tax returns,
26 about 20% of individuals residing in California who filed a federal tax return had no income
67
1 from salary or wages99 which suggests that the individuals in this 20% of California’s population
2 may not show up in payroll data. More importantly though, Equifax’s “Work Number” product
3 does not allow for pre-assignment of income data to each household, rather it only permits
4 Equifax to share income data about the customer verification after receiving permission from
5 that customer for Equifax to share data about the customer. There is also no refresh ability
6 without additional permission from the customer, which is problematic given data for some
7 customers is known to be highly variable over time.
8 Based on the research the Joint IOUs have been able to complete thus far, the Joint IOUs
9 have determined that data sets available for purchase from credit reporting agencies are not
10 designed to be used as the source of data for assigning an income categorized fixed charge
11 bracket and attempting to use these data sets for this purpose may not be authorized by the data
12 protection laws with which credit agencies are required to comply. Overcoming existing credit
13 data protection laws, including the FCRA, appears to require either: (1) obtaining consent from
14 each of over 10 million customers to use their income data (which was not viewed as being
15 practicable on such a wide scale, for a rate component that is required rather than an “opt-in”), or
16 (2) obtaining an amendment to the FCRA statute that exempts provision of data for IGFC
17 purposes (which seems unlikely to happen in time, or at all, given the many interest groups who
18 might object or seek their own exemptions).
19 5. Using Customer Stated or Verified Income Data
20 Due to the constraints on the availability of income data described above, the Joint IOUs
21 explored the option of obtaining and verifying data from all customers directly. Even more than
22 obtaining consent from all customers to use credit agency data, obtaining stated income data
23 directly from all customers is not practicable due to high cost and customer impact. The
99 In 2020, according to the Internal Revenue Service, only 80% of federal income tax filers residing in
California had income from salaries or wages, IRS: SOI Tax Stats - Adjusted Gross Income (AGI)
Percentile Data by State, available at https://www.irs.gov/statistics/soi-tax-stats-historic-table-2. 100
The customer population enrolled in CARE/FERA is 24%, 25% and 27% for PG&E, SCE, and
SDG&E respectively.
68
1 CARE/FERA program experience is useful to consider as it does collect some stated income
2 data. Approximately one quarter100 of the Joint IOUs’ total residential customer base are
3 currently enrolled in CARE/FERA programs. Of these, approximately 40% of current
4 CARE/FERA enrollees were enrolled in the program based on the customer’s own statement of
5 household size and total household income, whereas approximately 50% were enrolled based on
6 their stated participation in one or more ”proxy” assistance programs (see above) the final 10%
7 were enrolled due to known participation in another income qualified program.101 Most
8 customers on CARE/FERA must recertify their eligibility every two years (four years for
9 customers on a fixed income).
10 Each year, the Joint IOUs require approximately 6%-8% of their CARE/FERA
11 participants to verify their stated information or else they will be removed from the program. Of
12 the verification group, only about 28% respond and complete the verification process; the
13 remaining 72%102 who do not reply are removed from the opt-in CARE/FERA programs until
14 they can apply again and certify their household is income-qualified. The Joint IOU’s 2022 costs
15 for CARE and FERA income verification were approximately $2.1 million, which represents
16 about $9 per customer verified.103 This process, however, is not appropriate for the IGFC,
17 because customers who fail to respond cannot simply be removed from the IGFC. Fixed charges
18 are mandatory, and presumably, non-respondents and customers who fail to recertify every 2 or 4
19 years would be defaulted to a predetermined fixed charge such as the highest fixed charge until
20 proven otherwise.
100 The customer population enrolled in CARE/FERA is 24%, 25% and 27% for PG&E, SCE, and
SDG&E respectively.
101 Monthly Reports of PG&E, SCE, and SDG&E on Low Income Assistance Programs for December
2022 available at https://liob.cpuc.ca.gov/monthly-annual-reports/.
102 Opinion Dynamics, 2019 California Low Income Needs Assessment , Final Report (Dec. 13, 2019),
(hereinafter 2019 LINA Report), available at https://www.cpuc.ca.gov/-/media/cpuc-
website/divisions/energy-division/documents/energy-efficiency/iqap/2019linavol3.pdf.
2022 available at https://liob.cpuc.ca.gov/monthly-annual-reports/ as mentioned in section E2 above ,
this represents steady state program verification cost not the CARE start-up verification cost which
are believed to have been higher, but research continues.
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1 The 2019 Low Income Needs Assessment (LINA) Report sheds further light on the
2 process challenges of the CARE program’s recertification and verification methods.104 For the
3 2018 program year, about 28% of CARE participants statewide were selected for post-
4 enrollment processes, of which:
5 • 21% were due for recertification (i.e., renewal application), with 39% of those being
6 removed from the program, and 61% retained.
7 • 4% were selected for income verification, with 69% of those removed from CARE
8 and 31% retained.
9 • 3% were selected for income verification due to high usage, 96% were removed from
10 CARE and 4% were retained.
11 According to the LINA Report, the post-enrollment processes perform well at removing
12 income-ineligible customers from CARE, however, LINA survey evidence also shows many
13 removed participants reporting that the removals had not necessarily been income-related.
14 Specifically, the 2019 LINA Report’s survey of customers no longer on CARE showed: 42%
15 reported the reason for removal as “inconvenience/forgot,” 23% “didn’t know how to continue,”,
16 and 9% reported “issues with the process.” This suggests that there are process issues that
17 prevent many eligible customers from responding to CARE recertification or verification
18 outreach.
19 These findings from the 2019 LINA Report suggest that modeling income information
20 collection and verification on CARE processes could result in many customers being defaulted to
21 higher income categories than may be warranted, simply due to not providing or certifying
22 income information. In the CARE program, such customers tend to then call the IOU once they
23 receive a higher, non-CARE bill and seek to get back on the program, which creates both a
24 burden on the customer as well as program operational impacts (call center resources, billing
25 processing etc.). This also suggests that basing income bracket assignments on a high-quality
104 2019 LINA Report.
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1 data source would significantly lessen customer and operational burdens on individuals and
2 systems as opposed to a method modeled on CARE-type processes.
3 Examining the CARE program’s income verification process and costs illustrates that an
4 IOU-led process similar to the CARE Post-Enrollment Verification process would be
5 unreasonable and exceedingly expensive to scale to the entire electric residential population. For
6 the Joint IOUs, the cost of CARE Post-Enrollment Verification in 2022 was $2.1 million, to
7 verify the selected subset of approximately 230,000 CARE customers. This equates to
8 approximately $9 per customer on average105. But such average cost per customer is based on
9 current CARE processes after decades of refinement, such that the per-customer costs for
10 administering a completely novel IGFC income verification process would almost certainly be
11 higher due to startup costs. Scaling the current CARE verification cost of approximately $9 per
12 customer to the entire 10.8 million electric joint-IOU customers who need to have income
13 assessed to determine the IGFC bracket for each and every customer (since IGFC is not an opt-in
14 program) would put the cost at approximately $97 million. However, initial annual costs would
15 likely reach upwards of $100 million to implement when also factoring in startup costs (which
16 the cited $9 per customer cost does not include).106
17 If verifying all customer income information is cost-prohibitive, proceeding only with
18 customer self-stated income information is unreasonable for reasons of accuracy and billing
19 integrity. There would be little incentive for a high-income customer to provide accurate data
20 and it is also likely that a significant portion of customers would fail to provide income data,107
21 forcing those customers to be assessed the default fixed charge.
2022 are available at https://liob.cpuc.ca.gov/monthly-annual-reports/.
106 The Joint IOUs are still researching the earlier level of CARE income verification costs closer to the
time CARE was started, if available. Start-up costs for the IGFC are likely to differ from and be more
expensive than CARE both because the IGFC is not an opt-in program requiring initial self-
certification but also involves all levels of income so it would have to process about ten times as
many customers’ household income verifications per year.
107 PG&E’s and SCE’s research demonstrate that customers are uncomfortable with IOUs having their
income data.
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1 With this in mind, the Joint IOUs considered and rejected a stated income approach, due
2 to severe downstream financial and operational impacts and significant adverse customer
3 impacts. This approach would collect stated income from all customers and then verify income
4 for a subset of customers (e.g., a similar percentage as the CARE/FERA programs, that is, 7-9%
5 annually). However, many customers would likely not submit their income information and it is
6 unclear how many customer appeals this will result in, and what the corresponding total cost to
7 process these appeals would be. If the analysis used the current steady-state CARE/FERA
8 application processing cost of approximately $2-3 per customer (which is likely lower than any
9 new and larger-scale program like the IGFC), the upfront stated income collection could cost
10 approximately $25-30M each time the data were refreshed, but this would likely be dwarfed by
11 the cost of a high volume of appeals. It would also require every customer to repeatedly take
12 action to report income, imposing a significant burden on customers. Stated income collection,
13 at a minimum, would require notification of each customer and processing information received
14 from the customers. Such an approach would likely be more operationally impactful and cost-
15 prohibitive than other potential approaches (but more research is needed to make valid estimates
16 to compare). Notably, income information would need to be requested from every customer both
17 before launch as well as periodically thereafter (e.g., every 1-2 years), and a secure system would
18 have to be designed and implemented to collect, store, and update customer stated income
19 information through various channels, such as business reply cards, the call center, and online
20 self-service, so as to protect customer privacy concerns. Too much is unknown about the stated
21 income collection approach, but what is understood caused the Joint IOUs not to propose it.
22 Most importantly, collecting stated income directly could result in a large number of non-
23 responses. As noted above, the 2019 LINA study108 provided evidence that there is a large drop-
24 off of customers from CARE during recertification (61% retained) and even more so during
25 income verification (only 31% retained) due to reasons other than income qualification. For
108 2019 LINA Report.
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1 instance, it is possible that customers do not read/open their mail, or do not know how to
2 complete the income verification. Per LINA, two thirds of removed customers experienced
3 process issues with CARE that prevented them from remaining on the program. If two thirds of
4 the 39% of customers removed during recertification were removed due to non-response or other
5 process issues, this suggests that a quarter of all prior participants fail to reenroll in CARE due to
6 process issues. Conceivably, collecting stated or verified income data from customers for the
7 purposes of the income-graduated fixed charge would encounter similar process barriers as the
8 CARE program. If the non-response rate approaches 25%, it could trigger a large number of
9 appeals down the road.
10 Therefore, the Joint IOUs have concluded that an IOU-administered income verification
11 process that seeks to collect customer-stated income information directly from each customer
12 would not only be cost-prohibitive but would likely result in larger numbers of customer non-
13 responses and refusals to provide household income data, due to both process barriers and
14 privacy concerns regarding the Joint IOUs’ possession of their household’s specific total income
15 data. Simply assigning non-respondent customers to the fixed charge for the highest income
16 category would result in financial impacts to customers who should have been made eligible for
17 a lower fixed charge, but who failed to submit income information. The Joint IOUs considered
18 whether such customers could instead be assigned to the fixed charge for the moderate-income
19 level, but this would create disincentives for high-income customers to provide income data
20 which in turn could result in under collections or would dampen the IGFC’s ability to reduce
21 fixed charges for low-income customers, as fewer customers would be paying the higher income
22 fixed charge.
23 6. IOU Developed Data Model
24 Another option the Joint IOUs considered was to predict income based on publicly
25 available data points. Developing an income data model is also challenging due to a lack of
26 publicly available source data that can be used as a reliable proxy for income at the household
73
1 level. While there is publicly available data on aggregate incomes by area, such as by census
2 tract from e.g., the Current Population Survey109, American Community Survey110, etc. that can
3 be useful to discern income trends among populations and communities, such data is not reliable
4 for predicting each individual household’s income within that area. Using census tract income
5 data to assess an IGFC could result in significant under-identification of low-income customers
6 living in moderate- and higher-income census tracts, and vice versa. For these reasons, the Joint
7 IOUs do not recommend using current publicly available data or developing internal models to
8 determine and verify customer household income solely based on population data. It is
9 important for IGFC income bracket placement to be as fair and accurate as practicable, to
10 minimize customer appeals and to stabilize IOU revenue collection and resulting rates. Using
11 modeled data would not be likely to provide accurate results, which could undermine trust and
12 result in operationally unsustainable levels of appeals.
13 7. Key Findings on Evaluated Options
14 The options evaluated above did not lead to emergence of any single clear-cut solution
15 that would minimize customer action, while also providing highly accurate results in a manner
16 that is feasible, ensures billing integrity and is cost effective. To summarize: 1) Neither current
17 program information nor current state programs are directly adaptable to the needs of income
18 verification for fixed charge purposes; 2) Population-based data models cannot accurately predict
19 individual household income; 3) The direct collection of customer-stated income is costly and
20 burdensome and will likely result in considerable non-response; and 4) Obtaining affirmative
21 consent to use credit-agency data, while somewhat more accurate and less burdensome to the
22 customer, is still costly and the lack of data will likely affect a significant portion of customers.
109 Current Population Survey Data available at https://www.census.gov/programs-

surveys/cps/data.html.
110 American Community Survey Data available at https://www.census.gov/programs-
surveys/acs/data.html.
74
1 There are two reasons the Joint IOUs have concluded that accurate initial income bracket
2 assignments are essential to have before the initial launch of any IGFC. First, by presenting
3 customers with an accurate initial income level assignment, customer trust and acceptance of the
4 new IGFC is anticipated to be higher. If, instead, there is a higher degree of inaccuracy in the
5 initial income bracket assignments, customers are likely to question the overall implementation
6 of the rate structure, they may be less likely to accept the change, and the Joint IOUs will have to
7 address high levels of customer dissatisfaction. Second, inaccurate initial assignments would
8 result in more customers filing appeals seeking to be placed in an alternate income bracket. This
9 would drive up costs to manage the higher volume of appeals. Focusing solely on the cost of
10 appeals while using the CARE Post-Enrollment Verification system as a proxy for costs, an
11 initial income bracket assignment process that results in 20% of customers appealing could result
12 in approximately $20 million in costs across the Joint IOUs service territories. Given the data
13 above about lack of Federal income information or State tax filings for over 20% of Californians,
14 it seems more likely that the appeal rate might be higher than 20%. Many of the millions of non-
15 low-income customers could also disagree with the results (given that it’s based on household
16 income, not one individual’s return).
17 It Is impossible to know the exact degree of accuracy of any of the methods described
18 above without conducting an actual data analysis using real customer income data, but pursuing
19 a method that has even a 20% appeal rate would be costly. Aside from such Credit Agency
20 products likely not being available for direct income verification without affirmative customer
21 consent due to legal constraints, the Joint IOUs review of available credit agency data suggests
22 error rates in excess of 10-20% assumed in the cost estimates above. This would impose very
23 significant administrative costs no matter who is running the program, and would certainly result
24 in a more negative customer experience than under a more accurate process.
25 A high number of customer income bracket appeals could also impact utility revenue
26 stability as the utility would need to adjust rates the following year to account for the misplaced
27 customers. One of the benefits of the IGFC rate structure is that it is anticipated to stabilize rates
75
1 for residential customers. Adopting an income bracket assignment process and data source that
2 is less accurate puts this benefit at risk.
3 8. Recommendation
4 Based on the initial research above and the necessity of accurate income bracket
5 assignments, the Joint IOUs have concluded that the optimal approach would be for the CPUC to
6 contract with a Third Party that would use actual income data on a consistent statewide basis.
7 The LifeLine program provides a precedent for having a Third-Party administrator handle
8 income verification under the Commission’s direction. In D.05-04-026, the Commission
9 concluded that income certification/verification should be performed by a Third Party

10 Administrator (TPA) “under the direction of a state agency, namely the Commission.”111 As
11 noted above, the LifeLine program is targeted towards low-income customers and therefore not
12 directly transferable to the requirements for a fixed charge at various Income Brackets, but it
13 nevertheless provides proof that Third Party administration is an established and workable model
14 for income verification purposes.
15 Under such a model, each customer would be assigned to an Income Bracket based on
16 available data specific to their household, and then be given an opportunity to appeal -- as
17 opposed to having to proactively submit income data. The primary venue for obtaining such
18 income verification data would be California’s FTB. In 2020, the FTB received approximately
19 18.5 million state income tax returns112, covering 13.2 million California households113 and over
20 39 million inhabitants. However, it is estimated that the FTB does not have income information
21 for up to 20% of California households who do not file any state income tax return114. A
111 D.05-04-026, at p. 26.

112 Franchise Tax Board, Personal Income Tax (PIT) Annual Report 2021, available at
https://data.ftb.ca.gov/California-Personal-Income-Tax/PIT-Annual-Report-2021/y7ws-kpcd.
113 There are more individual tax returns than households because more than one earner can live at the
same address.
114 The Joint IOUs estimate that up to 20% of customers may be missing from an FTB data set through
an analysis reviewing Census demographic data and FTB County resident tax filing data.
76
1 customer may choose not to submit a California income tax return if they file as a single
2 individual and earn less than $20,913 per year 115. This suggests that the pool of customers who
3 do not file state tax returns are likely to predominantly be part of lower-income households. To
4 address this gap, additional data from the California DSS’ CalFresh program should also be
5 included as part of the verification process, to provide additional income data for lower-income
6 customers who may not be included in the FTB data set. As an example of how this could work,
7 LifeLine executed an interagency agreement to use the CalFresh verification results.116 It is
8 conceivable that CalFresh verification could be enhanced to use the underlying data sources to
9 meet the needs of income verification for the purposes of the electric fixed charge. One
10 challenge remains obtaining customer consent for this step, but that would be for a much smaller
11 group of customers without any FTB data match.
12 An amendment to the existing California Revenue & Taxation Code would appear
13 necessary to allow the FTB to accomplish mass provision of individuals’ income data to any
14 outside entity administering the IGFC categorization and appeals process. Access to customer-
15 specific information from the California Department of Social Services, such as CalFresh, may
16 also require amendment to existing law, or direct customer consent. It is also conceivable that a
17 verification system could then use other secondary data source in a hierarchical order, which
18 would reduce the incidence of “no matches” in the data. For example, as a secondary step in
19 case there is no FTB or DSS data, the customer of record could be asked to either submit income
20 information or to provide permission to verify income against a secondary database. As a final
21 backstop for the “no-match” population, census tract data could be incorporated to make an
22 educated guess for initial assignment, to help mitigate the possibility that a low-income customer
115 Franchise Tax Board, Filing Requirements, available at

https://www.ftb.ca.gov/file/personal/residency-status/index.html.
116 CPUC, 2021 Annual Report California Lifeline Program, Program Years January 20219-December
2021, p.18, (April 2022), available at https://www.cpuc.ca.gov/-/media/cpuc-
website/divisions/office-of-governmental-affairs-division/reports/2022/2021-ca-lifeline-annual-
report.pdf.
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1 would be initially assigned to the highest income bracket, with communications to the customer
2 providing them information on how to appeal if necessary.
3 H. Income Verification and Appeals Process
4 1. Income Verification Ownership and Implementation
5 The Joint IOUs recommend that the income verification process, described in further
6 detail below (including initial assignment, handling any customer appeals, and the periodic
7 refresh process), be conducted by a Third Party under the supervision of the CPUC. It is not
8 practicable or cost-effective for each individual IOU (across the range of large and small IOUs
9 regulated by the CPUC) to implement its own income verification process. Rather, using a
10 single Third Party, supervised by the same governmental entity (as the CPUC has done with
11 LifeLine), allows there to be a consistent statewide approach which should result in increased
12 overall accuracy. Supervision of the Third Party by the CPUC would help to further maintain
13 customer trust that their income information would not be accessed in any way by the IOUs.
14 Furthermore, centralizing statewide income assignment and verification under a single
15 administrator will benefit the customers of all the state’s IOU’s (small and large) by realizing
16 economies of scale, as well as creating a one-stop-shop that consistently uses the same process
17 equally for all.
18 Establishing a single Third-Party entity to conduct the income verification process,
19 supervised by the CPUC, minimizes the cost of implementing the IGFC and limits access to
20 income data, helping to establish customer trust in the process. In contrast, income verification
21 conducted by each utility would result in replication of costs for a similar process. Further, with
22 a Third Party conducting income verification, the State could also leverage the information it
23 receives for other purposes and programs, providing additional benefit to Californians. Indeed,
24 existing income verification programs beyond LifeLine are established or processed at the state
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1 level, for similar reasons.117 Although the energy utilities do have some experience running the
2 CARE/FERA programs’ income verification process, that process only verifies a small number
3 of low-income customers each year, and even that is expensive and labor-intensive for a steady-
4 state program, let alone a start-up like the IGFC. The Joint IOUs have concluded that the
5 CARE/FERA verification process is not reasonably scalable to provide initial and periodically
6 recurring IGFC verification for the approximately 10.8 million residential electric customers who
7 must receive a new IGFC on their electric bill. As discussed in the section above, scaling current
8 CARE processes to income verify all residential electric customers in the Joint IOUs service
9 territory could cost approximately $97 million, plus added “start-up” costs. The Joint IOUs
10 conclude that doing so would be cost-prohibitive. Moreover, collecting stated income from a
11 customer that applies for inclusion in a discount program like CARE or FERA (and in so doing
12 represents they have qualifying income and consents to a utility verifying this representation) is
13 fundamentally different from collecting and/or accessing personal, private income data from
14 millions of customers who do not seek any discount in order to place those customers on income
15 brackets to determine the fixed charge they will pay.
16 Furthermore, the Joint IOUs have limited experience building income verification models
17 and may only be able to use public income data, which is not available at the household level.118
18 For these reasons, the Joint IOUs recommend the IGFC income bracket assignment and appeal
19 be administered through the CPUC, contracting with a Third Party (or another public agency if
20 needed), rather than trying to develop an entirely new process to be conducted by the Joint IOUs.
21 Finally, initial marketing research conducted by the Joint IOUs revealed that many
22 customers will likely be concerned about IOUs having access to customer income data. The
117 Covered California, Government Code Title 22. California Health Benefit Exchange.SB 1208 (Reg.
Sess. 2021-2022), Low-Income Utility Customer Assistance Programs: Concurrent Application
Process.
118 The US Census Current Population Survey, available at https://www.census.gov/programs-
surveys/cps/data.html and American Community Survey, available at
https://www.census.gov/programs-surveys/acs/data.html only provide income data down to the
census tract level.
79
1 challenges associated with income “verification” are compounded to the extent that a customer’s
2 assigned household income bracket and corresponding fixed charge will depend not only on the
3 named customer’s income, but on the collective income of that customer’s entire household.
4 Establishing a neutral Third-Party to conduct the process will ensure that a trusted, transparent,
5 and secure process for evaluating customer household income and income bracket placement is
6 consistent across the state.
7 For the reasons outlined above, the Joint IOUs reiterate that income bracket assignment
8 and appeal processes should be conducted by a Third Party under the supervision of the CPUC.
9 Although the LifeLine program (which depends on residents seeking out the discount and
10 affirmatively providing proof of income eligibility) does not provide a template for a system in
11 which each household served by a utility is assigned to an income bracket based on household
12 income data collected or accessed without the customers’ involvement, it does provide an
13 example of a verification system that is administered by a Third Party administrator (TPA) under
14 the supervision of the CPUC. As such, the Joint IOUs propose to utilize an administration model
15 here that is similar to the LifeLine program119 to handle IGFC income bracket assessment and
16 appeals, as depicted in Figure III-7 below.
Sacramento, California LifeLine Program Assessment & Evaluation (May 2022), at p. 37, available
at https://docs.cpuc.ca.gov/PublishedDocs/Efile/G000/M478/K367/478367564.PDF.
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Figure III-7
Proposed High Level Chart of Entities Involved In Administration and
Implementation of Income Bracket Assignment and Appeal Process
2 As depicted in the chart above, the Joint IOUs proposal seeks state funding for income
3 verification to support the policy goals of the IGFC and not adversely impact customer rate
4 affordability. Including funding for the state-administered process of income verification in
5 electric rates would dilute desired impact of beneficial electrification for residential customers.
81
1 The Joint IOUs propose to collaborate with the CPUC to seek funding for the income
2 verification costs from the State Budget.
3 2. High Level Utility Process Overview
4 The IGFC differs from CARE/FERA because it is not an opt-in rate rider, but a
5 fundamental rate component to ensure that fixed costs are fairly recovered, on an ongoing basis,
6 for the benefit of all customers -- as well as the environment -- by reducing the volumetric rate
7 thus supporting the state’s decarbonization climate action goals through building electrification.
8 Therefore, the Joint IOUs recommend that the IGFC be applied to each and every rate under
9 which all residential customers take electric service from an IOU. Because there are fixed costs
10 to serve every residential customer, and AB 205 requires an income graduated set of fixed
11 charges, there must be some process for categorizing each and every one of the over 10.8 million
12 electric residential households served by the Joint IOUs into appropriate Income Brackets.
13 PG&E, SCE, and SDG&E have approximately 4.9 million, 4.7 million, and 1.3 million electric
14 residential households, respectively. Every one of these residential households must be
15 categorized into the appropriate Income Bracket and then periodically reverified in the future
16 because of income changes. Thus, the type of income verification needed for even a simple
17 graduated fixed charge, at full scale, is a new and complex challenge that will undoubtedly
18 present unanticipated difficulties and unintended effects. At a high level, the Joint IOUs
19 anticipate that there will be three primary components of the verification process: (1) initial
20 income bracket assignment, (2) processing of any appeals and taking any remedial action
21 necessary, and (3) a periodic reverification that makes any necessary changes to income bracket
22 assignments. Each step is described briefly below.
23 a) Initial Income Bracket Assignment
24 During the initial income bracket assignment, customers are placed in the appropriate
25 Income Bracket by the process to be established by the Third-Party, under the CPUC’s
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1 supervision. The Joint IOUs are responsible for providing the customer data including customer
2 account information (e.g., name and address, and social security number if available), and the
3 file is used by the Third Party to identify the appropriate Income Bracket, using income data that
4 the Third Party obtains from one or more sources such as FTB and other state entities. The
5 customer’s assignment is then relayed back to the utility, who is responsible for informing the
6 customer of their income bracket placement and providing contact information for assignment
7 appeal with the Third Party. The Joint IOUs stress that in advance of implementation, thorough
8 testing of the income bracket assignment process with real customer data is necessary to
9 demonstrate the accuracy of initial placements and minimize appeals. The testing results could
10 also be used to influence staffing levels for customer support services, such as call center
11 staffing. Further, the Joint IOUs recommend that the Third Party selected by the CPUC for
12 income bracket assignment meet key criteria such as strong data modeling capabilities, a
13 reputation for secure handling of customer data, and accurate results to establish public trust in
14 the process. Information regarding customer outreach and education in this phase is detailed in
15 the Marketing and Outreach, Chapter 5.
16 For existing customers, this process is expected to occur in advance of implementation to
17 give customers adequate time to appeal if their initial income bracket placement is incorrect.
18 New customers would be informed about the income verification process at some point during
19 the move-in process. This process has a more compressed timeline than the initial income
20 verification. The income bracket assignment would have to occur during the first billing cycle
21 and in many cases, the first customer bill cycle is less than a full month. New customers will
22 have to be provided notice of their income bracket assignment so that an appeal can be initiated
23 if needed. From a customer perspective, the ideal solution is to check income during the move-
24 in, through regular data exchange with the Third-Party income verifier. The customer could then
25 be immediately informed of their assigned Income Bracket, either over the phone during a call
26 center turn-on, or on the IOU website during a self-service turn-on.
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1 It is probable that some populations of customers will not be matched with Third Party
2 data during initial income bracket assignment or during turn-on. For example, there may be a
3 lack of data for new immigrants, customers whose primary residence is in another state or
4 country and who pay no California taxes, or residential accounts that are held by a non-person
5 entity, e.g., a property management company, non-profit organization, or a Home Owners
6 Association taking service for common space lighting. The total number and breadth of these
7 cases is not known. The non-matches are likely higher as a percentage of new move-ins than as
8 a percentage of the existing customer population. The Joint IOUs recommend that the Third-
9 Party track and report out on the number of customers that cannot be matched with income data
10 annually. That data should be evaluated to determine what subpopulations exist and if those
11 subpopulations can be identified and assigned an appropriate fixed charge level. The
12 Commission should address the evaluation of this population in a ruling at such time as relevant
13 data become available which is likely within two years of implementation of the IGFC. In the
14 meantime, in cases where a customer is not able to be matched with income data, a secondary
15 data source could be applied. In the absence of such a process, Joint IOUs should assess Income
16 Bracket 3 and inform the customer of the appeal process. In addition, the Joint IOUs
17 acknowledge that some customers may be uncomfortable with any level of data collection, and
18 so an opt-out policy is needed to allow customers their right to privacy. In this scenario,
19 customers opting out would be assessed the highest fixed charge.
20 For a small proportion of customers enrolled in the CARE and FERA programs, Joint
21 IOUs have self-reported income data that has been provided by the customer directly, as long as
22 the customer enrolled based on income, or voluntarily provided income when enrolling via the
23 categorical eligibility method. Additionally, only approximately 6-8% of customers who
24 participate in CARE/FERA programs are subject to income verification through existing
25 processes. As such, Joint IOUs will use Third Party data to assign Income Bracket 1 or Income
26 Bracket 2 fixed charges for customers enrolled in the CARE and FERA programs. If at any
27 time, a CARE/FERA customer becomes no longer enrolled in CARE or FERA the customer will
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1 then be assigned an Income Bracket 3 or Income Bracket 4 fixed charge based on Third Party
2 data. Likewise, a non-CARE/FERA enrolled customer who then enrolls in CARE or FERA
3 would be assigned to the Income Bracket 1 or Income Bracket 2 fixed charge. The Joint IOUs
4 recognize that the CPUC’s decision authorizing the IGFC may, once implemented, warrant a
5 CPUC re-examination of current CARE/FERA processes, and recommend that any efficiencies
6 or revisions be discussed in the Low Income Proceeding.
7 b) Appeals Process and Customer-Initiated Income Updates
8 The Joint IOUs’ proposed CPUC process for resolution of customer disputes over their
9 IGFC Income Bracket assignment will provide all residential electric customers an ongoing
10 opportunity to “appeal” and seek what they assert to be a more appropriate categorization of their
11 total household income assignment. The Joint IOUs recommend the customer appeal or dispute
12 resolution process should consist of the following steps:
13 1. Customer contacts the utility through either the call center or the website, and is
14 directed to the Third-Party website or call center to initiate an appeals claim
15 2. Customer claimant provides the Third Party with all requested information, which
16 could include but is not limited to: a complete listing of the legal names of all residents in their
17 household, and for each household member: recent pay stubs, copy of federal tax filings and W2
18 or 1099, affidavit from employer (for cash wages only), finally signed releases from each
19 household member allowing access (for each person) to data from the Department of Social
20 Services, or other such agency
21 3. Third party conducts the appeals process by reviewing the provided
22 documentation and, if necessary, using the releases to obtain any appropriate additional income
23 verification data, and determines whether appeal should be approved or denied
24 4. Third party informs the customer
25 5. Third party informs the respective IOU of the results of the appeal
26 6. IOU adjusts customer’s IGFC Income Bracket within its billing system
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1 This recommended appeals process (to be conducted by the Third Party under the
2 supervision of the CPUC) may have three mutually exclusive potential outcomes.
3 The first is a denial determination, with the Third Party deciding that the customer’s
4 initial household income level placement had been correct or that the customer has not submitted
5 sufficient or qualifying information to prove that the assigned income level was incorrect. In
6 such instances, the appeal would be denied, with the customer and their IOU being informed that
7 no change will be made to the customer’s existing, assigned income level.
8 The second potential outcome would be approval by the Third Party if it finds a
9 significant enough change in total household income to warrant a revision to the customer’s
10 previous IGFC Income Bracket placement. In such instances, Third Party would have found that
11 its initial Income Bracket placement (at the time of the most recent IGFC data refresh, or account
12 turn-on) had been correct; nevertheless, the Third Party could still approve the appeal if the
13 available evidence successfully showed that household’s total income had since changed enough
14 to merit placement in a different fixed charge category, going forward. The Third Party would
15 inform the customer that their appeal has been approved and, simultaneously, notify their IOU to
16 update that customer’s fixed charge Income Bracket assignment, as of the next one or two billing
17 cycles after the date of the ruling and notice to the customer and IOU. One to two billing cycles
18 is the standard duration to allow adequate time to process other types of account changes
19 initiated by a customer. Sufficient time is needed for the IOU to process a change in account
20 information reflected in the billing system. The Joint IOUs do not plan to rebill customers for
21 updated income information as this does not constitute a billing error. The Joint IOUs would
22 place the customer onto their updated household Income Bracket prospectively. It is standard
23 practice to receive updated information from a customer that qualifies them for a program or rate
24 and place them into the program or rate on a going-forward basis, per customer request.
25 Examples include 1) a customer applying for CARE for the first time, despite potentially having
26 qualified in the past; 2) a customer buying an electric vehicle, but not sharing information about
27 the purchase and only taking service on an EV rate until months later; 3) a customer installing a
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1 smart thermostat, but not signing up for a demand response program until the following year. In
2 these cases, the Joint IOUs do not retroactively place customers on these rates.
3 For efficiency, it is important for the CPUC to consider a limitation on the frequency with
4 which appeals could be made by a given customer. Likewise, because the customer must
5 provide evidence of their updated household income to result in a change to their fixed charge
6 level, then it is important that an account so verified may maintain the new fixed charge level for
7 a certain period of time. To avoid overriding the verified income information, a good option
8 would be to restart the clock for the regular data refresh with the completed appeal. Otherwise,
9 the customer could be caught in an endless appeals loop, which could result in customer
10 frustration. Therefore, any change to the fixed charge Income Bracket pursuant to appeal should
11 be set for a predetermined period (e.g., one or two years). It would be appropriate to apply the
12 same period of time as for the regular data refresh cycle. This will require that an account
13 having gone through appeal and verification be identifiable as such in the Joint IOUs’ billing
14 systems and it will require the Third Party transmit information to the Joint IOUs on the outcome
15 of the appeals process for individual customer accounts. At a minimum, the Third Party should
16 provide the IOU an updated start/end date for the validity of the Income Bracket assignment.
17 The third potential outcome would be that the customer appeal is approved if evidence
18 provided by the customer can demonstrate that their initial household Income Bracket placement
19 at the most recent Income Bracket assignment was already incorrect (e.g., because the income
20 data was incorrect and put them into the wrong category). IOUs have rules governing “billing
21 errors” which are defined similarly as errors by the utility that result in incorrect meter reads or
22 clerical errors that result in the customer being placed on the wrong rate or being charged based
23 on the wrong billing factor or calculation.120 While the Joint IOUs do not consider the situation
24 where a customer was placed on an Income Bracket assignment based on information provided
25 by the CPUC contracted Third Party which was later overturned on appeal to constitute a billing
120 See PG&E Rule 17, SCE Rule 17.D and SDG&E Rule 18.C.
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1 error, this assumption should be confirmed in the CPUC’s decision. Furthermore, the Joint IOUs
2 recommend that the CPUC order the IOUs to update their applicable Rules governing billing
3 errors to explicitly state that the situation described above does not constitute a billing error and
4 does not warrant a retroactive bill correction. If the CPUC disagrees and finds that in these
5 instances a rebill is warranted, this type of appeal would require the Third Party to review the
6 information the customer provides with their appeal application seeking to verify it, as well as an
7 additional process for submitting information to the IOUs about the appropriate time period to
8 rebill (e.g., to provide the date as of which the income level needed to be corrected). Depending
9 on the level of accuracy of the income verification data the Third Party uses, this enhanced
10 appeals process to correct an actual income data mistake is likely to be more time- and labor-
11 intensive than the other two appeal outcomes. The volume of appeals requests and therefore the
12 operational and financial impact of this third appeals outcome will depend on the accuracy of the
13 underlying data. The higher the quality of the data, the less likely the need for appeals.
14 In general, the as-yet unresolved details about this process that the CPUC will determine
15 in its final decision would likely result in significant impacts on the operational requirements for
16 and costs of such income verification appeals. For instance, if the CPUC decides that accounts
17 with no income data match should be defaulted to the highest fixed charge Income Bracket, then
18 it would seem much more likely that more account owners might initiate the appeals process,
19 which in turn would result in additional processing. In contrast, putting accounts with no data
20 match on Income Bracket 3 could create revenue impacts, but in turn lower appeal volumes and
21 processing costs. This would provide disincentives for customers with high income and no data
22 to provide their true income level. As mentioned above, the Joint IOUs recommend that the
23 population without a data match be analyzed to determine the best approach, and potentially a
24 secondary data source be used for such accounts. Another important determinant of the impact of
25 the appeals process is when customers are informed about the Income Bracket and their ability to
26 update information or appeal. If customers are informed about the ability to appeal at initial
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1 assignment and at each change of the Income Bracket, the onus would be on customers to inform
2 the Third Party managing the income verification in a timely manner.
3 c) Periodic Refresh
4 The final component of the overall income verification process is periodic refreshes of
5 household income categorization. During this phase, the Third-Party would re-evaluate each
6 customer’s existing household Income Bracket placement, applying the same method used to
7 identify initial placement, but would incorporate any results of the appeal process that may have
8 resulted in a customer being moved to an alternate Income Bracket as well as any other newly
9 available household income data. As with the initial Income Bracket assignment process, the
10 Third Party being supervised by the CPUC would conduct the analysis and assign Income
11 Bracket to customer accounts. The Joint IOUs would only be provided the refreshed
12 categorization results for all customers, so as to inform customers whose household income level
13 placement has changed. The Joint IOUs recommend considering operational impacts to the
14 IOUs’ respective internal processes, such as billing and call center volume, when determining
15 the appropriate refresh cadence, timing, and cost recovery.
16 I. Currently Projected Costs of Joint IOUs’ Proposal
17 The Joint IOUs anticipate that, under their recommended approach where the CPUC
18 would contract with and supervise a Third-Party income verification process, all of the electric
19 IOUs (small and large) would still incur incremental costs during the income level assignment
20 and appeal processes. Such cost categories include marketing and outreach costs, call center
21 costs, IT and billing operations costs to move customers to a different Income Bracket and revise
22 customer bills based on the appeals process, and administration costs to staff and maintain
23 operations relating to the new income verification process. The majority of these costs are
24 presented in the next two chapters, on Implementation and Marketing chapters, with the
25 exception of staff administration costs. Estimated costs for administration and support costs for
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1 each Joint IOU, specific to income verification, under our recommended CPUC-supervised Third
2 Party approach, are listed here in Table III-12 below.
Table III-12
Summary of Each Joint IOU’s Internal Costs to Support our Recommended CPUC-
Supervised Third-Party Approach to IGFC Income Verification
Cost Category PG&E SCE SDG&E Total
Labor $1.6M $0.5M $0.7M $2.8M

NOTE: Labor costs cover four years, and include labor for compliance related activities, and anticipated
impacts to CARE program
3 J. Anticipated Costs for CPUC-Supervised Third Party Income Verification
4 The Joint IOUs anticipate that the costs for the recommended implementation of income
5 verification under a CPUC supervised Third Party implementer are likely to include such cost
6 categories as: (1) data transfer and potential purchasing and modeling costs, (2) data
7 management and storage costs, (3) systems and business process costs, including the costs of
8 handling appeals, notifying the customer-appellant as well as their IOU of the outcome, and (4)
9 customer outreach and call center costs to handle customer concerns and results of appeals, (5)
10 other resource costs including ongoing program management costs. The initial costs to start-up
11 this new income verification process and apply it to 10.8 million residential electric customers of
12 the Joint IOUs cannot be reliably estimated, however, until more information is known. The
13 Joint IOUs look forward to working with Energy Division and the parties to this proceeding,
14 perhaps in a workshop forum, to further define and research each of the potential costs.
15 As mentioned above, the LifeLine program cannot currently be used as an accurate cost
16 comparison point for the IGFC, for two major reasons. On the one hand, LifeLine program costs
17 may include other cost elements such as customer outreach, etc. that go beyond what we believe
18 would need to be handled for fixed charge income verification and more research is needed to
19 make sure the LifeLine totals can be made apples-to-apples comparable with the IGFC income
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1 verification only functions proposed here. On the other hand, the LifeLine program may
2 underestimate IGFC costs because of differences like: (1) an initial IGFC assignment is
3 mandatory whereas LifeLine is an optional rate rider for which a customer application to
4 participate is provided first, and (2) the larger scope including numbers of customers as well as
5 breadth of income types necessary for IGFC income verification seem likely to cause increased
6 overall costs. It is not yet possible to know the precise cost of the much larger scope involved for
7 the IGFC, which must initially verify income for about 10.8 million customers of all Income
8 Brackets, as well as conduct appeals and periodic reverification. At a minimum it could be
9 expected that the statewide IGFC start-up costs of the IGFC would be higher than the current
10 costs for LifeLine. The Joint IOUs also anticipate that startup costs would be more significant. A
11 comparison of existing income verification program costs and how they might be initially
12 estimated to compare to IGFC is shown in Table III-13, below:
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Table III-13
Comparison of Third Party Income Verification Implementation Costs
Program Cost per Cost per Difference from IGFC
year Participant
LifeLine $46M for 3 $11.80 IGFC is anticipated to cost more because it is a
years* much larger scale program. Some Lifeline costs
are not comparable due to major program
differences, including that LifeLine only
manages 1.3M customers, while IGFC would be
implemented for about 10.8M electric
customers.
CARE** IGFC is anticipated to cost more due to scale of
1. Application/ 1. $3.4M 1. $2.37 program in comparison to CARE. Similar to the
Recertification 2. $2.1M 2. $9.40 logic above, IGFC requires that all 10.8 M
2. Verification Costs electric residential customers are transitioned to
the rate structure, resulting in more costs than
the optional CARE rate for X customers.
Further, the CARE program processes have been
refined and improved since the 1990’s. IGFC is
anticipated to have startup costs that are not
reflected in this comparison.
CalFresh CalFresh costs were researched and found to be $2.1 billion from 2020 to
2021,*** but due to the nature of funding, which includes state and federal
funding, exact income verification costs were unable to be determined. However,
due to the high frequency of required verifications for CalFresh, IGFC costs are
anticipated to be lower.
* See Administrative Law Judge’s Ruling Providing Guidance for Phase 1 Track A Proposals and Requesting
Comments on a Consulting Services Proposal (Jan. 17, 2023), Attachment 1, R.22-07-005, Phase 1 Track A:
Income Graduated Fixed Charge Guidance Memo, at p. 10. This $46 million over three years comes out to
an average of 15.3 million per year for 1.3 million households, or about $11.80 per household per year.
**CARE costs displayed here only include costs relating to applications, recertifications, and verification
processes. The CARE program includes additional annual costs in categories such as general administration,
IT programming, pilots and studies, measurement and evaluation, regulatory compliance, and marketing and
outreach costs. Source: Monthly Reports of PG&E, SCE, and SDG&E on Low Income Assistance Programs
for December 2022 available at https://liob.cpuc.ca.gov/monthly-annual-reports/.
***Source: The 2022-23 Budget: California Food Assistance Program available at
https://loa.ca.gov/reports/2022/4532/CA-Food-Assistance-Program-021122.pdf
1 AB 205 did not mention the IGFC costs in its estimated fiscal impact for the bill.
2 However, because the legislature adopted the IGFC out of concern that high electric rates tend to
3 disincentivize adoption of beneficial electrification technologies necessary to decarbonize
4 California’s economy, the CPUC should consider whether the costs of verification should be
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1 borne by ratepayers at all, given its likely magnitude. Instead, since the fixed charge is being
2 income graduated for the public purpose of both climate action as well as improved equity and
3 keeping rates affordable, (especially for lower income customers), the CPUC should consider
4 requesting state funding to cover the income verification costs rather than putting the costs into
5 electric rates that would directly undercut the state’s decarbonization and climate action. Further,
6 once this system is established, there will likely be benefits to other Third Parties across the state,
7 such as the State Agencies who are administering State Programs where income verification is
8 required (e.g., CalFresh, Medicaid, LifeLine).
9 1. High-Level Cost Estimates for the Other Major Scenarios Evaluated but not
10 Recommended – In-House IOU Income Verification
11 The Joint IOUs acknowledge that the guidance provided by the ALJ requests that parties
12 provide cost estimates for alternative scenarios to help the CPUC gather a full range of options to
13 compare and evaluate. One primary element of the Joint IOUs’ income verification proposal is
14 that the processes should be conducted by a Third Party and overseen by the CPUC. As
15 discussed in Section F.1 above, there are both cost and policy supporting arguments for this
16 structure. Regarding cost, utilizing the most accurate data set will limit costs associated with
17 handling calls and analysis for appeals. Additionally, utilizing one centralized party for
18 administration would minimize costs as economies of scale are able to be achieved. Furthermore,
19 a centralized administration structure would provide consistency across the state and help enable
20 smaller utilities to implement the IGFC structure. As the CPUC currently oversees a similar
21 process with the LifeLine program, they are the ideal party to oversee this process.
22 As stated above, the Joint IOUs are not able to estimate costs for establishing an in-house
23 IOU income verification process because, despite an exhaustive and ongoing search as described
24 in Section E of this chapter, the Joint IOUs lack access to a data source that would provide an
25 acceptable level of data accuracy. Adopting a data source with significant gaps and/or a high
26 probability of mis-assignment of Income Bracket would likely result in a higher number of
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1 customer appeals requiring manual verification of income documentation, thus the potential cost
2 of such a verification process are likely to be higher than the Joint IOUs’ proposal. Although the
3 Joint IOUs currently perform manual verification for a small subset of CARE/FERA customers
4 as described in Section E.5, the process is very costly and not scalable to meet the demands of a
5 process for the entire residential population of the Joint Utilities.
6 Implementation costs are discussed in the Implementation Chapter. Most Implementation
7 costs are not driven by any particular income verification method and as such are unlikely to
8 change significantly based on selection of a method other than the IOU recommended model.
9 Exceptions to this are calls relating to appeals. Those figures currently assume an accurate data
10 set based on state tax data and other state data sources. Should a less accurate data source be
11 used, the costs for handling calls related to the misassignment of Income Brackets and appeals
12 would increase roughly proportionally with the decreased accuracy of the data.
13 K. Timeline for Implementation of Third-Party Income Verification
14 As noted in the CPUC guidance memo, legislation will likely be required to allow the
15 FTB to provide taxpayer data to another entity (such as the CPUC supervising a Third Party
16 implementor) for purposes of IGFC income verification. It is possible that other legislation will
17 be needed to modify existing customer privacy laws as it relates to sharing of income data. The
18 Joint IOUs anticipate that any necessary legislation could still occur in the 2023 legislative
19 session. Assuming legislation is adopted swiftly in 2023, in 2024, any impacted state agency or
20 agencies could issue new regulations and implement any necessary changes to website privacy
21 statements, which could be made effective in January 1, 2025. In 2024, the CPUC could begin a
22 solicitation for a Third Party to perform the income verification function in anticipation of
23 receiving income data from the FTB and other state agencies once it becomes legally accessible
24 in the following year. In 2025, the Third Party would develop processes to receive FTB and data
25 from other state agencies and develop a process to determine household income and associated
26 household Income Brackets. Concurrently in 2025, the Third Party would enter into agreements
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1 with the IOUs and begin to work through data sharing protocols and requirements as well as
2 cybersecurity reviews. Work between the IOUs and the Third Parties is likely to begin in 2026,
3 and the remaining steps are discussed in detail in the Implementation chapter of this exhibit.121
4 In Summary:
5  2023: Legislation for FTB & State Agency Data should be passed.
6  2024: State agencies issue updated regulations and implement changes to privacy
7 statements; CPUC solicits for and contracts with a Third Party implementer.
8  2025: Third Party develops solution. Joint IOUs enter into contracts with the Third
9 Party for IOU implementation functions, such as data sharing. See Chapter 4 Section
10 C.1 Implementation Timing Table IV-17, line 8.
11  2026: System integration with Third Party begins, see Chapter 4 Section C.1
12 Implementation Timing Table IV-17, line 7.
121 The Joint IOUs have worked hard to assess a practicable timeline for implementation of the Joint
IOUs’ IGFC Income Verification proposal that balances the desire to expedite with the need to be
realistic and cost effective; that timeline is represented in this testimony. However, the Joint IOUs
are committed to implementing our respective IGFCs as soon as practicable, and we are open to
exploring other practicable solutions for accelerating the timeline proposed above.
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1 IV.
2 IMPLEMENTATION
3 A. Introduction
4 In this chapter, the Joint IOUs describe our plan for implementing the Joint IOUs’
5 proposed IGFCs, with a focus on: (1) required changes to the Joint IOUs’ respective billing
6 systems, (2) the need for increased customer support staff resources for activities such as
7 managing customer inquiries, and (3) adjustments to customer-facing rate tools. Other features of
8 the Joint IOUs’ implementation plan are covered elsewhere in this testimony but cross-
9 referenced in this chapter. For example, the Joint IOUs’ recommended income assignment and
10 verification process is covered above in Chapter 3 (Income Verification), while the overarching
11 marketing, education and outreach (ME&O) plans are described in Chapter 5 (Marketing
12 Education and Outreach), as well as in each of the Joint IOU’s utility-specific separate exhibit.
13 The showings in this Chapter are presented in the following sections:
14  Section B outlines the principles that guide the Joint IOUs’ implementation approach
15 and provides a high-level overview of our proposed plan.
16  Section C describes the significant billing technology infrastructure changes that will
17 be required to implement IGFCs for each of the Joint IOUs’ various residential rate
18 schedules. This section also outlines the Joint IOUs’ recommended approach to
19 transitioning customers as well as updates that will be required to online customer-
20 facing tools to incorporate IGFC rates.
21  Section D describes the Joint IOUs’ proposed coordination activities with Community
22 Choice Aggregators relating to IGFC implementation.
23  Section E describes how the Joint IOUs’ existing customer support processes will be
24 leveraged and, if necessary, amended to assist customers during the transition to
25 IGFC rates.
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1  Section F provides cost estimates for implementation activities that are not separately
2 covered in Chapters 3 and 5 (Income Verification and ME&O). Section F also covers
3 estimated costs associated with the Joint IOUs’ proposed Measurement and
4 Evaluation activities that are further detailed in Chapter 2 (Rate Design).
5  Section G describes how the Joint IOUs plan to address the Energy Division’s IGFC
6 Guidance Memo to assess implementation costs associated with other parties’
7 proposals.
8 The implementation cost estimates for the Joint IOUs proposal, provided in this chapter,
9 may need to be adjusted based on the final rate structure and other programmatic directives
10 provided in the CPUC’s Final Decision.
11 B. Implementation Objectives and Plan Overview
12 The Joint IOUs’ proposals for implementing the transition to rates with IGFCs may be
13 further refined based on additional stakeholder and customer feedback. Currently, our approach
14 seeks to:
15  Provide customers timely notifications about when the structural IGFC changes will
16 take effect.
17  Offer customers an opportunity to appeal their assignment to a given Income Bracket
18 before they are transitioned to a rate with IGFCs.
19  Promote customer understanding of why changes are being made to existing rates.
20  Educate customers about how they will be affected and where they can find
21 information about their IGFC for their current rate.
22  Provide customers information and tools to explore how they may benefit from
23 electrification and reduced bill volatility with the IGFC.
24 The Joint IOUs’ testimony on Marketing Education and Outreach (ME&O), outlined in
25 Chapter 5 below, covers the strategies the Joint IOUs propose to use to ensure timely
26 notifications and promote customer understanding. The proposed ME&O effort will include
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1 significant outreach to build customer awareness and understanding ahead of the transition to
2 rates with IGFCs. These efforts will also inform customers about their specific fixed charge
3 household Income Bracket to which they have been assigned and will describe how customers
4 can appeal that assignment prior to being transitioned to the new rates with IGFCs. The
5 Marketing approach outlined in Chapter 5 is further supported by the IOU-specific supplemental
6 exhibits which present cost estimates based on each IOU’s unique circumstances.
7 The Joint IOUs plan to transition all residential customers to rate plans with IGFCs, as
8 described in Chapters 1 (Policy) and 2 (Rate Design). In Section C, below, the Joint IOUs
9 elaborate on our planned transition approach. The following is a brief overview of the Joint
10 IOUs’ transition plan.
11  Prior to transitioning customers, the Joint IOUs will need to receive the Income
12 Bracket for each customer, which each IOU will utilize to provide its residential
13 customers with information on how they are likely to be impacted by the new IGFC
14 rate design.
15  Prior to the transition, each IOU will also need to make the necessary billing system
16 and website changes and provide IGFC-related training to our customer contact
17 center personnel.
18  After the IGFC transition, customers will continue to have access to online tools that
19 enable them to determine their best available rate given their historical usage patterns.
20  On an ongoing basis, customers will receive periodic notifications of any re-
21 assignment to a different Income Bracket, along with information about how to
22 appeal that assignment through the Third Party process.
23 C. Billing Information Technology System Changes
24 As is described in Chapter 2 (Rate Design), implementing an IGFC component into the
25 Joint IOUs’ residential electric rates will require structural billing system changes with
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1 reprogramming and related testing to modify each of the following residential rate plans to
2 include IGFC components:
Table IV-14
Joint IOU Residential Rates Impacted by IGFCs
IOU Rates that will be modified to include IGFCs

PG&E E-1, E-TOU-C, E-TOU-D, EV2-A, E-ELEC
SCE Domestic, TOU-D-4-9PM, TOU-D-5-8PM, TOU-D-PRIME
SDG&E TOU-DR-1, TOU-DR-2, DR, DR-SES, EV-TOU-2, EV- TOU-5, TOU-
ELEC
3 Additionally, the following rate modifiers that may be used in combination with each
4 residential rate plan will also be made available and tested for the new IGFC rates:
5  Legacy NEM 1 and 2
6  Net Billing
7  CARE, FERA
8  Medical Baseline
9  Critical Peak Pricing (SmartRate for PG&E, Summer Advantage Incentive for SCE,
10 Time of Use Plus for SDG&E)
11  Summer Discount Plan (SCE), Smart Energy Program (SCE), ACSaver (SDG&E),
12 Summer Saver (SDG&E)
13 Each of the Joint IOUs’ systems will need to interface with the database provided by the
14 Third Party, which will contain information about each customer’s categorization into the
15 appropriate household Income Bracket.122 Each IOU can then use this data to update its billing
122 The Joint IOUs expect that, due to customer privacy requirements, the data provided by the Third
Party will only indicate which of the four household income categories a customer’s electric service
account was assigned.
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1 system(s) and other tools to reflect the household Income Bracket assignment of each customer
2 so the account is charged the corresponding monthly fixed charge amount. The approach for
3 developing this database is described in Chapter 3 (Income Verification).
4 1. Implementation Timing
5 The Joint IOUs’ Billing Implementation timelines are shaped by dependencies with the
6 Third Party income verification process described in Chapter 3, as well as with the ME&O
7 efforts set forth in Chapter 5 of the Joint IOUs’ IGFC testimony. Some workstreams can be
8 completed in parallel but dependencies between the workstreams put constraints on when the
9 IGFC rates can go live in each of the Joint IOU’s billing systems. The Joint IOUs estimate a
10 minimum of 32 months from the time at which contracting and cyber security review have been
11 completed between each IOU and the Third Party, and the “go live” date on which customers
12 will begin to receive bills with IGFC rates.123 The following key implementation workstreams
13 are interdependent with income assignment/verification and ME&O:
14  Contracting and cybersecurity reviews must be completed with the Third Party
15  Income assignment data must be integrated with the Joint IOUs’ billing systems and
16 tested (estimated to span 12-18 months for integration plus another 1-2 months for
17 testing)
18  Modeling of customer bill impacts must be completed for IOUs who plan to send
19 customers this information in their pre-launch customer notifications (estimated to
20 span 1-3 months)
21  Customer notifications must be sent out enough months ahead of the initial launch of
22 IGFCs on bills to allow customers to respond and for the Third Party to resolve
23 appeals (estimated to span 6 months)
123 Timing and costs for PG&E to make necessary changes to its billing system may vary due to its
multi-year billing modernization initiative. Please see PG&E’s supplemental implementation chapter
for more details.
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1 Table III-12 illustrates a preliminary timeline for billing implementation and key
2 dependencies. Due to uncertainty about when the Third-Party income assignment and
3 verification system will provide household income bracket assignments, the Joint IOUs are
4 showing the timeline with reference to month “t” which indicates the month in which the IGFC
5 goes live in the Joint IOUs’ billing systems and customers begin receiving bills that show the
6 IGFC rate component and the reduced volumetric rate.
7 The Joint IOUs believe that income assignment information must be available and billing
8 calculations must be coded into the Joint IOUs’ billing systems roughly 12 months before the
9 “Go Live” month when customers would begin receiving bills under IGFC rates (line 1 in Table
10 IV-16 below). This would allow integration of the income assignment data with Joint IOUs’
11 billing systems (line 6), which would then allow rate modeling of what customers’ impacts
12 would be on the IGFC rates to enable such information to be included if and as appropriate in the
13 Joint IOUs’ pre-launch notifications sent to customers. These notifications will be staggered to
14 avoid overloading the Joint IOUs’ contact centers with customer inquiries triggered by the new
15 IGFC changes set forth therein. The exact timing for each utility will likely be different for each
16 IOU based on system capabilities and customer preferences.
17 The integration of income assignments into the billing system, as well as other needed
18 system changes, is estimated to take about 12-18 months. This is based on discussions with the
19 Joint IOUs’ Information Technology (IT) organizations as well as on prior experiences in system
20 integration with Third Party vendors when a two-way data feed is required. This effort would not
21 begin until contracting and cyber reviews have been completed with the Third Party which is
22 estimated to be the end of 2025 as described in the Income Verification Chapter Section H. This
23 timeline is an estimate across all three utilities and may increase or decrease in duration for a
24 given IOU, based on the time required for that IOU to execute these steps. Timing may also be
25 impacted by other unknowns related to implementation of the income verification process.
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Table IV-15
Implementation Milestones
Line Month Milestone/Activity Dependency (Line)
1 t minus 0 (t-0) Launch date when customers’ bills start 3
months separately showing the IGFC and reduced
volumetric charge
2 t-6 through t-1 Third party processes customer appeals 3
3 t-6 through t-3 Customer notifications sent 4
4 t-9 through t-7 Customer impacts are modeled and customer 5

communications are prepared
5 t-11 through t-10 Complete integration and testing of income 6

assignment data and billing system changes
6 t-12 Income assignment data from Third Party is 7

fully integrated into IOU’s billing system(s)
7 t-31 through t-13 IOUs Implement IT changes needed to 8
restructure rate calculations and bills to show
the IGFC line item and integrate income
assignment data flow from Third Party
8 t-32 Contracting and cybersecurity review n/a
completed with Third Party
1 2. Approach to Transitioning Customers
2 Once all of the required prerequisites have been accomplished, including: (1) Joint IOUs’
3 billing system changes are in place, (2) household income categorizations have been prepared by
4 a Third Party for all customers and transmitted to each IOU, and (3) appropriate pre-transition
5 ME&O has been accomplished, the Joint IOUs will transition their residential customers to IGFC
6 rates during a time of year when customers’ attention is less likely to be diverted to higher bills,
7 weather events, or potential outages. This timing aims to reduce the chance that the impact of the
8 transition to IGFCs could be confounded by other changes that also affect the customer’s total
9 bill.
10 At the time an IOU’s customers are transitioned to a rate with an IGFC, Net Energy
11 Metering and Net Billing customers will retain their banked bill credits accrued prior to the
12 addition of the IGFC, and these bill credits will carry forward through the end of their relevant
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1 true-up period. By design, rate changes or changes to an existing rate will not trigger the relevant
2 true-up period to end prematurely in the billing system.
3 Customers will be transitioned to the updated version of the same rate schedule on which
4 they currently take service (like for like), after it is modified to include the new IGFC line item
5 as well as the reduced volumetric rate. This avoids the customer having to navigate changes to
6 other elements of their rate structure, while also understanding the IGFC changes. The Joint
7 IOUs’ cost estimates assume that the transition to new rates will occur during one billing cycle
8 over approximately one month, with customers transitioning on their billing cycle date, which
9 varies by customer. However, the exact rollout approach is still being reviewed.
10 3. Updates to Current Customer-Facing Tools
11 The Joint IOUs currently provide residential customers access to online rate analysis
12 tools that help customers determine their best rate option. The tools leverage a given customer’s
13 latest year of historical electricity usage to determine what their bill would have been on
14 alternative rates and show customers the lowest cost rate. Current customer-facing tools will be
15 updated with IGFC rates to help customers determine their best rate option once they have
16 transitioned. Also, PG&E and SCE offer an online solar calculator to our customers, where
17 customers can use their last year’s usage history to examine the economics of investing in solar.
18 This tool will also be updated to reflect the changes in rate structure resulting from the final
19 IGFC decision.
20 SCE and PG&E also offer budget assistant tools that helps customers predict their
21 upcoming bill amounts. All of the Joint IOUs provide Bill-Forecast and/or Bill-to-Date
22 capabilities for their customers. These tools will likewise have to be updated.
23 4. New Tools
24 To support decarbonization through beneficial electrification, the Joint IOUs propose to
25 explore developing additional tools during the roll-out of IGFCs, such as adding technology
26 modeling to existing rate analysis tools or offering calculators that estimate the price of energy
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1 for an electrification technology compared to non-electric technologies. Our current cost
2 estimates do not include the cost of implementing and maintaining such tools.
3 D. Coordination with Community Choice Aggregators
4 The Joint IOUs propose to coordinate with Community Choice Aggregators (CCAs)
5 about the rate design changes adopted by the CPUC. As is explained in Chapter 2 (Rate Design),
6 generation costs will not be included in the IGFCs so CCA generation rates will not be directly
7 affected. Joint IOUs will also communicate with the CCAs in their service areas about IGFC
8 transition plans and monitor any CCA transition activities that might occur simultaneously so
9 that customer communication about the multiple changes to their billing is considered.
10 E. Customer Support Resources - Contact Centers
11 Each of the Joint IOUs has customer contact centers that collectively fielded about 12.5
12 million customer calls per year on average between 2019 and 2022 (PG&E fielding about 6.4
13 million customer calls per year, SCE fielding about 4.5 million, and SDG&E about 1.6 million
14 calls per year). The majority of these calls are related to billing and rates which, as a category,
15 generally have the highest average handle times among residential calls. The Joint IOUs
16 anticipate a considerable increase in customer inquiries before, during, and after deployment of
17 the IGFC rates because the changes required for the IGFC are a new rate framework that
18 customers will have to navigate. The Joint IOUs’ proposal will seek to minimize customer calls
19 through use of self-service Interactive Voice Response software and online resources to provide
20 information that may respond to the customers’ questions without requiring them to talk with a
21 live customer service representative. Even with those measures, the Joint IOUs expect that the
22 volume of calls coming into our call centers will increase, with the magnitude of increase
23 dependent in part on how accurate the household Income Bracket assignments are, which will be
24 influenced by the type of data available used in the process the CPUC ultimately adopts. An
25 approach like the Joint IOUs’ proposal to have an independent Third Party, supervised by the
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1 CPUC, that uses highly accurate data sources will likely result in fewer misassignments and
2 resulting customer appeals than an approach that depends on less reliable income data sources.
3 Based on the income assignment approach described in Chapter 3 (Income Verification), the
4 Joint IOUs expect that calls would increase significantly in the period before, during, and shortly
5 after deployment of the fixed charges. Each of the Joint IOUs has provided current estimates of
6 the associated costs of handling increased calls if the Joint IOUs’ IGFC rate and process
7 proposals are adopted without modification. Deviations from the Joint IOUs’ proposal have the
8 potential to increase these costs significantly. A summary of PG&E’s, SCE’s, and SDG&E’s
9 respective IOU-specific information can be found in each of their supplemental exhibits SCE-01,
10 PG&E-01, and SDG&E-01.
11 F. Costs
12 The Joint IOUs’ current cost estimates associated with our proposed income verification
13 approach are described in Chapter 3 (Income Verification). Costs associated with the Joint IOUs’
14 ME&O approaches are covered in Chapter 5 (Marketing, Education & Outreach). In this
15 Implementation chapter, the Joint IOUs outline and provide cost estimates for other costs
16 associated with implementation. For convenience, this Exhibit presents as Appendix C, a table
17 reflecting the currently estimated IOU costs under the Joint IOUs’ proposal for Implementation,
18 IOU Income Verification, and ME&O.
19 1. Implementation Costs
20 Key implementation costs include IT billing system changes and revisions to rate
21 calculations that support a number of customer-facing tools. Significant costs are also likely to
22 be incurred by the Joint IOUs’ contact centers, which will need to be appropriately staffed and
23 trained to field questions about how and why the IGFC-related changes are being made to
24 residential rates, as well as address customers’ questions about household Income Bracket
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1 assignment and verification. Table IV-16 below presents the currently estimated costs, by Joint
2 IOU, for the anticipated major cost areas:
Table IV-16
Estimated Implementation Costs by IOU
Cost per IOU (in thousands of dollars)

Cost Category PG&E SCE SDG&E Joint IOUs’ total
Billing IT Implementation including $5,000 $5,900 $6,500 $17,400
incorporation of income data into
billing system and coding and testing
of new rates
Updates of customer-facing online rate $1,010 $59 $1,200 $2,269
tools and Distributed Energy Resource
calculators
Contact Center Training and $15,910 $9,900 $5,138 $30,948
Operations (in the year prior to
deployment and two years after
deployment)
Program/Project Management of $2,400 n/a $1,560 $3,960
Implementation
Total: $24,320 $15,859 $14,398 $54,577
3 These estimates are based on the Joint IOUs’ implementation proposal, and they do not
4 reflect costs associated with other approaches to implementation, or the costs resulting from the
5 CPUC’s 2024 final decision, if it differs from the Joint IOUs’ opening testimony proposal herein.
6 The Joint IOUs request the authority to file an Advice Letter, within 90-days after the CPUC
7 issues its Final Decision. In this filing, the Joint IOUs will provide more detailed implementation
8 costs for which we will seek balancing account recovery, as described in Chapter 6 (Cost
9 Recovery).
10 Exhibits (PG&E-01), (SCE-01), and (SDG&E-01, et seq.) provide more detail on each of
11 the Joint IOUs’ currently expected individual, IOU-specific Implementation cost estimates.
12 Differences between costs and timing among the Joint IOUs are primarily explained by the
13 following:
14  SDG&E serves fewer customers than SCE and PG&E, thus SDG&E’s customer-
15 specific costs can be expected to be lower.
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1  SCE believes it has sufficient resources for Program/Project Management to
2 implement the Joint IOUs’ proposal but reserves the right to reassess costs once
3 the final decision’s approach is adopted.
4 2. Measurement and Evaluation
5 To evaluate the effectiveness of the transition to residential rates with IGFCs, the Joint
6 IOUs propose that the CPUC provide sufficient funding to assess whether the IGFC transition
7 has met the policy objectives outlined in the Assigned Commissioners Phase 1 Scoping Memo
8 for R-22-07-005 that are relevant to income-graduated fixed charges. One of the Joint IOUs
9 should be tasked with leading the Measurement and Evaluation (M&E) effort for all affected
10 IOUs.
11 The policy objectives to be evaluated include:
12  Goal (b) make electric bills more affordable and equitable
13  Goal (d) enable widespread electrification of buildings and transportation to meet the
14 state’s climate goals
15 The Joint IOUs’ proposed process for assessing and evaluating the IGFCs’ ability to meet
16 the goals set forth in the CPUC’s final Track A decision can be found in the Rate Design
17 Chapter.
18 G. High-Level Estimates of Timing and Cost for Other Anticipated Proposals
19 The Energy Division’s January 17, 2023, Guidance Memo states that “IOUs should
20 provide estimated timelines for different implementation options that the IOUs anticipate that
21 other parties will propose.”124 It is very difficult to anticipate and understand what other parties
22 are recommending without having seen the details of what they actually propose in their
23 concurrent Opening Testimony due April 7, 2023. The Joint IOUs have been informally
124 Administrative Law Judge’s Ruling Providing Guidance for Phase 1 Track A Proposals and
Requesting Comments on a Consulting Services Proposal (Jan. 17, 2023), Attachment 1,R.22-07-005,
Phase 1 Track A: Income Graduated Fixed Charge Guidance Memo, at p. 10.
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1 communicating with a number of stakeholders as we have worked to develop our Opening
2 Testimony, but parties have still been in the process of determining their specific proposals. The
3 Joint IOUs intend to review all proposals as quickly as possible, as well as conduct discovery to
4 gain clarification through data requests, if needed. Additional information evaluating and
5 comparing high level impacts of their proposals, including its impacts on implementation costs,
6 will be provided in Reply Testimony, to the extent practicable.
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1 V.
2 MARKETING EDUCATION & OUTREACH
3 A. Introduction
4 The Joint IOUs recognize that Marketing, Education, and Outreach (ME&O) is
5 fundamental to gaining customer awareness, understanding, and acceptance of the IGFC.
6 The Joint IOUs’ ME&O approach is constructed with the understanding that energy costs
7 are a disproportionate burden on lower-income families, with households across California
8 struggling to pay their bills. It is an opportunity to educate customers about how implementing
9 the IGFC will help address equity and affordability. Additionally, the IGFC sets the stage for
10 beneficial electrification in California by reducing volumetric charges for all residential
11 customers. Effective communication with customers before, during, and after introducing the
12 IGFC for electric service will be critical to improving customer understanding and reducing
13 complaints.
14 The overarching ME&O approach outlined in this chapter aims to demonstrate how the
15 Joint IOUs propose to test, adjust, and inform customers that the IGFC will help cover
16 incremental costs associated with providing electricity in a less regressive, more efficient
17 structure. The expected outcomes of the ME&O are awareness, understanding, and acceptance.
18 B. Research Insights
19 1. PG&E
20 In fall 2022, PG&E hired C-Space to conduct initial qualitative research exploring
21 customer reactions to messaging and positioning of descriptive language for a residential Fixed
22 Charge (PG&E’s 2022 Messaging Research). This initial research also identified customer-
23 facing names for this rate component that would be intuitive to customers and accurately
24 represent the intent underlying AB 205’s directives to the CPUC requiring it to approve
25 conforming residential IGFCs for all IOUs by mid-2024.
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1 More specifically, PG&E’s 2022 Messaging Research set out to understand:
2 1. Customer perceptions of a generic illustrative fixed charge rate component, and
3 whether their perceptions change based on potential impact to their bills;
4 2. Reactions to different amounts for this charge, as well as the reaction to the charge
5 varying based on household income categories;
6 3. How clearly did customers understand the exploratory descriptions, and what did
7 customers want to learn about the IGFC;
8 4. Best way(s) to message this charge for understanding and acceptance;
9 5. Through what communication channels would customers prefer to receive
10 information to learn about the IGFC;
11 6. Recommendations on what customer-facing name customers prefer for referring to
12 Fixed Charges.
13 PG&E’s 2022 Messaging Research was conducted in English and Spanish and included
14 both CARE and non-CARE customers. Methods included video focus groups of high,
15 medium, and low-income customers across hot and cool climate zones (three one-hour video
16 focus groups, 4-5 participants per group), in-depth one-to-one interviews in hot climates of
17 Spanish speakers, and an online survey (284 participants).
18 a) Stimuli
19 Customers were given a written description to introduce the concept of a Fixed Charge
20 based on an early generic understanding of a potential implementation. The description was
21 intentionally written in a straight-forward, factual manner to monitor initial customer reactions,
22 understanding of basic concepts, pinpoint areas of potential confusion or need for further clarity
23 of details (information we may not have today but that will come later in this process). The
24 research purposefully did not initially state the potential dollar amount(s)of residential fixed
25 charges, to allow early discussions to probe for what preconceived amounts could be in each
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1 customer’s mind. The initial descriptive statement, without yet putting forth any fixed charge
2 dollar amount, was provided as follows:
3
4 PG&E’s 2022 Messaging Research also probed customers on what potential names for
5 the charge might be considered, and provided the below examples, in addition to “Fixed Charge”
6 to gain reaction as to which one is most descriptive:
7  Basic Services Charge
8  Customer Services Charge
9  Base Charge
10  Standard Charge
11  Shared Services Charge
12 b) Key Findings
13 Results from PG&E’s 2022 focus groups and survey provided clear direction on how to
14 evolve messaging and outreach to achieve greater customer understanding and acceptance.
15 Highlights include:
16  Initial reactions to the IGFC involve confusion and distrust. Customers had a lot of
17 questions about how the charge would work and the impact it would have on their
18 bills.
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1  Customers from all income groups expected their bills to increase with the
2 implementation of the IGFC
3  Customers presumed the IGFC amount may go up to $20 or $25 dollars at most and
4 reacted negatively to any amount above this range.
5  There is a general concern that the IGFC would not incentivize conservation. Many,
6 especially CARE customers in the study, felt the IGFC would be unfair to those who
7 intentionally try to minimize their energy usage.
8  The income-based structure doesn’t sit well with most customers, as many are
9 confused about whether or how PG&E might get such income information as
10 well as perceived it as unfair. There should be clear and open communication
11 before implementing the IGFC. Customers would like to have data to
12 understand the calculations, real examples of what the charge covers, bill
13 mock-ups, and comparisons with the previous way of charging.
14  Email and bill inserts are preferred channels of communication, but some customers
15 point out that a personalized approach is also needed. They would like to have 3-6
16 months of notice before the new residential IGFC first appears in their bills.
17  When asked to provide feedback on potential names for the charge, customers most
18 preferred “Basic Services Charge,” followed by “Base Charge.” Customers said the
19 terms “Basic” and “Base” helped them identify that the charge represents the
20 foundational costs to maintain and operate their service, which is completely separate
21 from their energy usage. These terms also helped them understand that all residential
22 customers would experience a fixed charge.
23  PG&E’s 2022 Messaging Research indicated that moderate- and higher- income
24 customers understand and are even in favor of lower income customers not having to
25 bear the higher portion of this charge. However, their initial reactions to the concept
26 were not positive and they appeared to need further information, with real examples
27 of before and after bills, to increase understanding and acceptance.
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1 2. SDG&E
2 In the first quarter of 2023, SDG&E hired Travis Research to facilitate qualitative
3 research to help inform the ME&O strategy and implementation. The primary goals of the
4 qualitative research were to understand customers' current rate structure better, gauge their
5 reactions regarding an IGFC, and gain initial feedback on messaging areas. A total of 22 in-
6 depth interviews lasting up to one hour each was conducted with participants representing the
7 following customer segments: low income, moderate-income, and high-income, as well as
8 Spanish-speaking and existing solar customers.
9 SDG&E's key Q1 2023 research findings showed that:
10  Participants assumed the IGFC would automatically result in higher bills;
11  There was concern about increased usage being more affordable, with several
12 mentioning it goes against the conservation message that they've been receiving for
13 years;
14  Email was the preferred communication channel, slightly higher than direct mail
15 followed by the SDG&E app;
16  Participants indicated a preference for three- to six-months' notice before
17 implementation of the IGFC, although some thought that a month might be sufficient;
18 and
19  Several participants felt the dollar differential between the basic service fees for low-
20 income vs. high-income was too large. This further fueled the opinion that this
21 structure is unfair to customers who make more money; although some were more
22 open to the concept of higher-income households paying more.
23 3. SCE
24 In the first quarter of 2023, SCE conducted an online survey of nearly 700 residential
25 customers using the cloud-based platform, Alida, about perceptions of a fixed charge. Insights
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1 from SCE’s Q1 2023 Research generally align with the research insights from studies conducted
2 by PG&E and SDG&E.
3 The concept of an IGFC was not well-received by residential customers. The charge
4 evoked negative feelings of worry, helplessness, anger and/or confusion, with 66% feeling that it
5 was not acceptable for SCE to have access to their income data and that they believed it was
6 effectively a tax, and another way for SCE to make higher profits.
7 Other relevant insights from SCE’s Q1 2023 Research include:
8  Customers would be more likely to support a fixed charge based mainly on their
9 usage instead of solely on their income level (54% support vs. 25% oppose this
10 option).
11  Overall, customers believed it was not fair that the fixed charge be based on their
12 income, but instead, it should be based on usage. For example, energy conscious
13 lower users felt they were being penalized through fixed charges. Also, they stated
14 they already pay high property taxes, and believed that the IGFC would increase their
15 financial burden.
16  When asked if customers would seek out additional information on the charge, only
17 13% said no.
18 C. Joint IOU ME&O Proposal’s Objectives
19 The objectives for the Joint IOUs’ proposals for ME&O outreach are to:
20  Help customers understand that the way they have been charged for electricity will be
21 changing, why and when the new structure is being applied, what the funds will be
22 used for, how their bill may be impacted, and helpful ways to manage energy costs;
23 Inform existing residential customers of their household’s income-based
24 categorization and provide a way for customers to dispute their income bracket
25 assignment if incorrect
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1  Explain how the IGFC will be a separate line item shown on their bill rather than a
2 change in rate design; educate that the new IGFC charge line item on their bill had
3 previously been embedded in their volumetric energy use charge (and how all
4 customers’ volumetric charge will be going down once the fixed costs are relocated to
5 a separate line item);
6  Assure low-income CARE and FERA customers that their assistance program
7 discounts will not be affected by the IGFC, as well as that after the shift to a separate
8 IGFC line item, they may actually see lower bills as a result;
9  Craft targeted messaging for subgroups more likely to need specialized outreach, as
10 discussed below;
11  Explore the use of clean energy and electrification messaging, while explaining that
12 the pricing structure encourages adoption of technologies that allow expanded use of
13 lower-priced, cleaner, more plentiful electricity and reduced use of GHG-emitting
14 fossil fuels;
15 D. Lessons Learned from Residential Time-of-Use Transition Inform IGFC Outreach
16 Strategies
17 Recent IOU experiences transitioning millions of residential customers to default Time-
18 of-Use (TOU) rate plans provide useful insights to help inform customers, calm potential
19 backlash, and make sure vulnerable customers are included in the conversation. Key lessons
20 from the TOU default TOU transition, as shown in Table V-17 below, include communicating
21 with customers early and often about how the change will impact their bills, what the IGFC
22 covers, the reasoning behind it, and how it will create a more equitable, cleaner energy future.
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Table V-17
Useful Lessons from Residential Default TOU Transition to Inform IGFC
1 The Joint IOUs took RROIR’s default TOU transition lessons, summarized above, and
2 applied them to come up with the following IGFC outreach strategies:
3  Integrate and coordinate general market communications with targeted direct
4 channels, to create awareness, understanding, and acceptance;
5  Leverage the IOU’s network of CBOs, earned media, and external stakeholders, to
6 help increase awareness and understanding of the IGFC;
7  Use customer segmentation to create personalized, tailored communications;
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1  Take a multi-touch approach, with targeted marketing and outreach, to drive
2 awareness across all customers; and
3  Strategically integrate messaging into other marketing efforts, as appropriate.
4 E. Plans to Refine Outreach Plans Based on Findings from Additional Research
5 The Joint IOUs plan to conduct additional research prior to the start of outreach to
6 continue to learn from customers about their preferred approach to IGFC messaging and
7 education, so as to enable parties to further refine their marketing, education and outreach using
8 the customer voice. We will share research approaches and outcomes to align on results, and
9 implementation of these learnings on customer outreach. Areas of research may include:
10 1. Refine and validate language that clearly communicates the intended message;
11 2. Identify areas of potential confusion that may require further clarification
12 3. Validate materials and tools to address specific customer needs;
13 4. Learn when and how to differentiate messaging by the three phases and by bill impact
14 and customer segment;
15 5. Identify clear and well-received terminology to use in customer-facing
16 communications when referencing the IGFC; and
17 6. Test and validate specialized messaging necessary for customers in Income Brackets
18 1-4, as well as for solar customers segments within the various Income Brackets,
19 among other targeted customer segments as appropriate.
20 F. Target Audiences
21 The Joint IOUs propose to use bill analysis as well as IGFC household income category
22 assignments (once the Third Party makes that list available) to determine target audiences as well
23 as to assess impacts and determine customer segments. Customer segments may include low-
24 income, moderate- and high-income/low-usage users, as well as solar customers, and segments
25 large enough to warrant in-language communications, among others. These segments may
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1 require the Joint IOU’s proposal here to be adjusted for any further incremental outreach efforts
2 and specialized messaging found to be appropriate (as it cannot yet be included here). If so, such
3 additional specialized messaging for segment-specific communications would need to be tested
4 and validated through additional research as described in section F above.
5 G. Rollout and Implementation
6 To effectively support ME&O efforts, customer communications are planned to begin
7 approximately six months ahead of the Joint IOUs’ transition showing the IGFC on customers’
8 bills. The Joint IOUs propose multiple touchpoint communications in a phased approach, with
9 additional rate communications after the transition. In addition, outreach to external stakeholders
10 and community leaders, including elected officials, Community-Based Organizations (CBOs)

11 and media may start as soon as the CPUC’s final decision on the IGFC is issued.
12 Similar to the residential default TOU transition, the IOUs’ customers will need time to
13 become aware of the new IGFC rate structure, understand what costs are being pulled out of the
14 volumetric rate and charged separately through a new fixed charge line item, as well as
15 understand how this structural change will likely affect their own household electricity bills.
16 Therefore, the Joint IOUs propose to use a phased approach when communicating with
17 customers, to achieve customer awareness, understanding, and acceptance. This approach will
18 inform the timing of tactics and allow for progression of the messaging and outreach channels.
19 Phase 1 – Awareness: Setting the context for what the IGFC is, why it is being
20 implemented, and when it will take effect;
21 Phase 2 – Inform: Further emphasis on individual bill impacts including the income
22 category a customer has been assigned, and the income verification and appeals process;
23 these materials will also reinforce available online resources where customers can get
24 more information; and
25 Phase 3 –Engagement: After IGFC implementation, outreach will focus on the total bill
26 experience. Ongoing rate education will reinforce the desired behaviors to support the
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1 state’s decarbonization goals, along with the cost saving benefits of shifting usage out of
2 the higher cost and higher emissions TOU peak times, as well as promote other bill
3 management solutions.
4 Table V-18 (below) outlines three sample personas and touchpoints for each phase as
5 outlined above to help bring to life how a customer may experience education and outreach.
6 Actual customer touchpoints may vary depending on the customer segment, service territory and
7 any final directives provided through this proceeding.
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Table V-18
Joint IOUs’ Proposed Phased IGFC Communication Sample
1 H. Messaging Phases and Customer Journey
2 The Joint IOUs plan to differentiate messaging by the phases noted above, as well as by
3 bill impact and customer segment once it is tested and validated through additional customer
4 research.
5 In Phase I (Aware), all customers will receive base messaging that provides over-arching
6 information about the IGFC. Early messaging will communicate how the charge will apply to all
7 residential customers. Communications will detail the various fixed charge Income Brackets as
8 well as emphasize why the change is occurring.
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1 Marketing materials will be developed to illustrate what the proposed IGFC means for
2 customer bills, and to engage stakeholders, such as media, elected officials, and CBOs early in
3 the process. The change in the way customers are billed could easily be misunderstood unless
4 the narrative is communicated in advance and proactively supported by examples of customer
5 bill outcomes.
6 Building on Phase 1 (Aware), Phase 2 (Inform) will expand to clearly explain what to
7 expect when and where to find personalized information. This is a key step toward educating
8 customers about the proposed IGFC as the focus evolves to the benefits most customers will gain
9 from the rate structure, including helping to achieve California’s climate goals and increase
10 electrification. Messaging may also include how the IGFC helps low-income customers,
11 provides more transparency in electric bills, and makes bills more predictable.
12 The Joint IOUs also plan to create representative scenarios with representative amounts
13 of monthly usage combined with CPUC-adopted fixed charges for the various IGFC Income
14 Brackets. This will also include a comparison of several typical bills before and after the IGFC
15 is applied. These scenarios will include a breakdown of the IGFC and the volumetric usage
16 charge to illustrate how the costs are not new but have only been reallocated. As with other
17 major changes to rates or bill structures, it will be critical to steer customers toward tailored
18 information about how it may directly affect their own bills. This information will be provided
19 on the Joint IOUs’ websites, in customer notifications, as well as through other channels detailed
20 in the Tactics section below.
21 Once the IGFC has been implemented, the Joint IOUs propose to focus on Phase 3
22 (Engage) to continue educating customers about energy-saving and efficient electrification
23 behaviors and actions they can take to help manage their bills. Messaging may promote energy
24 management solutions, such as available incentives and rebates, building and transportation
25 electrification and Time-of-Use, and assistance programs.
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1 I. Integrated Campaign Tactics
2 The Joint IOUs plan to use various outreach channels to form a holistic, integrated
3 education and outreach campaign to support IGFC implementation. Tactics may include direct-
4 to-customer messaging, broad customer outreach, and paid channels, as well as IOU-owned
5 channels. In-language materials will be developed based on target audience, and may vary,
6 depending on each IOUs’ unique service area’s demographics.
7 Integrated campaign tactics may include:
8 1. Direct-to-Customer: Direct Marketing tactics will be part of specific, targeted
9 campaigns that will leverage customer segmentation data. Timing scenarios are for illustrative
10 purposes and may change due to exact implementation and operational requirements. These
11 tactics include:
12 a. Direct Email or Direct Mail: Direct channels will be used to inform customers
13 of the IGFC and will drive them online to learn more and find applicable bill examples that apply
14 to their households. This approach will help inform customers and satisfy their need to
15 understand how the IGFC will affect their electric bills. As with the TOU transition, the Joint
16 IOUs propose to deploy multiple touchpoints throughout the customer journey. The Joint IOUs
17 anticipate direct customer outreach may begin up to 180 to 90-days prior to the transition, to
18 notify them of their IGFC bracket and the appropriate cadence and response channels for
19 submitting bracket assignment change requests. Each IOU will adopt their own plan, depending
20 on the details of the final decision, the rate structure, and the IGFC implementation timing.
21 (1) For increased cost efficiencies, the Joint IOUs plan to adopt an “email
22 first” communication channel approach, in which customers will be contacted by email if they
23 have email addresses on file. Direct mail will be used for those customers without email
24 addresses on file.
25 b. Bill Package: Additional opportunities to directly reach customers about the
26 IGFC include leveraging customer bill inserts, “onsert” messages, and/or on-bill messaging at
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1 least 60-days or one to two bill cycles prior to implementation and throughout the first transition
2 year. These tactics will help educate customers at the point at which they may be the most
3 confused. A short explanation can guide customers to a website for more in-depth information.
4 2. Web Presence: Many customers will go online as the primary source of
5 information about the new IGFC. The Joint IOUs’ websites will provide both higher-level
6 explanations of the IGFC as well as more in-depth information of the services it covers and the
7 illustrative impacts it may have on bills. The web is an important channel to support and educate
8 as many customers as possible, when it is convenient for them to self-serve information. It is also
9 critical to help the Joint IOUs reduce the volume of follow-up calls to customer contact centers.
10 Content will include:
11 a. An overview of the income verification process, and guidance on how to appeal
12 their assigned income bracket;
13 b. Visual examples of high, medium, and lower electricity bills before and after the
14 IGFC is implemented. Research findings indicate this must be explained through visuals that
15 customers can easily understand. These visuals will illustrate how rates were previously
16 structured, how the IGFC will adjust their bills based on various fixed charge amounts and
17 usage, and how the per-unit price of energy is lowered accordingly for all customers
18 3. Media Relations/IOU Blogs: The Joint IOUs anticipate the IGFC will receive
19 press attention, perhaps even before the CPUC makes its final decision. Customers and the
20 media may misconstrue the IGFC as a new charge or many focus on the fixed charge amount
21 itself, without the full context of the reduction in volumetric rates that results from showing
22 customers on a separate line item their costs for basic services that do not vary depending on
23 their usage. The Joint IOUs will engage and inform media about the construct of the proposed
24 IGFC, the legislative impetus behind it as a way to better support decarbonization, how all other
25 customer classes within California’s IOUs as well as other utilities and business entities employ
26 fixed charges, as well as how customers’ bills within each electric IOU’s service territory, may
27 be impacted for each of the four Income Brackets. Accurate local reporting about the IGFCs will
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1 be critical. Communication channels will include media engagement, social media and the Joint
2 IOUs’ blogs (Currents for PG&E, News Center for SDG&E, and Energized by Edison for SCE).
3 4. Digital Newsletters: The Joint IOUs propose to leverage their own digital
4 newsletters or similar email communications to feature information about the IGFC and link to
5 more information available online.
6 5. Paid Media: Using the successful individual default TOU paid media campaigns
7 as a case study for localized, paid outreach, the Joint IOUs plan to consider employing a
8 campaign to inform customers about the bill change. Paired with outreach through other
9 channels, cost-effective paid media can be used to target customers by geography, income (at the
10 ZIP code Level), in-language, and provide supplementary coverage to support other channels.
11 Before committing to customer funding for this effort, the Joint IOUs will explore customer
12 interest levels for this channel of messaging, and test ads to ensure they are simple, clear,
13 resonant, and that they add value beyond utility-owned communication channels. Paid media
14 channels may include highly targeted digital, search, and community and/or ethnic print
15 advertising.
16 6. Social Media: Social media channels (i.e., Twitter, Facebook, Instagram,
17 Nextdoor, and/or YouTube) may be leveraged as an interactive and targeted way to broadly
18 inform customers about the IGFC. Posts will be, brief, clear, and easy to understand, and will
19 guide customers to obtain more information online via direct links.
20 7. Collateral: Printed materials, such as brochures and fact sheets, may be produced
21 for use with various customer segments and through various channels, such as outreach teams,
22 field representatives, branch offices, and CBOs.
23 a. Quick-Response (QR) Codes: QR codes may be leveraged, where appropriate
24 and feasible, on print materials as another opportunity to connect customers directly to the Joint
25 IOUs’ websites, where they can find additional information and resources.
26 8. Integration: The Joint IOUs each will also identify opportunities to integrate
27 fixed charge messaging into other relevant ME&O efforts being otherwise undertaken by that
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1 IOU. Message integration will be based on how well the audience and calls to action overlap,
2 and which channel is used. In addition, different channels will be evaluated individually for their
3 potential to carry multiple messages. Messaging will also be integrated into planned outreach to
4 specific target groups such as low income, solar, and other program outreach.
5 J. Community Outreach Tactics
6 1. Community Based Outreach (CBO)
7 The Joint IOUs will collaborate with CBOs to help educate customers about what the
8 IGFC means for them and engage them in solutions including connecting them to valuable
9 programs, services, and tools. These organizations represent the diverse communities of PG&E,
10 SCE, and SDG&E service areas, spanning across agricultural, residential, civic, and public
11 sectors. Many of these CBOs are small grassroots agencies serving individuals with access and
12 functional needs, including those who are multicultural, multilingual, low-income, seniors, and
13 Limited English Proficient (LEP) audiences in communities of concern.
14 Together, the CBOs and the Joint IOUs will communicate why and when the IGFC is
15 being implemented, how customers may be impacted, the income verification processes, and
16 how they can appeal their assigned household income bracket. Additionally, low-income
17 customers who participate in CARE and FERA will be reassured that their program participation
18 benefits will not be impacted and shown how they may get greater assistance from the IGFC.
19 Efforts to inform customers about available resources for managing energy costs will
20 continue. CBOs regularly share communications about programs and services, such as Energy
21 Savings Assistance, Medical Baseline, and available rebates and incentives, through social
22 media, newsletters, eblasts, blog posts, and direct stakeholder engagement efforts like digital
23 webinars.
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1 2. Joint IOU Employee Outreach
2 ME&O activities will also include outreach and education to employees prior to the
3 implementation of the IGFC. Employees may be engaged through internal channels, including
4 internal events, emails, and internal online resources. Internal customer-facing groups will be
5 leveraged to help drive early education about the IGFC for utility-employees, especially those
6 whose work is customer-facing about the IGFC. Customer-facing groups may include the
7 employees at each of the Joint IOUs’ Customer Contact Centers, payment locations and branch
8 offices, field service teams, and credit and collections groups.
9 3. External Stakeholders:
10 Information will be provided to external stakeholders, including elected officials, tribal
11 leaders, local media, and Community Choice Aggregators, to help them understand the impetus
12 of the IGFC as well as its benefits, and to address potential questions from constituents.
13 K. Metrics and Tracking
14 The Joint IOUs propose to measure and track key pieces of outreach data to monitor
15 progress in reaching customers with messages about the IGFC. In more broad-based messaging
16 channels, this will include measurements including press article mentions, reach and/or
17 impressions of paid media, outbound targeted communications (like e-newsletters), bill
18 messages, email response, call center feedback, customer listening post, etc. Reporting on
19 account-level notifications and customer responses regarding IGFC assignments will also be
20 tracked.
21 L. Budget
22 In this section, the Joint IOUs identify ME&O-associated research and tactics that require
23 incremental revenue recovery to implement. Essential implementation costs include incremental
24 labor resources needed to develop, manage and implement the proposed ME&O tactics and the
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1 deliverables. The Joint IOUs are recommending a digital-first approach to mitigate costs.
2 However, not all customers have an email address on file and will require direct mail, which is
3 more costly. Additional prices that can drive up the ME&O budget include paid advertising.
4 Again, to mitigate costs and still effectively reach customers, the Joint IOUs are proposing more
5 targeted paid media strategies. The following are estimated ME&O costs, by IOU:
Table V-19
Initial Estimates of ME&O Costs, by IOU
6 These are still relatively high-level estimates based on what is currently understood about
7 implementation of the Joint IOUs’ Opening Testimony proposals; they may not reflect costs
8 associated with implementing whatever differing directives the CPUC may issue in its final
9 decision at the end of this proceeding, after all the evidence has been considered. The Joint
10 IOUs respectfully request the authority for each IOU (including the small IOUs) to file an
11 Advice Letter within 90-days after the Final Decision in which each IOU will provide its more
12 detailed final ME&O costs to implement what the final decision authorized, for which the Joint
13 IOUs propose be recovered through the balancing account approach described in the Cost
14 Recovery Chapter.
15 Chapters PG&E-01, SCE-02, and SDG&E-01, et seq., provide more detail on each of the
16 Joint IOUs’ respective utility-specific cost estimates related to these proposals. Differences
17 among the estimated costs provided by each of the Joint IOUs are primarily based on the
18 residential population size as well as the demographics within each IOU’s unique service
19 territory, as well as other IOU-specific considerations such as numbers of media markets and
20 costs of using such media markets’ channels.
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1 VI.
2 COST RECOVERY
3 A. Introduction
4 This chapter discusses the cost recovery for the Joint IOUs’ proposal to establish an
5 income-graduated fixed charge for residential rates (IGFC) as discussed in other chapters of this
6 joint testimony and in the concurrently served IOU-specific testimony. This chapter discusses
7 the cost recovery and rate allocation (together “cost recovery”) for the Joint IOUs’ proposal to
8 establish an IGFC for residential rates, as discussed in other chapters of this joint testimony and
9 in the concurrently served IOU-specific testimony. The Joint IOUs provide preliminary cost
10 estimates in their separately submitted testimony sponsored by their respective witnesses. These
11 preliminary estimates are contingent on the Commission approving the IOUs’ proposals in the
12 Joint IOUs’ testimony and in the separately submitted testimony of each IOU. If the
13 Commission requires modifications to the Joint IOUs’ proposals, or approves different
14 proposals, the Joint IOUs’ estimates presented in their opening testimony would no longer be
15 applicable. As necessary, the Joint IOUs reserve the right to develop and submit updated cost
16 estimates based on the Commission’s final, adopted implementation approach. Specifically,
17 upon the issuance of a final Commission decision, the Joint IOUs expect that work for the
18 purpose of updating costs according to whatever was adopted will begin, and a process that can
19 allow cost recovery will be needed. After the Commission's final decision, as the IOUs, Energy
20 Division, and other interested third parties work through implementation, updates to these cost
21 estimates may be needed. Therefore, the Joint IOUs propose that the CPUC adopt cost recovery
22 mechanisms and processes that can accommodate the development of updated costs in the future.
23 Additionally, this chapter also discusses potential impacts to the cost recovery
24 mechanisms as a result of the new rate design associated with the IGFC and the corresponding
25 lower volumetric rate, shifting the recovery of certain categories of authorized costs from
26 volumetric rates to the fixed charge. The IOUs assert that the cost recovery authority for costs
128
1 that are moved from a volumetric basis to the IGFC will not change. The IOUs anticipate that
2 there may be changes needed to their respective tariffs and preliminary statements as a result of
3 shifting the recovery of these costs from volumetric rates to the IGFC and propose to submit
4 separate advice letters with those modifications prior to the fixed charge going into effect.
5 Finally, this chapter proposes an IGFC Calibration Mechanism that would allow for
6 timely recovery of any large revenue imbalances (i.e., undercollections) as a result of
7 uncertainties around the accuracy of the income level forecasting, especially in the initial years
8 after implementation. A calibration mechanism will allow the Joint IOUs to adjust rates timely
9 to avoid large undercollections growing throughout a given year to an amount that would
10 significantly impact the following year’s rates.
11 The Joint IOUs propose the following cost recovery proposals for the Commission’s
12 consideration and approval:
13  Authorize each Joint IOU to separately submit a Tier 2 advice letter after the approval
14 of the final decision to provide a budget consistent with the final decision and the
15 related revenue requirements;
16  Authorize each Joint IOU to separately submit a Tier 1 advice letter, 30-days after the
17 issuance of a final decision in this proceeding, to establish a new two-way balancing
18 account to recover the costs associated with the final IGFC approach approved by the
19 CPUC at the end of this proceeding, to be recovered from all customers through
20 public purpose program (PPP) rates;
21  Approve the Joint IOUs’ proposal that the Income Verification costs associated with
22 the IGFC be paid for through state funding rather than through ratepayers, which
23 would be accomplished by either having the IOU incur the Income Verification costs
24 as a debit in the IGFCBA with an offsetting credit for the amount of state funding
25 received or by having a Third-Party incur the costs with state funding provided
26 directly to the third party (in which case no debits or credits for Income Verification
27 would be included in the IGFCBA);
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1  Approve the Joint IOUs’ proposal to separately submit a Tier 1 advice letter before
2 the IGFC goes into effect to modify any applicable tariffs and/or preliminary
3 statements, as needed, to maintain appropriate operation of cost recovery mechanisms
4 for cost items removed from volumetric rates and included in the IGFC; and
5  Approve the Joint IOUs’ proposal for an IGFC Calibration Mechanism to allow for
6 timelier recovery of any large revenue imbalances.
7 The Joint IOUs request the Commission approve their Joint Cost Recovery Proposal as
8 reasonable and necessary to implement each of their proposals to establish an IGFC for
9 residential rates, to promote the state’s electrification policy and adoption of technologies that
10 use electricity and reduce or avoid greenhouse gases (GHG).
11 B. Cost Recovery and Rate Making Proposal
12 1. Cost Recovery Advice Letters Filings
13 The costs separately presented by each of the Joint IOUs in its respective utility-specific
14 testimony are estimates based on what is known at present and are not meant to represent each
15 individual IOUs’ forecasted budget or the amount requested for recovery in rates. Upon issuance
16 of a final decision in this proceeding, the Joint IOUs propose to separately submit Tier 1 advice
17 letters within 30-days to each establish a new two-way balancing account, the Income Graduated
18 Fixed Charge Balancing Account (IGFCBA). The Joint IOUs propose that the effective date for
19 this new balancing account be the effective date of the decision in order to allow for an
20 immediate commencement of the work needed to implement the new IGFC. All costs recorded
21 to the IGFCBA would be incremental and would not include costs requested in the IOUs’
22 General Rate Cases (GRCs) or other Commission-approved funding.
23 Additionally, the Joint IOUs propose that each IOU submit a separate Tier 2 advice letter
24 after the final decision is issued to provide a budget and the associated revenue requirements
25 based on the elements for the fixed charge adopted in the final decision. All actual costs incurred
26 by each IOU from the effective date of the final decision would be included in that IOU’s
130
1 respective budget submitted in its Tier 2 advice letter. The revenue requirements included in
2 these Tier 2 advice letters, once approved, would become the authorized revenue requirements
3 used in the IGFCBA, as further discussed below. All costs recorded to the IGFCBA would be
4 incremental and would not include costs requested in the respective IOUs’ General Rate Cases
5 (GRCs) or other Commission approved funding.
6 2. Income Graduated Fixed Charge Balancing Account (IGFCBA)
7 As described in the Joint IOUs’ testimony and in the separately submitted testimony by
8 each IOU, the IOUs have identified three main cost categories associated with the IGFC: (1)
9 income verification,125 (2) implementation, and (3) marketing, education, and outreach (ME&O).
10 The Joint IOUs propose that all costs incurred by the IOU, i.e., the actual incremental operations
11 and maintenance (O&M) expenses and the capital-related revenue requirements associated with
12 the actual incremental capital expenditures, be tracked and recorded in a new balancing account,
13 the Income Graduated Fixed Charge Balancing Account (IGFCBA).
14 The IGFCBA will be a two-way balancing account that will track and record on an
15 annual basis the difference between (1) actual O&M expenses incurred plus the capital-related
16 revenue requirement associated with actual capital expenditures, and (2) the total authorized
17 revenue requirement. To the extent the actual capital-related revenue requirements and O&M
18 expenses are greater than or lesser than the authorized revenue requirement, the Joint IOUs
19 respectfully request authorization to recover or return, without further reasonableness review, the
20 difference (i.e., the December 31 balance) on an annual basis. The Joint IOUs propose to return
21 or recover the December 31 balance in their respective IGFCBAs from all customers through the
22 following year’s PPP rates126 using the annual year-end rate change advice letter process adopted
125 Income verification costs recorded to the IGFCBA and recovered from customers would be those
costs not funded by the state of California‘s general fund as discussed below in Section B.4. of this
chapter.
126 PG&E would transfer the December 31 balance in its IGFCBA to its Public Policy Charge Balancing
Account (PPCBA). SCE would transfer the December 31 balance in its IGFCBA to its Public
131
1 in Resolution E-5127. The annual authorized revenue requirements would be recovered on a
2 forecast basis in PPP rates.127 The Joint IOUs propose to no longer utilize the IGFCBAs once
3 the ongoing revenue requirements associated with maintenance and operations can be forecast
4 and included as part of GRC base rates.128 This timing will likely vary by IOU given the
5 difference in the timing of each of the Joint IOU’s GRC Phase 1 four-year cycle.
6 The Joint IOUs believe that two-way balancing account treatment is appropriate to
7 recover the cost categories outlined above because these costs are incremental amounts necessary
8 to comply with Assembly Bill 205. Additionally, two-way balancing account treatment is
9 appropriate in situations where the program or activity is highly volatile, difficult to estimate,
10 outside the utility’s control, and/or material to customers and investors. Two-way balancing
11 account treatment in these circumstances would ensure that neither customers nor investors are
12 disadvantaged unduly by inherently unpredictable program costs. As previously described above
13 and in the separately supplemental testimony concurrently provided by each of the Joint IOUs as
14 separate links within the same Notice of Availability used to serve this Joint IOU Opening
15 Testimony, there is a high degree of uncertainty in the ultimate cost of establishing an income-
16 graduated fixed charge for residential rates. Two-way balancing account treatment provides a
17 reasonable method for addressing this uncertainty. A two-way balancing account requires the
18 Joint IOUs to return to their respective customers any revenue collected that exceed actual costs,
19 while allowing for unforeseen costs to be recovered.129
Purpose Programs Adjustment Mechanism (PPPAM). SDG&E would include the balance within its
annual PPP advice letter.
127 PG&E would record its forecast authorized revenue requirement in its PPCBA. SCE would record its
forecast authorized revenue requirement in its PPPAM. SDG&E would record its forecast authorized
revenue requirement in its IGFCBA.
128 For PG&E, the ongoing recovery once in GRC base rates would be via the Distribution Revenue
Adjustment Mechanism (DRAM). For SCE, the ongoing recovery once in GRC base rates would be
via the Authorized Distribution Base Revenue Requirement (ADBRR). For SDG&E, the ongoing
recovery once in GRC base rates would be via the Electric Distribution Fixed Costs Account
(EDFCA).
129 If the utility does not have the ability to recover unforeseen costs, that can result in deferred or
delayed work. To prevent this, the Commission has authorized two-way balancing accounts to ensure
132
1 The Commission adopted a similar cost-recovery approach in the Gas Leak Abatement
2 proceeding (Rulemaking (R.) 15-01-008), when it authorized PG&E to create the two-way New
3 Environmental Regulations Balancing Account (NERBA)130 for incremental costs to implement
4 best practices to reduce methane emissions from gas systems. In doing so, the CPUC explained:
5 “The primary purpose of balancing accounts is to

6 ensure that a utility recovers its CPUC authorized revenue
7 requirement from ratepayers for a given program or functions, but
8 no more or less. [¶] Two-way balancing accounts authorize a utility
9 to collect more or less than the authorized revenue requirement for
10 an existing program depending on actual costs, and are intended to
11 ensure that the utility does not make or lose money to uncertainties
12 in the scope of work. [¶] The Commission typically reviews the
13 entries and the net balance in a balancing account and authorizes
14 recovery from or refunds to rate payers on an annual basis.”131
15 More recently in D.22-11-009, the Commission authorized PG&E to establish a two-way

16 balancing subaccount, the Third-Party DGEMS Contracts Subaccount, in the Microgrids
17 Balancing Account (MGBA)132 to record and recover costs related to Third-Party contracts for
18 multi-season Distributed Generation-Enabled Microgrid Services (DGEMS). Although the
19 Commission considered authorizing a one-way balancing account in which the amounts to be
20 spent and recovered from customers would be capped, it noted that “the costs incurred by PG&E
21 in any given year under a Third-Party Distributed Generation Enabled Microgrid Service
22 contract is likely to be different than the costs of it reasonably forecast at the time of the
23 proposing solution. Thus, the use of a one-way (capped) balancing account is suboptimal given
24 the variability.”133 As such, the Commission considered it “more reasonable”134 to authorize a
25 two-way balancing account while controlling costs through stakeholder review via the GRC or a
26 separate application.
that work is not deferred or delayed. See Section 8.1.1 of D.21-08-036, which directed SCE to
establish a two-way Underground Structures Replacement Balancing Account (USRBA) given lack
of clarity on the scope of the work and the desire for work not to be deferred.
130 See PG&E Gas Preliminary Statement Part DZ.
131 D.17-06-015, at p. 131.
132 See PG&E Electric Preliminary Statement Part IT.
133 D.22-11-009, at p. 47.
134 D.22-11-009, at p. 47.
133
1 The Joint IOUs’ proposed approach to IGFC cost recovery, using a two-way balancing
2 account, allows the flexibility to “to ensure that the utility does not make or lose money due to
3 uncertainties in the scope of work.”135 Oversight would be achieved through the submittal of the
4 Tier 2 advice letters outlined above that would include a budget and revenue requirements based
5 on the adopted final decision. Therefore, it is reasonable and appropriate for the Commission to
6 authorize the establishment of two-way balancing accounts to recover the costs associated with
7 the IGFC for the reasons outlined above.
8 1. Recovery of the IGFCBA Via the PPP Rate Component
9 As discussed in the Policy and Rate Design Chapters above, the legislature intended
10 implementation of the IGFC to support California’s efforts against climate change and remove
11 the current disincentive to broad-scale customer adoption of beneficial electrification
12 technologies to reduce California’s GHG emissions. For these reasons, it is appropriate that the
13 costs needed to help support the movement to IGFCs are recovered from all customers because
14 all customers should experience the intended benefits of this change. The PPP charge funds
15 programs considered by law to benefit society. This includes costs to administer income
16 qualified programs such as the California Alternative Rates for Energy program (CARE) and
17 energy efficiency programs. Given the public purpose benefit associated with the integration of
18 IGFCs into residential rates, the related costs for this transition should be included in the PPP
19 rate, as the most appropriate rate component in which to recover costs associated with this shift.
20 2. Recovery of Income Verification Costs through State Funding
21 As discussed in the Policy Chapter, the Joint IOUs propose that the state of California’s
22 general fund be used as the primary funding source for costs related to income verification. As
23 discussed in the Income Verification Chapter of this Exhibit, recovery of all income verification
24 costs through rates could overly exacerbate the unaffordability of electric rates; thus, its inclusion
25 in rates could inappropriately disincentivize the beneficial electrification that caused the
135 D.17-06-015, at p. 131.
134
1 legislature to pass AB 205. The Joint IOUs propose to collaborate with the CPUC to seek state
2 funding for these costs, lest the well-intended income verification for a first-ever progressive
3 fixed charge structure undermine the overall legislative intent.
4 If the costs associated with income verification are incurred by the IOU, but seeking state
5 funding for income verification is successful, the Joint IOUs propose that these costs be recorded
6 as debit entries in the IGFCBA with any offsetting state funding received recorded as credit
7 entries in the IGFCBA, which results in a net zero cost to ratepayers. If the IOUs do not incur
8 the costs associated with income verification (i.e., the costs are directly incurred by a Third-Party
9 and are not “charged back” to the IOU), no amounts (debits or credits) would need to be
10 recorded in the IGFCBA. Ultimately, if there are any income verification costs incurred by the
11 IOUs that are not offset with state funding, those costs would be recoverable from ratepayers via
12 the IGFCBA and the PPP rate as discussed in Sections B.2. and B.3 of this chapter.
13 C. Recovery of Authorized Costs via the IGFC
14 The new rate design associated with the IGFC, and lower volumetric rate will shift how
15 certain categories of authorized costs are recovered from a volumetric basis to a fixed charge.
16 The Commission will ultimately determine which costs will be included in IGFCs and moved out
17 of the volumetric rates. Shifting recovery from a volumetric basis to an IGFC basis should not
18 change the cost recovery authority for costs that are moved. For instance, GRC Phase 1
19 authorized distribution costs should still be entitled to rate recovery for differences between
20 forecast and actual sales or forecast and actual IGFC revenues. Other costs that are subject to
21 two-way balancing account recovery for the difference between authorized costs and actual costs
22 must continue to be recoverable on that basis, whether they are part of a fixed charge or
23 volumetric rate.
24 The Joint IOUs have not yet been able to determine what, if any of their respective tariffs
25 or preliminary statements, might need modification if costs authorized for recovery therein are
26 moved to a fixed charge, instead of volumetric rates. That evaluation will depend on what the
135
1 Commission approves for inclusion in the fixed charge. Therefore, the Joint IOUs propose that,
2 after the CPUC’s final decision but before the fixed charge goes into effect, each IOU would
3 separately submit its own Tier 1 advice letter with proposed modifications to tariffs and/or
4 preliminary statements, if needed to maintain appropriate operation of cost recovery mechanisms
5 for cost items removed from volumetric rates and included in the fixed charge.
6 D. IGFC Calibration Mechanism
7 To enable ratesetting, the Joint IOUs will each need to forecast the number of residential
8 customer accounts that will fall into each IGFC income brackets. If there are deviations in what
9 the IOUs have forecasted compared to the income brackets that customers actually fall in when
10 billed, the potential exists for revenue imbalances that would have to be recovered in the
11 following year’s rates. It is most likely that this potential revenue imbalance would be an
12 undercollection, meaning that the forecasts overestimate the number of customers that would be
13 billed at the higher IGFC brackets because customers moving down in income level are more
14 likely to notify the utility given the potential economic hardship relative to customers who saw
15 increases in income.
16 Given the uncertainty around how accurate the income bracket assignment will be,
17 especially in the initial years after implementation, the Joint IOUs propose the authorization of
18 an IGFC Calibration Mechanism to allow for timelier recovery of any large revenue imbalance
19 undercollections as opposed to allowing the undercollections to grow throughout the year to an
20 amount that significantly impacts the following year’s rates.
21 The Joint IOUs’ proposed IGFC Calibration Mechanism would function as follows:
22  Beginning each year in January, and every month thereafter throughout the remainder
23 of the calendar year, an IOU will track the amount of revenue that was forecast to be
24 recovered via the IGFC (this can be done either at an aggregate level or at each
136
1 income bracket with the IGFC) and the amount that was actually recovered via the
2 IGFC.136
3  If the revenue imbalance results in an undercollection that exceeds 10 percent of the
4 forecast revenue to be recovered from the IGFC on a cumulative monthly basis,137 an
5 IGFC Calibration threshold will have been exceeded.138
6  Once an IGFC Calibration Mechanism has occurred, the IOU will have the option in
7 its next regularly scheduled rate change to do one of the following three activities:
8 o Option 1: Increase rates for the remainder of the calendar year139 to recover the
9 IGFC Calibration Mechanism Balance that exists as of one month preceding the
10 date of the rate change (i.e., a June 1 rate change would implement the under
11 collection that had accumulated from January through April, since May numbers
12 are not available until after June 1) AND adjust the IGFC income bracket
13 customer account forecast to mitigate the revenue imbalance from continuing to
14 accumulate on a going-forward basis; OR
136 This functionality will need to be built into the IOUs’ respective billing and revenue reporting
systems, the costs of which would record to the IGFCBA.
137 For example, if the IGFC was set to recover $200 million in both January and February and only
recovered $185 million and $180 million, respectively, the 10 percent IGFC Calibration Mechanism
Threshold would not have been reached. However, in March, if the IGFC was set to recover $200
million and only recovered $170 million, the 10 percent IGFC Calibration Mechanism would have
been reached because only $535 million of the $600 million forecasted would have been recovered
(and that difference (i.e., the $65 million) exceeds 10 percent of $600 million (i.e., $60 million)).
138 There are no new cost recovery accounts needed to track the undercollection. Instead, the
undercollection will record to the IOUs’ existing revenue balancing accounts based on which costs
are ultimately included in the IGFC.
139 For example, if the IGFC Calibration Mechanism Balance was $300 million as of April 30 (and
assuming all of the costs included in the IGFC are distribution-related costs solely for the purposes of
this example), the IOU would increase its June 1 distribution-related revenue requirement by $300
million for the remainder of the calendar year to be recovered from all customers. Whatever balance
remained at the end of the calendar year would be included in the annual year-end ratesetting true-up
process as directed in Resolution E-5217. Assuming perfect ratemaking and all else being equal, this
would result in an undercollection of only $125 million at year-end instead of $300 million (and
significantly more given the undercollection would likely have continued into the remaining months
of the year).
137
1 o Option 2: Only adjust the IGFC income bracket customer account forecast to
2 mitigate the revenue imbalance from continuing to accumulate on a going-
3 forward basis (but do not change rates to recover the existing IGFC Calibration
4 Mechanism Balance);140 OR
5 o Option 3: Take no action.
6  The Joint IOUs would use their Tier 1 or Tier 2 rate change advice letters (based on
7 the tier level presently used) to effectuate the IGFC Calibration Mechanism process,
8 including the rationale for selecting Option 1, 2 or 3.
9  The Joint IOUs propose to have the IGFC Calibration Mechanism take effect in the
10 second year following the implementation of the IGFC to minimize rate volatility in
11 the first year of implementation (recognizing this could result in sizeable
12 undercollections that would be recovered in the second year after implementation).
13 Ideally, the IGFC Calibration Mechanism will ultimately prove to be unnecessary.
14 However, the Joint IOUs respectfully request that the Commission authorize the establishment of
15 this mechanism to protect against the potential for sizeable undercollections that would result in
16 upward pressure on rates for customers in the following year and cash flow and financing
17 impacts to the utility in the current year.
140 This option would most likely be utilized in situations where an undercollection resulted from
deviations to the IGFC income level forecast, but the revenue balancing account overall was
overcollected or barely undercollected. This could occur, for example, during periods where an IOU
overcollects on the volumetric portion of the rate due to weather-related events like heat waves.
138

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Proceeding.: R.

Joint Testimony of Southern California Edison

I. POLICY .......................................................................................................1 M. Backstrom

Section Page Witness

C. Basis for the Average IGFC Level.................................................34

Section Page Witness

a) DSS’s “CalFresh Confirm” Data .................................. 62

Section Page Witness

E. Customer Support Resources - Contact Centers ..........................104

Section Page Witness

VI. COST RECOVERY .................................................................................128 R. Madsen

Table I-1 Illustrative Proposed IGFCs ..............................................................................................5

Figure I-1 Residential Rate Design Across the U.S..........................................................................8

17 support achievement of the state’s decarbonization goals.

25 administered by a Third Party contractor supervised by the California Public Utilities

6 California’s residential electric customers to income categories is unprecedented, and requires

11 reasons, as described in Chapter 3 of this Exhibit, income verification should be overseen by a

13 the necessary protocols to ensure a fair and positive customer experience.

16 statutory language requiring default residential rates to be almost exclusively charged on a

1 See R.22-07-005, Phase 1 Track A: Income-Graduated Fixed Charge Guidance Memo at p. 9.

5 herein as well as in each of the Joint IOUs’ individual rate calculations.

9 more equitable and affordable manner relative to the status quo.

14 all proposals are guided by the following key principles:

16 more equitable manner from all customers through an IGFC;

20 volumetric rates and the IGFC;

21  Encourage electrification by reducing volumetric rates for all customers, providing a

25 will remain flat and predictable from month to month; and

3 these high-cost hours.

4 Today, lower- and moderate-income customers, on average, pay a greater percentage of

7 Figure I-2 below.) As customers adopt environmentally-beneficial electrification technologies in

12 verification as accurate as possible, while also aiming for a cost-effective implementation of a

13 major structural change for all residential customers.

22  Bracket 1 – CARE customers with incomes less than 100% of FPL;

3  Bracket 3 – Non-CARE or FERA customers with incomes up to or equivalent to

4 650% of FPL; and

5  Bracket 4 – Non-CARE customers with incomes above 650% of FPL.

6 While it is important to maintain affordability for the most vulnerable low-income

8 categories be sufficient to enable meaningful reductions in volumetric rates that incentivize

14 IOU’s residential rate schedules.

3 Non-CARE/FERA <= 650% $51 $73 $51

5 the sections below.

6 a) Improving Equity by Bringing Rates Closer to Cost of Service.

14 design across the U.S. as shown in Figure I-1 below.

9 lower volumetric rates also will be vital to enabling electric appliances/equipment/vehicles to

10 better support the transition to a decarbonized economy.

11 b) Addressing Affordability and Protecting Low-Income Customers.

12 Introducing even a traditional non-income-graduated fixed charge coupled with lower

9 significantly lower volumetric charges.

14 these customers, on average, without changing their energy consumption.

18 Energy Division as part of this proceeding.

8 c) Encouraging Beneficial Electrification.

1 Widespread electrification of customer homes and vehicles will be critical in accelerating

4 of California’s GHG inventory as reported. Customer adoption of beneficial electrification

6 with these two sectors.

2 Powered by increasingly clean electricity, electrification will help replace traditional

7 in compliance with state law.

10 economic disincentive for the adoption of electrification technologies.11 A fully electrified

6 put the achievement of our GHG reduction goals at risk.

16 electrification was predicted to increase by one-third in California.16

3 $1,771 and $1,929, respectively.