By WENDY FRY | CalMatters
California’s electric bills, among the highest in the country, are increasing. However, regulators are considering a new plan to charge customers based on their income level. Traditionally, electricity bills are based on usage. But the state’s three largest electric utilities, Southern California Edison Company, Pacific Gas and Electric Company, and San Diego Gas & Electric Company, have proposed a plan to charge customers based on both their energy usage and household income. This proposal comes as part of several state regulations designed to make energy more affordable for low-income customers in California.
Some Republican lawmakers have expressed concerns that this change could have unintended consequences, such as discouraging electricity conservation or increasing costs for customers who use solar energy. However, the utility companies argue that the measure would lower electricity bills for low-income customers, estimated to save them about $300 per year. On the other hand, households earning over $180,000 a year would end up paying an average of $500 more on their electricity bills under the proposed plan.
The California Public Utilities Commission has a deadline of July 1, 2024, to decide on these proposed changes. These proposals come at a time when many moderate and low-income families are being priced out of California due to rising housing costs.
The fee structure change was mandated by a comprehensive energy bill passed last summer and signed by Gov. Gavin Newsom. Under this law, the public utilities commission is required to establish a “fixed monthly fee” based on each customer’s household income. A similar idea was initially proposed by researchers at UC Berkeley and the nonprofit thinktank Next 10 in 2021. Their main recommendation was to divide utility costs into two categories: fixed charges based on income levels and variable charges based on energy usage.
The proposed fixed charges would help cover utilities’ costs for providing customer service, including meters, poles, wildfire preparedness, operations, and maintenance. However, customers would still have the opportunity to lower the portion of their energy bills based on usage by investing in solar panels or running appliances during non-peak times.
Supporters of the proposal argue that it would reduce costs for low-income customers. However, critics argue that it is unfair to those who have been working to conserve energy. Some state Senate Republicans believe that these changes would make living in California less affordable and could discourage energy conservation. They argue that if energy bills are based on income rather than usage, customers would have little incentive to conserve energy.
One major issue in implementing these changes is collecting data on approximately 14 million households and categorizing them into income brackets. Critics are concerned about data privacy, given the state’s history of fraud cases involving financial information. Senate Minority Leader Brian Jones raised concerns about income verification, stating that the proposed fixed charges raise questions about data privacy.
California’s high energy rates can be attributed to factors such as aging and failing power lines, the state’s geographic spread, the cost of building and connecting energy infrastructure, and the impact of climate change. Despite these factors, all three utility companies reported gross profit gains in the past year.