Why is California considering an income-based fixed charge on utility bills?

California utility bills may go up even higher

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California electricity rates are some of the highest in the nation, with electricity customers in our state paying rates two to three times more than the national average.  And yet the California Public Utilities Commission (CPUC) is currently considering changes to our electricity bills that will make matters worse. 

The state’s utility companies and other organizations have proposed a new fixed charge on utility bills between $30 to $70 per month, which many are calling the “Utility Tax.”  This would be the highest such fee in the country and three to seven times the national average.

The proposals come after the State Legislature approved and the Governor signed Assembly Bill 205 last year that mandates restructuring electricity pricing based on income. 

The way it would work is that everyone would pay this fixed charge on their utility bill, in addition to a per kilowatt/hour rate, which would go down slightly. The size of the fee would be based on your income. Even though the kilowatt/hour rate would go down, the new high fixed charge is expected to result in bills going up for millions of Californians.

Bills are expected to go up especially for those who live in small homes or apartments or are focused on energy conservation and efficiency.  That’s because a high fixed charge and lower volumetric rate would end up reducing bills for high electricity users, and increasing bills for lower electricity users. 

That’s a big problem for consumers and the environment. 

By increasing bills on low energy users and decreasing bills on high energy uses, high fixed charges incentivize energy waste and discourage energy conservation, efficiency and rooftop solar. That means people who try hard to turn off their lights when they aren’t using a room, are thoughtful about their heating and cooling use, or have invested in energy efficient appliances, could see their bills go up, whereas people who are less focused on energy conservation or have large homes that use a lot of energy could see their bills go down. 

The proposed “utility tax” takes away control from consumers on their energy bill and is a reversal of the state’s long tradition of incentivizing behavior that benefits society and helps us hit our climate and energy policy goals.  

This has a critical economic impact beyond the individual consumer.  When a household uses less energy, not only does that household save, it contributes to lower costs for the entire system, which benefits all customers. Incentivizing higher consumption on the other hand could consequently drive up costs overall and in doing so could make high electricity bills even worse.  

Supporters of high fixed charges argue that the fee is necessary to pay for wildfire preparedness, updates to the electrical grid, and the cost of electrification throughout the state.  Some proponents also argue the lower kilowatt/hour rate will encourage electrification. While we share the goal of electrifying vehicles and buildings, imposing high fixed charges is a false solution. Analysis from the Clean Coalition and several utility experts demonstrates that high fixed charges improve the economics of electrification marginally at best. 

Bottom-line, this new rate structure would punish households that use less energy, encourage high consumption, and increase bills for many Californians. We need the Public Utilities Commission to reject these high fixed charges and we need the state legislature to step in and prevent more proposals like this in the future. 

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Jenn Engstrom

State Director, CALPIRG

Jenn directs CALPIRG’s advocacy efforts, and is a leading voice in Sacramento and across the state on protecting public health, consumer protections and defending our democracy. Jenn has served on the CALPIRG board for the past two years before stepping into her current role. Most recently, as the deputy national director for the Student PIRGs, she helped run our national effort to mobilize hundreds of thousands of students to vote. She led CALPIRG’s organizing team for years and managed our citizen outreach offices across the state, running campaigns to ban single-use plastic bags, stop the overuse of antibiotics, and go 100% renewable energy. Jenn lives in Los Angeles, where she enjoys spending time at the beach and visiting the many amazing restaurants in her city.

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