PG&E shifts rate increase away from big business

Small businesses and homeowners will bear the brunt of Pacific Gas and Electric Co. rate increases in January - a reversal from last week, when the utility said big businesses would shoulder more of the burden.

Small businesses will pay 6.9 percent more for electricity than they do this year, while residential rates will rise 4.1 percent, PG&E reported late Thursday.

Just one week ago, the company said rates in January would rise 1.3 percent for small businesses and 0.9 percent, on average, for homeowners. Large businesses - from grocery stores to manufacturing plants - were expected to face the steepest increases, as much as 6.4 percent.

But after a ruling by state energy regulators on Thursday, PG&E recalculated its rates and gave big business a break. Now, some large companies will see their electrical rates drop in January by 3.7 percent while others face a more modest rise of 1.9 percent.

Small-business owners say the rate increase won't kill them. But they aren't happy to pay more while some corporations get a cut.

"Small businesses, to a large degree, don't have lobbyists," said Scott Hauge, a San Francisco insurance broker and president of the Small Business California advocacy group. "What we see is the people who are represented - consumers and larger businesses - seem to get a better deal."

Why and how did PG&E change its rates so much in just one week? The answers lie in the byzantine process through which California energy regulators approve electricity rates.

Each year, utilities such as San Francisco's PG&E perform an exercise called a "true-up." They look at their costs to provide electricity, run energy-efficiency programs and pay off long-term power contracts with the state, among other things. Then they calculate how much they'll charge their customers, based on rate structures that state regulators have already approved.

The rates PG&E announced last week were based on the company's latest true-up. PG&E faced a Sept. 1 deadline for filing that information with the state.

But on Thursday, the California Public Utilities Commission approved changes in the underlying rate structures that PG&E uses. The commission's vote determined what proportion of the utility's revenue next year will come from different types of customers - how much would come from homeowners, from farms, from factories, from shops.

As a result, PG&E had to recalculate its rates, producing a wildly different set of numbers. Spokesman Jon Tremayne said the utility couldn't incorporate the new rate structures into the numbers it announced last week because the commission hadn't voted on them yet.

"We don't know the commission will approve a rate design until they approve it," he said.

The significant changes in big businesses' electrical rates were not the result of last-minute pressure from large corporations, he said. The changes approved by the utilities commission on Thursday had been under discussion since late 2005.

"The proposal on how that rate design would work we filed almost two years ago," Tremayne said.

Big companies faced the steepest rate increases during California's energy crisis of 2000 and 2001. Since then, PG&E has been shifting more of the financial burden away from large corporate customers and onto homeowners and small businesses. The recalculated rates for next year reflect that shift.

The rates may change one more time before they go into effect. PG&E will perform another true-up in December, using more recent financial data. Any changes at that point, however, are expected to be small.

For small businesses, a 6.9 percent boost in electrical rates probably won't spell financial doom. But it joins a long list of escalating prices entrepreneurs face every day.

The Arizmendi Bakery in San Francisco's Inner Sunset neighborhood spent about $480 for electricity in July, said Lorenzo Dodaro, one of the shop's workers and owners. The higher rates will tack on an additional $33.

"It wouldn't affect us that much, but everything's going up," Dodaro said. "Fuel's more expensive, so all our suppliers are charging us more."

E-mail David R. Baker at dbaker@sfchronicle.com.

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This article appeared on page C - 1 of the San Francisco Chronicle