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California is already home to some of the highest energy costs in the country, and those prices are only expected to rise as the state powers more of its economy with clean electricity.
Now a state plan to lower electricity rates and relieve the burden on low-income households, in particular, is sparking conflict among lawmakers, utilities and clean energy advocates.
At the tension’s core is whether the state’s three major investor-owned utilities should begin charging customers a predetermined amount for the delivery of power roughly based on household income, while lowering prices for actual energy use.
Supporters say this ‘fixed charge’ would shift more of the growing costs to power California on higher-income households. It will also keep overall rates down, they argue, to help encourage the adoption of electric vehicles and home appliances.
Opponents say the charge would punish those who have invested money in making their homes more energy efficient by installing rooftop solar. They also have privacy concerns related to providing income data to utilities.
California Assemblymembers Jacqui Irwin, D-Thousand Oaks, and Marc Berman, D-Menlo Park, introduced a bill last month that would grind the state’s process on this plan to a halt, arguing that the legislature should pursue other options.
Irwin noted that something as straightforward as encouraging electric vehicle charging at off-peak hours can dramatically reduce the need for expensive grid upgrades that utility regulators say are needed.
“We’re shifting around the chairs on the Titanic,” Irwin said in an interview. “As opposed to arguing about how we rearrange this to make it fair, we need to look at the bigger picture and drive down costs for everybody.”
High and rising costs
California’s electricity rates are 25% higher than the national average, and nearly one in four customers of the state’s largest utilities are behind on their bills.
Utilities and their regulators, meanwhile, say the cost of providing power will only rise as California responds to climate change. Those costs, they argue, include defending the power grid against extreme weather and expanding it to provide enough power for millions of Californians to power vehicles and cool buildings.
Some California public utilities, including the Sacramento Municipal Utility District, already add fixed monthly chargers to customers’ bills to help pay for grid maintenance. But Pacific Gas & Electric, San Diego Gas & Electric, and Southern California Edison rely almost entirely on revenue from energy use.
Utilities, energy research groups and the Public Advocates Office argue that the current system unfairly burdens low-income Californians because they pay the same amount per kilowatt hour as the state’s wealthiest residents to access electricity, a basic need.
It was this argument that led to a state law, AB 205, that ordered the Public Utilities Commission to study an income-based fixed charge at the three big utilities. It was slipped into a larger package at the very end of that year’s legislative session, frustrating lawmakers.
Now the CPUC is weighing two main fixed charge proposals. The plan from the state’s three big utilities includes the highest charges and is drawing the most controversy. Another led by the commissions consumer advocate arm submitted a more moderate plan.
Under the utilities’ joint proposal, income-based fixed charges for households earning $28,000-$69,000 would be $20 to $34 per month. Those earning $69,000-$180,000 would pay $51 to $73 per month, and those earning more than $180,000 would pay $85 to $128.
Under the Public Advocates Office proposal, ratepayers eligible for existing low-income programs who amount to roughly 30% of all customers would be charged only $7 a month and everyone else would see a $29 fixed charge.
Both proposals would lower the per-kilowatt-hour charges that customers pay to counterbalance the increase in fixed charges, structuring them in a way to allow lower-income customers to save money.
The fixed charge at SMUD, for comparison, is $24.15. Its overall bills are on average more than 54% lower than those of neighboring PG&E.
To fix charges or not
Irwin’s new bill, AB 1999, would overturn the 2022 law and prevent utilities from adding a fixed charge of no greater than $10 a month on customers’ bills to pay for the rising costs of grid maintenance regardless of household income.
The lawmaker, who heard from constituents who were concerned with privacy, said she was frustrated by the hurried way the policy became a state mandate.
“This was a huge policy shift. It affects almost every IOU rate payer and I think it should have had a much more robust discussion in the legislature,” she said, pointing to complications and potential legal issues with providing utilities income data on customers.
Yet Merrian Borgeson, California director of climate and energy at the Natural Resources Defense Council, noted that this policy option has been years in the making.
She said the PUC process has included multiple rounds of detailed public comments and the income-based piece was divided into two phases in order to tread carefully on privacy issues.
“This is a conversation that has been going on at the PUC, in the legislature and lots of other forums,” Borgeson said. “Ultimately this is one of the fastest and most direct ways we can address those equity and rate questions.”
Matt Baker, director of the utility commission’s Public Advocates Office, stressed the difference between the plan proposed by his office and that of the utilities. He said the latter is geared toward electrifying more quickly.
“Everybody is reacting to the utilities proposal, which I think would cause rate shock,” Baker said. “Our proposal tries to minimize the winners and losers.”
But environmental justice advocates aligned with the solar industry say they’re gearing up for a fight against any fixed charge, the same way they fought against California’s decision to slash benefits for rooftop solar last year.
“Anything that amounts to a bill increase is a burden on our communities,” said Esperanza Vielma, executive director of the Environmental Justice Coalition for Water. “At the end of the day who is this helping? The IOUs.”
The newly introduced bill, AB 1999, is not yet scheduled for a committee hearing. The energy commission is expected to weigh in on the various fixed charge proposals by July.