New utility rate change touches political nerve over California’s rising electricity costs

California utility regulators decision last week to change the way millions of households pay their electric bills has kicked up a political firestorm over rising costs of living and the state’s clean energy transition.

Under the new rules, 11 million customer’s of the state’s investor-owned utilities will see electricity prices on their monthly bill fall by between 8% and 18% and the addition of a fixed charge, a set fee to cover infrastructure expenses unrelated to power use.

Proponents of the change say its needed to keep rates down while meeting California’s climate goals, including adoption of electric vehicles and removal of gas appliances in buildings. Opponents say it discourages energy conservation and could harm low-income customers.

State lawmakers sparred at length in a committee hearing Wednesday about the merits of a bill to cap the fixed charge amount. The measure narrowly passed to appropriations, with members measures directed at California’s rising electricity costs.

Several of the lawmakers said the response they heard from constituents to the Public Utility Commission’s decision was the largest they had heard in months if not years.

“It’s time to exercise our legislative authority over the PUC instead of granting them a blank check. We need to ask for accountability and look for other ways to achieve savings,” said the bill’s author Assemblymember Jacqui Irwin, D-Thousand Oaks. “That is the only way to actually help low income residents and move the bar forward on electrification.”

The legislative effort, AB 1999, would set a limit on yearly increases to the fixed fee, establish a 2028 sunset date for the program and require the CPUC to do additional reporting on clean energy investments and impacts on electricity rates.

An original form that would have halted the regulator’s rate restructure move entirely was put on ice by legislative leadership, but given permission to get a hearing ahead of an approaching legislative deadline following public outcry over last week’s vote.

The change at the California Public Utilities Commission last week applies to electric customers of Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric. Fixed charges are a departure from billing structures long held by California’s major utilities, but they are a mainstay of electric billing across the country, at $11 on average.

That includes Sacramento’s own Municipal Utilities District, which has some of the state’s lowest electricity rates and charges customers a fixed fee of $24 a month for infrastructure costs.

Starting in late 2025 or early 2026, most customers will see a fixed charge of $24 on their monthly bills coupled with lower per-kilowatt-hour rates. Low-income households that qualify for discounted rates will pay a lower fixed charge of $6 or $12 through existing state programs.

A California Energy Commission analysis found that these rules are expected to benefit high electricity users the most, with savings on their monthly bills of up to $20 a month. Solar panel owners and low electricity users, meanwhile, are expected to pay close to $10 more per month.

For example, household in PG&E territory bringing in more than $62,000 in annual income and moderate energy use will see a very slight decrease in their monthly electricity bill, roughly $2.

But millions of others are likely to see increases at a time when Californians currently pay the second-highest electricity rates in the nation after Hawaii, and PG&E customers saw new rate hikes this year, with the average household paying an additional $34.50.

PG&E’s electric service territory stretches from Santa Barbara and Kern counties to California’s northernmost stretches, as well as east through mountainous Plumas, Nevada and Placer counties.

The fixed charge policy was included in a budget proposal by Gov. Gavin Newsom’s administration in 2022, and opponents have framed the policy as a power grab by utilities.

Yet the impact of the policy change is likely to be relatively muted either way, longtime electricity rate experts have argued. Many originally proposed the idea of an income-graduated fixed charge as one way to pay for reduced electricity rates.

“I think we can all agree that rates in California are not working,” said Merrian Borgeson, California director of climate and energy at the Natural Resources Defense Council, which supports the change and opposes Iwin’s bill, arguing it would hamper progress.

“We need to do a lot of things to fix this problem... nothing can rapidly reduce the price of consuming electricity and relieve burdens on low income customers as much as an income-graduated fixed charge.”

Opponents, including California’s powerful rooftop solar industry, argue that the fixed charge will not benefit monthly bills over time or encourage customers to adopt electric cars and other appliances.

“A revenue neutral fixed charge inherently creates a pivot point on average household consumption,” said Josh Plaisted, principal of Flagstaff Research and author of a report frequently cited by opponents, in today’s hearing.

“Fixed charges will be offset by the variable rate discount, but as homes use less energy the fixed charge dominates and bills increase.”

AB 1999 is scheduled to be heard tomorrow May 16 in the assembly appropriations committee.