Time of Use Billing with SDG&E

The sun sets on solar panels and SDGE rates go up with time of use billing

The clock is ticking. Get control of the SDG&E TOU energy rate plan transition.

Will the TOU schedule affect me if I don't have solar? Am I grandfathered from a TOU shift?

If you’re a current San Diego Gas & Electric customer and don’t have solar or have had solar since before March 30, 2018 and believe you are grandfathered into tiered rate billing, there are some significant billing changes that you may already be experiencing. The change is a passive transition from your current tiered rate to what’s called “Time of Use” (TOU) electricity rates. This began on March 1, 2019. Many customers are unaware of this reversible change to their electricity cost structure that nearly all SDG&E customers are or will be experiencing. The conversion is scheduled to roll out throughout 2019 and potentially into 2020. It may have impacted your bill already or will soon. The good news is you can choose which billing structure works best for your family. Before you decide, it’s important to understand how your electricity rate baseline is determined, understand your TOU rate schedule choices and consider a couple energy management options.

Before learning about TOU plans, it’s good to cover some basics about how your current tiered rate works. Tiered rate billing, in simple terms, increases the cost of electricity as you use more. Electricity costs start out each month at their lowest while the household is under its Baseline Allowance. San Diego Gas Electric gives different Baseline Allowance amounts for different homes. SDG&E’s online calculator [https://www.sdge.com/baseline-allowance-calculator] can give you some insight into how different regions, home set-ups and seasons all are factored in to determine each household’s baseline. The baseline is the approximated minimal amount of energy your house would need for basic needs – not much beyond lighting and keeping a refrigerator running. Once your individual household’s baseline is determined by the utility, on a tiered rate plan the lowest rate will be for electricity used before 130% of that baseline allowance is reached. There is a higher rate charge for electricity used from 130% to 400% of baseline, and a highest rate charge for all electricity used above 400% of baseline – this highest rate is called a “High Usage Charge” or “Super User Rate.” And SDG&E’s Summer Rates (June 1 to October 31) schedule, when peak energy use hits, increases everyone’s rates for a 5-month period across the board.

What is the best the TOU pricing plan?

As for Time of Use billing, San Diego Gas Electric’s TOU rate plans have different electricity prices for different times of the day. Let’s look at two popular plans, TOU-DR1 and TOU-DR2: the most expensive time periods for both of these two plans is during peak energy demand; its called “On Peak,” and falls between 4:00 PM to 9:00 PM. Electric energy however, is cheaper during “Off Peak” time periods. On the DR1 plan, Off Peak is between 6:00 AM and 4:00 PM on weekdays (with an exception during March and April) and also from 9:00 PM until Midnight. Between midnight and 6:00 AM (and also between 10:00 AM and 2:00 PM during March and April) the rate is billed at the “Super Off Peak” pricing which is the lowest rate on this plan. DR1’s weekend and holiday billing structures have the same On Peak hours, but Off Peak hours switch from 2:00 PM until 4:00 PM then again from 9:00 PM until midnight time periods. Midnight until 2:00 PM falls under Super Off Peak billing. That’s a lot to take in. TOU DR2 billing rate structure are easier to understand and only has two rate categories: On Peak is from 4:00 PM until 9:00 PM every day, and Off Peak is every other time. Both of these TOU plans shift to different electricity prices for “Summer” and “Winter” sections of the year.

Another TOU pricing plan is called TOU-Plus (TOU-P) and it involves vigilant attention to energy consumption on “Reduce Your Use” event days. SDG&E can impose up to 18 of these Reduce Your Use days per year which drastically increase prices of energy between 2:00PM and 6:00PM for that day – this is based on the understanding that customers shifting to this plan must self-enforce zero or minimal energy consumption during this period. For households that can be flexible enough to essentially avoid using electric energy during these peak energy hours on the selected days, there are good savings to be had. This is the pricing plan for people willing to pay additional attention to SDG&E’s Reduce Your Use days schedule and announcements and don’t mind the inconvenience of occasional, self-imposed power “outages” as a trade-off for SDG&E charging lower electricity rates throughout the rest of the calendar days.

For solar customers, the DR-SES rate plan is the current default plan. The TOU-P plan described above is a good option, but comes with the need to heed “Reduce Your Use” days. Another good option is the TOU-DR plan, which does not require observation of those “Reduce Your Use” restrictions. And as Electric Vehicles become more popular, the TOU-EV-5 is a good choice, provided you use that electric car enough to overcome a monthly fee of sixteen dollars on the plan.

No matter whether you do or don’t have a solar system, you can proactively choose to remain on your current tiered billing plan. And if you’ve determined that tiered billing is the better plan for you than SDGE TOU plans, we have put together some tips on making this selection process through SDG&E easier on our website: https://www.bakerhomeenergy.com/tou-migration (On our website you will also find more information on solar savings, the benefits of producing your own renewable energy, solar industry news that affects residential solar, and more)

What is net energy metering?

The best defense against high energy costs, regardless of changing billing structures, is to produce your own solar energy. Southern California is host to two factors that make a home solar panels one of the best financial investments a homeowner can make: high energy costs and lots of sunshine. A solar energy system allows families to produce their own renewable energy for use during the day. Excess energy (clean energy) is sold back to the utility. Baker designs home solar systems to offset, through net energy metering, 100% of the homeowner's electricity in order to maximize savings. The total cost of the system usually pays for itself in five to six years – after that it’s free energy from the sun.

And there’s another factor that makes 2019 the very best time to get into solar or solar + a home battery system: The Investment Tax Credit. This is a federal program that was created to encourage home solar use back when energy rates were lower and residential solar systems, and the entire solar industry, were in their early stages of development. Today, solar systems are so efficient and solar savings are go great that that there’s no longer the need for a tax incentive, so it is expiring. That means this is the last year to take advantage of the Federal Investment Tax Credit (ITC) at its full rate of 30%. Here’s an example of the impressive financial benefit you could experience. Let’s say a solar system costs around $30,000 to purchase and install. That means most taxpayers can deduct $9000 from their 2019 income tax payment. Every year, homeowners walk away from thousands of dollars because they delay their clean energy solar or solar + home battery purchase. So, Baker would like to ensure we educate as many homeowners as possible about the reasons to invest in solar systems this year. 2019 is the final year to get the full 30% benefit; for this your system needs to be installed and operational before the end of the year. Solar panels will still be a smart financial investment after the ITC is gone, and still the best way to create renewable, clean energy, but the system will just take longer to pay for itself.

Should I change my SDG&E rate plan? How do I contact SDG&E?

Be warned if you don’t think any of this rate plan switch applies to you. Many households that installed solar panels before March 30, 2018 were told that their current tiered electricity rates were grandfathered. Those customers still need to confirm their plan – some are finding they were switched to a TOU plan already or will be shifting to one soon. Your San Diego Gas Electric bill will tell you which billing plan you’re on. To actively choose your plan you’ll want to log into your SDG&E account at https://myaccount.sdge.com or call 1.877.558.1674. If you’re an SDG&E customer and haven’t yet been switched over, and you qualify to remain on tiered billing, you can prevent shifting to a TOU plan by mailing your request to SDG&E at SDG&E, P.O. Box 129831, San Diego, CA 92112-9831.

Here’s an overview of how the transition applies to households with solar:

SDG&E customers who activated their solar energy system before June 29, 2016 have the option – so long as tiered billing plans remain available – to stay on the tiered billing plan and sell back power on the Net Metering 1.0 plan until the 20-year anniversary of their system. (Net Metering is the buy/sell rate plan for the public utilities)

SDG&E customers who activated their solar system before March 30, 2018 get to delay the passive shift to TOU until the earlier of either five years from their system’s activation date or in June 2021.

SDG&E customers who activated a system after March 30, 2018 are already on a TOU plan; the default plan is the DR-SES plan, but they can select an alternate plan. TOU plans keep the same baseline allotment of energy usage and also have a rate increase for energy consumption beyond 130%, but the two popular TOU plans do away with an additional increase after 400% of baseline energy usage.

Another major factor for residential solar customers to consider is the effect TOU has on Net Metering. With TOU rates, solar customers will sell excess produced energy back to SDG&E at the lower mid-day Off Peak rates but need to use SDG&E energy during the costlier On Peak hours.

TOU plans incentivize customers to lower energy use during peak times when energy is in higher demand to ease the load on SDG&E’s system to meet this spiked energy usage. The generation of this energy occurs at Peaker Plants – facilities the electric utilities use that burn natural gas to create electric energy. Energy from natural gas Peaker Plants is produced quickly to meet the immediate demand, then shut down; compared to residential solar, solar industry energy, or hydroelectric production it is much dirtier.

As an interesting wrinkle in all of this, SDG&E is offering temporary “One Year No-Risk Pricing” to most customers; this allows customers to give SDGE TOU DR1 or DR2 pricing plans a try; if they don’t save, they can switch back to tiered billing and SDG&E will pay back, via a credit, the difference over one year. It could be useful to evaluate a new rate plan and see what your actual utility bill would have been during the same period. Essentially, this is a no-risk option for an ‘apples to apples’ comparison between SDGE TOU and their tiered plan.

Some non-billing measures to consider for residential solar customers looking to expand their energy independence are home energy storage solutions - using your solar system for charging a home battery . At current electricity prices, money savings is not the primary benefit of energy storage. The main benefit of charging home battery systems still remains power outage protection with some benefit to energy cost. But as TOU billing reaches more households and rates increase overall, energy storage will become an option to help mitigate peak rates.

The customer transition to TOU is being undertaken by three major California public utilities: PG&E (Pacific Gas & Electric), SCE (Southern California Edison), and SDG&E (San Diego Gas & Electric). It’s important for you and your family to consider your electricity needs now and what you might need in the future (will there be a plug-in electric vehicle in your garage in the next 10 years?). Get on the right rate structure to ensure you’re on the plan that will give you the best solar savings and the best value on your energy - It’s the smart thing to do!