1. 1 SB 695 Impact On Rates LIOB- March 30, 2010

2. 2 Current Residential Electric Rate Structure  Multi-tiered rate structure (up to 5 Tiers) based on the customer’s quantity of electricity usage.  Customers with the lowest consumption (defined as Tiers 1 and 2) pay the lowest per-unit charge.  Cost for electricity increases with each higher tier.  Tier 1 applies to usage up to a customer’s baseline usage depending on climate zone and utility. Tier 2 applies to usage between the baseline and 130% of baseline.

3. 3 AB1X – Cap on Rates  Since February 2001, electric residential rates for Tiers 1 and 2 have remained capped under AB1X.  All subsequent revenue requirement increases assigned to residential customers have applied only to users in Tiers 3, 4, and 5.

4. 4 SB 695  On October 11, 2009, SB 695 was signed by the Governor into law.  SB 695 lifted the caps set by AB1X.  The bill allows Tier 1 and Tier 2 rates to be increased within specific limits.

5. 5 SB 695 Mandates Different Rate Increases for CARE and Non-CARE Customers  Rate increases for non-CARE customers within Tier 1 and Tier 2 are based on the annual percentage change in the consumer price index. Rates cannot increase less than 3% or more than 5% per year.  Rates for CARE customers within Tier 1 and Tier 2 are determined in conjunction with a rate determined by the CalWORKs* program. Any rate increase cannot exceed 3% per year. * California Work Opportunity and Responsibility to Kids Act

6. 6 D.09-12-048  CPUC issued D.09-12-048 in response to utility applications to modify the residential rate structure for both CARE and non-CARE customers.  Future annual filings to implement proposed changes in residential rates as authorized by Senate Bill 695 shall be done through Tier 2 advice letters.  All rate changes are effective from January 1, 2010.

7. 7 Impact on non-CARE rates  Tier 1 and Tier 2 rates go up by 3%  Rates for Tiers 3, 4, and 5 decrease commensurately to result in revenue neutrality

8. 8 Impact on CARE rates  No increase in Tier 1 and Tier 2 rates. Reason-Increase in Tier 1 and Tier 2 CARE rates is linked to the rate determined by CalWORKs program which in turn is subject to an annual cost of living adjustment (COLA). COLA for the CalWORKs program was suspended for the 2009- 2010 fiscal year.  Tier 3 rate will go down. Reason - CARE rates are 80% of non-CARE rates and Tier 3 non-CARE rates are scheduled to go down.