Key Takeaways
Californians are seeing rate increases to pay for wild fires and storms.
The situation could get worse as California passed a bill to price electricity according to income, rather than usage, with wealthier customers paying more and lower income customers less.
The bill, passed in 2022, is to encourage electrification of vehicles and heating systems to advance California’s climate agenda.
Some of the bill’s supporters now oppose its implementation, realizing that cheaper electricity for some could mean higher usage, increasing its demand and prices.
In November, Pacific Gas and Electric (PG&E) announced that its customers would be paying about $35 more a month on their utility bills in 2024 after the California Public Utilities Commission approved its new rates. The rate increase will add over $400 more a year to customers’ bills and will cover improvements to power lines and gas pipeline safety. PG&E customers could see their bills increase even more this year if the public utility commission approves additional proposals from PG&E to recover costs from last year’s storms. If approved, customers could see their bills go up an additional $14 to $15 a month in a state that has worked diligently to achieve some of the highest electricity rates in the nation. .
And, it could get worse for higher income customers as PG&E is one of three major utility companies in California whose rates could soon be based on “equity” due to Assembly Bill 205. The bill allows the California Public Utilities Commission to charge customers fixed rates based on their income. Low income customers would save about $300 a year under the new law, according to Fox11 Los Angeles, while households earning more than $180,000 would pay an average of $500 more a year on their electricity bills. The regulatory agency’s deadline for approving the suggested changes is July 1, 2024, but the changes would not take effect right away.
California Assembly Bill 205
California’s Democratic-led Legislature passed Assembly Bill 205 in 2022, directing the California Public Utilities Commission (CPUC) to authorize the income-based charges by July of this year. The purpose of the rule is to lower the overall average monthly bills for low-income customers, with the result that higher income customers will pay more. The legislation was part of a budget trailer bill, which is a mechanism the legislature and governor use to quickly pass new laws on a fast-tracked timeline with little to no public discussion. AB 205’s debate on the Assembly floor on June 29 of 2022 does not mention the rule. The Assembly passed the bill on a party line vote of 64 to 13.
The state’s three largest electric utility companies, Southern California Edison Company, Pacific Gas and Electric Company and San Diego Gas & Electric Company, proposed the plan. The plan will break down monthly bills into a fixed rate, plus a usage charge based on consumption. According to Terrie Prosper, a spokesman for the CPUC, because customers can expect a flat rate from their utility companies, the “usage rate” is expected to go down. A lower usage rate could mean lower costs for consumers to charge an electric vehicle or run an electric heat pump–technologies needed to move away from the state’s use of oil and gas. It is believed that a lower usage rate is a critical step toward meeting California’s climate goals. Opponents, however, see the law weakening incentives to conserve electricity and/or raising costs for customers using solar energy.
California’s utilities already set discounted rates for lower-income Californians through the California Alternate Rates for Energy (CARE) program. For the CARE Program, electric companies with 100,000 or more customer accounts in California offer a 30 percent to 35 percent discount on electric bills to income-qualified customers as required by Public Utilities Code Section 739.1. Electric companies with fewer than 100,000 customer accounts in California offer a 20 percent discount. In 2021, the California Public Utilities Commission (CPUC) authorized over $11 billion for the California Alternate Rates for Energy (CARE), Family Electric Rate Assistance (FERA), and Energy Savings Assistance (ESA) programs of the state’s investor-owned utilities for 2021 to 2026. The programs are to benefit low-income customers by reducing their energy bills, increasing the comfort and safety of their homes, and promoting energy education and efficiency practices that lead to a reliable electricity grid and a lower carbon footprint.
A group of Democratic state lawmakers, however, recently announced an effort to roll back the rule that would set rates based on customer income instead of energy use—many of the same lawmakers that originally voted for the rule. One lawmaker wants an urgency clause that would allow the repeal to go into effect immediately with the governor’s approval. These lawmakers are worried about protecting Californians from high-cost energy bills that could result from the rule.
Conclusion
Typically, electricity bills reflect the amount of electricity a specific household or facility uses, similar to the way all consumer goods are priced. But, according to Assembly Bill 205, California could see electricity charges based on income level instead. The electric bills would be broken down into a fixed fee and electric usage fee. The original thought was the rule would reduce energy usage and make room for electric vehicles and electric heat pumps to allow California to meet its energy climate goals. But opponents were quick to indicate that usage could go up and solar owners could be affected negatively. Clearly, there can be huge negative ramifications from quickly moving to programs to accelerate climate agendas without the necessary forethought and research. California has a history of doing just that and this rule could be one of those programs.
