How Rates Are Set

PG&E's gas and electric rates are set through a process overseen by government regulatory agencies, with full public input. Rates include authorized costs to provide electricity generation, and electric and gas transmission and distribution services, including a fair rate of return on capital provided by PG&E investors. They also factor in the costs of state-approved programs and incentives to encourage energy efficiency and renewable energy, and funding for programs to help lower-income customers afford their electric and gas service.

Baseline Quantities and Electric and Gas Rates for Your Home

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

How Baseline Quantities Are Set

The methods for establishing gas and electric baseline quantities are set in accordance with state law, and the adopted quantities are reviewed and updated about once every three years by the California Public Utilities Commission.

Baseline quantities are defined separately for gas and electricity, and are specified in units of energy used per day. Baseline quantities are defined for 10 broadly-defined climate zones across all of those parts of California where PG&E provides service. The baseline quantities are also defined separately for summer and winter season gas and electric usage, in order to reflect seasonal variations in the amounts of energy needed to meet basic heating and cooling requirements.

Customers with documented medical needs that require additional energy usage may apply for and receive higher medical baseline quantity allowances. Also, customers who must rely upon permanently installed electric heating as the primary heat source for their homes are assigned higher electric baseline quantities to reflect this need.

Related Terms

  • Baseline Quantity:
    A minimum level of usage that is intended to satisfy a substantial portion of the energy needs of the average customer in a specific service area. Baseline quantities are set within a range specified by state law and implemented with the approval of the CPUC. Baseline quantities can vary depending on your location, the time of year (summer or winter), and your home's heating sources.

    Rate Tiers:
    Levels of energy usage that are priced beginning with Tier 1, the lowest, or baseline, usage level. Each increment, or tier, of use beyond the baseline level is charged at an increasingly higher price. The tiered structure was originally adopted by the State of California to provide a financial incentive for residential consumers to conserve energy.

    View All Terms