Affordability Rulemaking
The 2022 Affordability Ratio Calculator is the most recently issued final version of the Affordability Ratio Calculator and should be used for preparing AR metrics for inclusion in applications and reports going forward, until a more updated final calculator is issued in 2024.
Background
The California Public Utilities Commission (CPUC) recognizes that consumers need affordable utility services to ensure health, safety, and participation in society. On July 12, 2018, the CPUC issued an Order Instituting Rulemaking 18-07-006 to examine the impact of essential energy, water, and communications service charges for residential households, given their socioeconomic statuses.
The rulemaking is currently divided into three phases. Phase 1, which concluded in July 2020 with Decision D.20-07-032, established the affordability framework by defining affordability, setting residential household essential service level for electric, natural gas, water, and communications services, and adopting three metrics to assess the affordability of these services.
Phase 2 focuses on implementation of the affordability framework in various CPUC efforts, including but not limited to rate cases, grants, and program assessments. As part of Phase 2, a staff proposal on how to implement the affordability framework in CPUC proceedings and other efforts, as well as how to forecast future values of the affordability metrics and the process by which the metrics will be calculated, was issued in November 2021.
Phase 3 explores some of the energy rate mitigation proposals that were discussed at recent En Banc hearings held in February/March 2022 on California’s ongoing energy affordability concerns. For specifics on this phase, please refer to the Fifth Amended Scoping Memo and Ruling issued in June 2022.
For details on the affordability framework and the three phases of the proceeding, please see below.
Affordability Metrics & Associated Concepts
Definition
The degree to which a representative household is able to pay for an essential utility service charge, given its socioeconomic status.
Essential Service Level
Electric:
baseline quantity
Gas:
baseline quantity
Water:
six hundred cubic feet
Communications:
residental basic telephone service, 25 Mbps downstream / 3 Mbps upstream broadband
Affordability Metrics
The Affordability Ratio (AR) metric quantifies the percentage of a representative household’s income that would be used to pay for an essential utility service, after non-discretionary expenses such as housing and other essential utility service charges are deducted from the household’s income. The higher an AR, the less affordable the utility service. The AR may be calculated for a single essential utility service, a combination of services, or all essential utility services combined. To best understand how essential utility service charges impact lower-income households, the proceeding specifically examines AR20, which represents the household with income at the 20th percentile in a given geography.
The Hours at Minimum Wage (HM) metric quantifies the hours of earned employment at the city minimum wage necessary for a household to pay for essential utility service charges. The minimum wage-based metric also implicitly considers the impact of essential utility service charges on lower-income customers regardless of the socioeconomic conditions of the community as a whole.
The CalEnviroScreen (CES) metric represents a metric that is independent of utility bill data and is comprise of 21 population characteristics and pollution burden indicators. Each census tract has a composite CES score imputed from the 21 indicators, with higher scores representing communities that are more negatively impacted. California Environmental Protection Agency released a revised CES 4.0 in May 2022 which was used in this report.
Areas of Affordability Concern
The areas of affordability concern (AAC) for each industry are the geographical areas where the AR20 scores are greater than the affordability demarcations. These demarcations represent the inflection points of the distribution of all AR20 scores across the state. The demarcations are 15% for essential electric and communications services, and 10% of essential gas and water services. The AACs are presented in census tract geography. For detail tables of AACs for each industry, please refer to the Annual Affordability Reports and Updates section.
Disadvantaged Community
The CalEnviroScreen (CES) represents a metric that is independent of utility bill data and is comprise of 21 population characteristics and pollution burden indicators. Each census tract has a composite CES score imputed from the 21 indicators, with higher scores representing communities that are more negatively impacted. Using the CES, the California Environmental Protection Agency (CalEPA) identifies disadvantages communities (DACs) as census tracts with CES scores that rank in the top 25 percent.
Proceeding Schedule and Milestones
The CPUC held several public workshops and webinars and introduced two staff proposals across the three phases of the proceeding. For access to the recordings and reference material pertaining to each of the three phases, please visit the pages dedicated to each phase below.
Phase 1 – Establishment of essential utility service levels and affordability metrics
Phase 1 concluded with Decision 20-07-032, which establishes the affordability metrics and orders the issuance of an annual affordability report by CPUC staff. For details of key documentation that have contributed to this phase, please click here.
Phase 2 – Implementation of affordability metrics
Phase 2 builds on the foundation laid by Decision 20-07-032 and establishes how to use the metrics to provide forward-looking analyses and implement them in various CPUC efforts. In June 2022 the CPUC issued a Proposed Decision on implementing the affordability metrics. Phase 2 concluded with Decision 22-08-023 on August 4, 2022. For details of key documentation that have contributed to this phase, please click here.
Phase 3 – Strategies to mitigate future energy rate increases
Phase 3 focuses on energy and is set to consider strategies to mitigate future rate increase. The Fifth Amended Scoping Memo and Ruling highlights all the topics under consideration and sets forth the schedule for this phase. For details of key documentation that have contributed to this phase, please click here.
Proceeding Records and Public Engagement
The CPUC encourages public engagement and participation. For access to all proceeding documents or to view and leave public comments, please visit the Docket Card for R.18-07-006.
Annual Affordability Reports and Updates
Per Decision.20-07-032, CPUC staff is to publish an Annual Affordability Report to discuss affordability findings over time. To incorporate the most updated socioeconomic and bills data and integrate them into the calculation of affordability ratio metric, staff has developed the Affordability Ratio Calculator (ARC) to allow stakeholders to download and use. The annual report and the ARC are integral components of the annual refresh of affordability reports and updates, which also contain interactive maps, complete lists of AAC and DAC census tracts, as well as other reference materials and work papers. For each annual refresh, please visit the pages below.
2021 and 2022 Annual Affordability Refresh
For further inquiries, please direct them to Ankit Jain at ankit.jain@cpuc.ca.gov.
Affordability
Quick References
Itemized List of Revenue Requests
Proceeding Updates
Affordability Analysis
2021 and 2022 Annual Affordability Refresh
2022 Affordability Ratio Calculator
(Recommend to save this file onto your local drive (right-click and save) due to large file size.)