By California law, all of the state's investor-owned gas and electric utilities must charge residential customers more per energy unit as the customer's energy use increases. This policy gives customers a financial incentive to conserve energy. Customers who are able to maintain usage at levels within the lowest-priced "tiers" of usage will pay considerably lower average rates per unit of energy used and much lower total bills than customers with usage in higher tiers.
For PG&E's customers, electric use is divided into five tiers, based on increasing levels of usage. (Although you will see usage divided into all five tiers on your electric bill, the same price currently applies to electric usage in the two highest tiers.) Electric tiers work like many mobile phone plans—you get a low rate when your use stays within certain limits. If you go over the allotted quantity, you will be charged a higher rate for each unit of that additional usage, just as if you went over the allotted minutes on your mobile phone plan.
The first pricing tier is also referred to as your "baseline quantity," or "baseline allowance". This is a quantity specified in units of energy used per day, so you will be assigned higher baseline quantities for billing periods that have larger numbers of days. Baseline quantities also vary by climate zone, so that customers who are located in areas that have periods of extremely hot and/or cold weather each year will be assigned higher baseline allowances. The second and higher tiers are defined as increasing percentages of the baseline quantity.
Your gas bill also has increasing prices for increasing amounts of usage with baseline quantities that vary by climate zone. However, your gas usage is divided into just two pricing tiers. You are charged one price for the gas that you use up to the baseline quantity, and a second, higher price for any gas used in excess of the baseline quantity. Find Your Own Baseline