Electric bills based on income? Forget it, both parties agree
The push to make higher-income Californians pay higher fixed charges for electricity has sparked class warfare and a confounding round of ducking, glancing, blaming and fingerpointing.
“Today we will be introducing legislation to roll back the Public Utilities Commission's proposed incomegraduated fixed fee,” Assemblymember Jacqui Irwin, D-Thousand Oaks, said last month
“Today, 10 senators led by Senator Scott Wiener, D-San Francisco, released a letter calling on the California Public Utilities Commission to reject a utility-backed proposal that would raise energy bills for millions of Californians by $360-$824 per year,” a release from Wiener's office said.
It seems important to point out that, at least overtly, neither the CPUC nor the investor-owned utilities are to blame for this wildly divisive “earnmore/pay-more” plan for funding upkeep of the grid. Rather — as lawmakers well know! — they are.
Wiener and Irwin both voted aye on the bill that codified it on June 29, 2022, as did the overwhelming majority of state legislators.
Though some lawmakers didn't fully realize its implications at the time, the idea was tucked into a budget trailer bill that they passed with precious little public comment or debate at the bitter end of the session, which was then signed by the governor. Assembly Bill 205 repealed the existing cap on fixed charges — a wee $10 a month — and required the CPUC to develop fixed charges “on an income-graduated basis with no fewer than three income thresholds, such that a low-income rate
payer would realize lower average monthly bill without making any changes in usage.”
So before we explain the whys here and the flurry of activity that erupted this week, let’s be clear that the CPUC was just following orders from lawmakers when it tasked the utilities (Southern California Edison, San Diego Gas & Electric and Pacific Gas & Electric) and other stakeholders to propose income-based fixed charges.
“A sneaky way to make a big change in California law,” veteran Sacramento watcher Dan Walters of CalMatters called this budget-trailer-bill approach to policymaking.
Lawmakers are reaping the fruit of that process now. After hysteria broke out last year over the prospect of adding hundreds of dollars a year to the bills of higher-income folks, utilities ditched the income-based bit from their proposal entirely, settling on a straight $51 per month fixed charge for people not in a low-income program.
Consumer advocates, however, balked, arguing that the law clearly mandates income-specific fixed charges to ease pressure on lower-income folks and the CPUC must do exactly that — and do it by July 1.
The clock is ticking.
Why?
So here’s the rationale behind all this.
Electricity costs more in California than almost anywhere else in the nation. Prices have nearly doubled over the last decade, and that’s a tremendous problem when you’re telling everyone to abandon fossil fuels and go allelectric by 2035 — which, swallow hard — is just 11 years away.
A big driver of skyrocketing electric rates has been hardening the grid against wildfires, but those costs are not shared fairly by grid users, policymakers maintain. Right now, the cost of delivering electricity is largely baked into the rates we pay for electricity itself. But it’s as expensive to bring energy to homes that consume gob loads of power as it is to bring energy to homes that consume very little — like, say, rooftop solar households with no battery storage, who pump energy into the grid by day and pull it down at night. Those folks have largely escaped escalating infrastructure costs, even though they use the infrastructure, too.
So one of the ideas here is to simply bifurcate infrastructure costs from actual power costs. The price of power itself would drop — vital for the state to really go green — and the cost of maintaining the infrastructure would be more fairly spread, policymakers say.
Unpopular
You could say there was a contest over who hates the idea of an incomebased fixed charge more.
Democrats Irwin, Wiener et al, introduced AB 1999 — “Electricity: fixed charges” — repealing the income-graduated fixed charge requirement and the July 1 deadline. It would instead allow the CPUC to authorize fixed charges of $5 per month for low-income customers and up to $10 per month for others. Increases could not outpace inflation.
“Our constituents have had enough and so have we,” Irwin said at a news conference. “It’s time to put some reasoning back into how we charge for electricity in California.”
Now, Senate Republicans have been complaining about this idea for more than a year. Not to be outdone, they tried to force a floor vote “to repeal the law which created this mess.”
Sen. Shannon Grove, R-Bakersfield, proposed amendments to an election-related bill that would have “deleted” the incomebased fee, which she said “unfairly targets hardworking families in all of our districts.”
“We are creating energy poverty in California, where bills are not sustainable for the average Californian,” Grove said. Though many lawmakers clearly agree, her proposal didn’t fly.
So where does all this theater leave us? The Democrats’ bill to repeal the income-based charge is slated for a March hearing and just might fly. But until then, the CPUC’s marching orders remain the same: Create a fixed service charge based on income.
A dozen stakeholders have submitted nine different proposals “that all strive in different ways to balance the flat rate and usage rate elements of a residential customer’s bill,” a CPUC spokeswoman said in a statement. “We will carefully consider each of these proposals before adopting a billing adjustment.
“The implementation of this legislation is a critical step toward our climate goals because it will lower the usage rate, which means that it will be cheaper for consumers to charge an electric vehicle or run an electric heat pump, technologies we need to meet our decarbonization goals.”
`Keep going'
The CPUC’s in-house Solomon-the-Wise — the Public Advocates Office, charged with protecting the Little Guy — agrees that change is needed.
Blocking a fixed charge will only move California further from its electrification, climate and affordability goals, officials said. Lower-income households pay too large a share of fixed costs, “and historic rate increases will be exacerbated if the CPUC is prevented from implementing equitable rate reform that will help to stabilize bills.”
It has concerns about the utilities’ $51 a month proposal and favors a $25 fixed charge.
“This bill would kill a critical opportunity to help get electricity bills under control for Californians in the midst of a crippling affordability crisis,” Theo Caretto, an attorney at Communities for a Better Environment, said in a statement. “The answer is to work with regulators to get this right, rather than sending us back to square one by dismantling this reform before it gets off the ground. We can — and must — ensure the wealthiest households pay their fair share.”
Matthew Freedman, staff attorney at TURN, agrees.
“If the Legislature repeals current law, bills for low-income Californians, especially those living in hotter regions of the state, will skyrocket, in particular during the hottest months,” he said in a statement. “New incomebased fixed charges will reduce usage charges and require every customer, solar homeowner and nonsolar renters pay their fair share for wildfire safety and climate investments.”
The CPUC should be allowed to complete its work on the fixed charge proceeding, Edison spokesman Jeff Monford said.
`Titanic'
Loretta Lynch begs to differ.
She knows the CPUC. She was its president under Gov. Gray Davis from 2000-02 and was a commissioner until 2005. She’s had a long career as an attorney and expert on energy policy.
“This is rearranging the deck chairs on the Titanic rather than shrinking the size of the boat we’re on,” she said. “This is a bad idea.”
The real problem is that electricity rates in California are simply way too high and for no good reason, and this proposal does nothing to address that.
“What Californians pay to the private utilities is completely unwarranted and unsustainable,” she said. “What we’re really facing here is an affordability crisis, from my perspective, created by the California PUC and its inability to do its job and say ‘no’ to the utilities rather than giving them the sun, moon and stars. It’s an absolute travesty.”
The big three are allowed to collect some 10% as profit — but their income taxes also are built into rates, so Average Joe pays that, too, she said. Sometimes, when the utilities wind up collecting hundreds of millions more in profits than they’re technically allowed, CPUC has let them keep it, she said.
Lynch is not at all convinced that a drop in volume rates would mean lower electric bills for the lowest earners.
“It could result in a rate increase for everybody,” she said; the utilities estimate it would cost some $75 million to get started, changing the billing systems, educating consumers, manning customer hotlines and who is going to verify income levels? How much would that cost?
“California is in the top 10% of the country in terms of profit thrown at the utilities and in the bottom 10% for system reliability,” she said. “The utilities are making out like bandits. There are good reasons why even a poorly run municipal system can be better.”
Historically, this kind of radical change is been done through legislation that’s well-vetted and extensively discussed, rather than shoved through in a few days as part of a budget bill, she said.
It would really hurt the middle class, she said.
“People who make $100,000 a year are going to get slammed $400 to $600 more on their electric bills. My sister the school teacher and her husband the journalist are going to pay the same as Mark Zuckerberg.”
In summary: This is an ill-considered, cockamamie scheme and Lynch is heartened that there’s bipartisan opposition.
“We don’t want to be first in the nation for letting the utilities pick our pockets even more,” she said. “This is egregious, and I’m embarrassed to have been a regulator in this system, seeing how it’s conducted now.”
Ouch. Let your lawmakers know what you think. We’ll keep you posted.