California’s Plan to Base Utility Bills on Income Could Get a New Twist

California’s Plan to Base Utility Bills on Income Could Get a New Twist

Electric power lines at sunset in El Segundo, Calif., on Aug. 31, 2022. (Patrick T. Fallon/AFP via Getty Images)

Travis Gillmore

Travis Gillmore

4/2/2024

Updated: 4/9/2024

Regulators with the California Public Utilities Commission issued a proposal on March 27 in response to a new law, which takes effect in 2025 and 2026, that would charge a fixed rate for electricity based on users’ incomes.
The proposal suggests determining income levels based on enrollment in subsidy programs rather than by verifying household incomes.
Controversy swirled after utility companies introduced proposals last year that would require income verification for customers—with higher rates for those making more money.
While the rate structures proposed will be based on income, only customers enrolled in subsidized programs would qualify for reduced fixed-rate charges, and those households are already required to verify income levels.
“It’s concerning, too, but at least they’re not going to make people state their income,” state Sen. Brian Dahle told The Epoch Times on March 29.
Such changes in the proposal came about after utility companies expressed concern about the feasibility of verifying income levels for all households, which could cost $97 million. The state’s Franchise Tax Board is prohibited by law from sharing income levels without taxpayer permission.
Regulators are suggesting in the proposal a three-tier system that charges, in addition to the amount of electricity used, families of four earning less than $60,000 annually to pay monthly fixed charges of $6; the same size household earning $60,000 to $75,000 a year to pay about $12, and all other households, $24.15.
“They say it’s going to drop people’s rates, but this is the problem with California’s leadership,” Mr. Dahle said. “If you’re raising a fee, the ratepayers have to pay, and rates aren’t going down.”
The proposal comes before the July deadline for approval and follows more than a year of discussions following the 2022 passage of Assembly Bill 205, which ordered a tiered fixed-rate strategy to reduce costs for low-income residents.
In response to the new law, Pacific Gas and Electric (PG&E)—the largest utility provider in the state—proposed in April 2023 monthly fixed charges between $15 and $30 for the lowest earners, about $51 for middle-income earners, and $92 for those in the highest income brackets. Other companies also suggested fixed charges of various levels based on income, although the commission said in the proposal that it based its recommended monthly rates on the amounts charged by the publicly owned Sacramento Municipal Utility District.
With the latest monthly rates set at a fraction of those requested by PG&E and others, some are questioning whether, if the commission’s proposal is approved, utility bills will decrease for lower-income earners as intended in AB 205.
Some Democrat legislators have moved from supporting the new law to calling for its repeal and wanting more time to better consider its implications, according to a letter signed by a handful of lawmakers sent in October 2023 to the utility commission.
It represents a recognition that failed policies are negatively impacting the state, Mr. Dahle suggested—with some rates increasing by 20 percent this year and by as much as 127 percent over the past decade because of persistent rate increase requests approved by the utility commission.
“They’re realizing that rates are going up, and California is a flawed system, and they’re in control,” he said. “Energy prices are skyrocketing in California, and they’re going to continue to go up because of the policies that Democrats have put forward.”
Currently, investor-owned utility companies in California—such as PG&E and Southern California Edison, among others—charge customers a price per kilowatt-hour used. Publicly owned utilities in the state—including the Sacramento Municipal Utility District and Anaheim Public Utilities, among others—and most utilities nationwide have usage charges and fixed-rate charges, according to the utility commission’s proposal.
AB 205 orders investor-owned utilities to reduce consumer costs for those earning less than 250 percent of the federal poverty level.
With the addition of fixed-rate charges, prices for energy used will be reduced by between 8 percent and 9.8 percent, according to the proposal.
Lower rates will incentivize customers to purchase electric appliances and vehicles, regulators suggested.
Whether customers experience reductions in their monthly bills will depend on the amount of energy used.
In a second phase of the proceedings, set to begin later this year, regulators will consider adapting the fixed-rated charges and usage charges, according to the proposal.
Customers are wary, according to the proposal, citing a 2022 consultant-led study at the request of PG&E that found that most customers were confused and distrustful of a fixed charge and expected their bills to increase.
Californians and interested parties have 20 days to comment on the utility commission’s plan, and regulators could vote on the proposal as soon as the commission’s next public meeting, on May 9.
If approved, Southern California Edison Company and the San Diego Gas and Electric Company would implement the new rules during the fourth quarter of 2025, while PG&E and other smaller utilities would have until the first quarter of 2026, according to the proposal.
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Travis Gillmore

Travis Gillmore

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Travis Gillmore is an avid reader and journalism connoisseur based in California covering finance, politics, the State Capitol, and breaking news for The Epoch Times.

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