California lawmakers seek to short-circuit new income-based utility charges

GOP and Dems eye plans to overturn hastily approved billing scheme

OAKLAND — Multiple efforts are underway on both sides of California’s political divide to short-circuit a 2022 law that would impose new income-based fixed fees on customers of PG&E and other utility leviathans.

Democrats and Republicans in the state legislature have crafted separate measures designed to quash a plan to implement the fee that lawmakers hastily approved in an 11-hour proceeding.

PG&E, Southern California Edison and San Diego Gas & Electric would be able to impose the new charge on their customers if the state Public Utilities Commission gives the plan a final OK — potentially by this spring or summer. Newsom, who signed the bill, appointed all five current members of the powerful commission.

RELATED: PG&E profits hop higher as revenue from electricity and gas surges

The legislative efforts seek to either overturn or drastically alter the 2022 law, AB 205, a wide-ranging energy bill including a one-sentence provision that directed the utility commission to study income-based fixed charges and then decide on their implementation by no later than June 30 of this year.

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The provision in the legislation was intended to help encourage a transition to greater electrification and energy conservation in California as part of a shift away from reliance on fossil fuels, along with making utility bills more affordable for low-income customers. Critics, though, warn the bill might actually produce higher monthly bills.

The state lawmakers involved in the various efforts to overturn the income-based utility charge plan include Assembly Democrats Marc Berman of Menlo Park and Jacqui Irwin of Thousand Oaks, and Senate Republican Brian Dahle, Shannon Grove, Janet Nguyen, Roger Niello, Rosilicie Ochoa Bogh, Kelly Seyarto, and Scott Wilk.

What’s more, 22 state lawmakers wrote to the utility commission’s president in October warning that the powerful California regulatory agency might be racing too quickly — and with no public input — to decide on the income-based fees.

“At a minimum, more time will be needed to consider such a significant and far-reaching change in policy that will significantly impact ratepayers with only a theoretical benefit,” the lawmakers wrote.

Several experts led by Ahmad Faruqui, an economist who has consulted with all three of the utility behemoths, have provided an array of reasons that regulators should reject the current proposal, including the fact that PG&E bills are already rising far faster than the Bay Area inflation rate.

“The proposed fixed charges are way too high compared to the national landscape,” Faruqui and the group of economists wrote. “The fixed charges will be burdensome for many, infeasible to administer, are likely to be challenged in court and are likely to unleash adverse unintended consequences, such as penalizing customers who use energy efficiently and frugally.”

Advocates for Income-based fees, including The Utility Reform Network (TURN) and the National Resources Defense Council, say that higher-income customers will tend to pay more, while lower-income customers will pay less. Proponents also claim that PG&E and the other utilities intend to lower the kilowatt-hour rates they charge customers as a way to offset the fees.

Even so, TURN and the environmental group concede that fixed fees are far from a complete solution. Despite their support, the groups wrote in a filing with the state that they recognize “the development of a progressive fixed charge does not represent a silver bullet and will not, on its own, make customer bills affordable.”

State lawmakers are increasingly alarmed about the income-based fee proposal.

“Too many Californians struggle to afford their electricity bills at a time when energy is already unreliable, and yet the legislature thought it was a good idea to rip people off more,” Wilk, a Santa Clarita Republican, said in a prepared release this week.

The fixed-income proposal has surfaced at a time when PG&E bills, along with the bills charged by the other two utility titans, have skyrocketed.

Click here to read the full article in the Mercury News

Lawmakers get cold feet on adding a fixed charge based on income to California utility bills

Statehouse Democrats backtrack after getting an earful from constituents; defenders say the new charge is needed to help lower-income ratepayers and boost electrification

Rob Nikolewski/The San Diego Union-Tribune

Legislation establishing perhaps the most sweeping change in how Californians pay their utility bills may get swept right out of existence before it even gets implemented.

Passed at the end of the 2022 legislative session in Sacramento, Assembly Bill 205 was a massive omnibus, or “trailer,” bill that ran 21,633 words. Though almost completely overlooked at the time, AB 205 included provisions to adopt a fixed monthly charge onto utility bills — with the amount based on household income.

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The precise amounts won’t be determined until July 1 by the California Public Utilities Commission, but state assembly members and senators have gotten an earful from constituents worried or angry about paying an added fee.

Supporters say the awkwardly named “income-graduated fixed charge” would lead to lower monthly bills for low- and moderate-income ratepayers, if implemented correctly.

Even though AB 205 passed on the strength of votes from Democrats who hold a super-majority in both chambers of the State Capitol, a sizable chunk are now back pedaling.

Assemblymember Jacqui Irwin, D-Thousand Oaks, has introduced legislation to completely repeal the language in AB 205 that deals with fixed charges. She was joined by 14 other Democrats during the announcement, including Assemblymember Chris Ward of San Diego and Sen. Catherine Blakespear of Encinitas.

“AB 205 should have had a very robust conversation among all legislators and to have it as part of a huge trailer bill is, in my opinion, not appropriate,” Irwin said at the Jan. 30 news conference.

Republicans who originally opposed AB 205 and have since tried to eliminate the fixed charge by amendments to other pieces of legislation are saying, “I told you so.”

“Let this unfortunately harsh reality serve as yet another example of how the majority party’s poor policies are driving people out of this state,” Sen. Brian Dahle, R-Bieber, said in a statement.

When asked whether Gov. Gavin Newsom supported or opposed Irwin’s bill, the governor’s press office said in an email to the Union-Tribune, “We typically don’t comment on pending legislation,” and pointed to multiple proposals submitted to the utilities commission, known as the CPUC for short.

“The governor is aware that the Public Utilities Commission is working diligently … and he looks forward to seeing a Commission proposal that is consistent with AB 205 when it is released,” the governor’s office said the day Irwin filed her legislation, called Assembly Bill 1999.

How a fixed charge would work

The impetus behind establishing a fixed charge based on income is two-fold:

  • to help lower-income customers who are straining to keep up with utility bills have shot up between 72 percent and 127 percent in the past 10 years among California’s investor-owned utilities, including San Diego Gas & Electric, and
  • to encourage customers to transition to a power system more reliant on electrification and slash the use of energy generated by fossil fuels.

Under AB 205, average prices per kilowatt-hour for electricity would be reduced for all customers — and, the thinking goes, would encourage households to install appliances like electric heat pumps, add battery storage systems and charge electric vehicles.

But AB 205 also creates a fixed monthly charge that escalates by income bracket and would be tacked on to residential bills each month.

The key is determining how much rates will be reduced and — crucially — how high the fixed charge will be and how much customers in each income tier will pay.

The language in AB 205 assigns the CPUC to implement specifics, which includes establishing a fixed charge program with at least three income brackets.

An administrative law judge at the commission is expected to release a proposed decision in a matter of weeks that will provide much-anticipated details. The proposed decision will then go before a vote of the CPUC’s five commissioners.

AB 205 requires the CPUC to authorize a fixed charge by July 1 — although its eventual impact on customer bills in SDG&E’s service territory is not expected to take effect until the second half of 2025.

Last year, the administrative law judge called on utilities, consumer advocates and environmental groups to submit respective proposals.

The judge and the voting commissioners don’t have to pick one proposal or another; the CPUC has a free hand to accept, reject, combine or alter any recommendations — or even come up with its own plan from scratch.

It’s also important to note that whatever the CPUC authorizes by July 1 will be the first iteration of a fixed charge. The dollar amounts are expected to change in succeeding years and the income brackets will likely expand from three to four.

All that said, here are some of the most recent proposals:

The three major investor-owned utilities that are regulated by the CPUC (SDG&E, Southern California Edison and Pacific Gas & Electric) submitted a joint proposal last fall.

SDG&E officials suggested reducing the average per kilowatt-hour rate by 35 percent for its residential customers. Three income brackets break down like this:

  • Households enrolled in the California Alternate Rates for Energy (CARE) program who earn less than $28,000 a year would pay a fixed charge of $24 per month
  • Households with annual income between $28,000 to $69,000 would pay $34 per month, including all other CARE customers, plus those enrolled in the Family Electric Rate Assistance (FERA) program)
  • All other households would pay $73 per month

The Public Advocates Office, the independent arm of the CPUC created to look out for utility customers, has a proposal that reduces the average per kilowatt-hour rate by 11 percent in the SDG&E service territory. Its income tiers call for:

  • CARE customers with incomes below the federal poverty level in SDG&E’s service territory paying a fixed charge of $4 per month
  • All other CARE customers and those in FERA paying $7 per month
  • All other customers paying $32.15 a month

The Utility Reform Network (TURN), a consumer group based in San Francisco, teamed with the National Resources Defense Council, a well-known environmental group. Their proposal would reduce average residential SDG&E rates by 21 percent. Their income brackets would see:

  • CARE customers paying $5 per month in fixed charges
  • FERA customers also paying $5, and
  • charging about $30 a month for all other residential customers

Rather than three brackets, the Sierra Club submitted a proposal with five tiers, with monthly charges as low as zero dollars for CARE and FERA customers and as high as $136.14 for upper-income customers. The Sierra Club proposal reduces the average per kilowatt-hour rate for SDG&E customers by 15 percent.

As per CPUC instructions, the proposals must be revenue-neutral, meaning an income-graduated fixed charge is not designed to increase the revenue collected nor the profits earned by investor-owned utilities such as SDG&E.

Rather, it reshuffles energy costs with the intention to benefit financially vulnerable customers while also helping California meet its decarbonization goals.

“My constituents are pissed off”

Creating a fixed charge has plenty of detractors on multiple fronts.

Many of the criticisms highlight long-time complaints that the CPUC has too cozy a relationship with the utilities and too often sides with them on policy decisions.

The Coalition for Environmental Equity and Economics praised Irwin’s repeal bill, saying the fixed charge plan “does not intend to lower energy bills but to bolster (investor-owned utility) profits with the highest guaranteed monthly fees in the United States.”

Some say encouraging greater electricity use while tacking on a monthly fee will curb incentives for customers to reduce their energy consumption. “This means that even if a household conserves by using solar or hanging out the clothes to dry in the sun, they cannot avoid a large fixed charge in the hundreds of dollars per year,” the Environmental Working Group said.

Others predict AB 205 will be challenged in court on the grounds that higher-income customers will pay a more expensive fixed charge than lower-income households even though they receive the same service.

But the biggest complaint centers on the prospect that utility bills for many customers will get even higher than they already are.

“My constituents are pissed off,” Assemblymember Marc Berman, D-Menlo Park, said at Irwin’s news conference. “I know because they told me over and over again at every community coffee that I had in the fall and in the winter. Their rates keep going up.”

Irwin’s AB 1999 repeal would cap the fixed monthly fee at $10 for residential customers and $5 for those enrolled in the CARE financial assistance program. Any increases to the cap would be adjusted to the Consumer Price Index.

Irwin’s bill is expected to have its first hearing in early March before the Assembly Utility and Energy Committee.

Supporters: “Get this policy right”

Defenders of AB 205 say the Legislature shouldn’t roll back the implementation of a fixed charge before the CPUC comes out with a plan.

“We urge lawmakers to focus on helping get this policy right, rather than killing equitable rate reform before it has a chance to succeed,” said Merrian Boregson, California director of Climate & Energy at the Natural Resources Defense Council.

The Public Advocates Office said a repeal may result in unintended consequences.

“Almost 1 in 5 customers are behind on paying their utility bills, making it critical that the CPUC be allowed to amend the current rate structure to ensure all customers pay their fair share of costs to safely maintain and operate the power grid,” said Public Advocates Office director Matt Baker. “Lower-income and working-class customers must not be unfairly burdened with these costs.”

Matthew Freedman, staff attorney for The Utility Reform Network (TURN), a consumer advocacy group based in San Francisco, said, “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.”

Another sticking point — how will the income data for each household be compiled and verified? Working out those details is still under discussion.

The utilities don’t want the extra responsibility. “We are very adamant that utilities don’t have this information, nor do we want it,” Adam Pierce, SDG&E’s vice president of energy procurement and rates told the Union-Tribune recently.

One potential solution calls for a third-party working with state agencies, such as the Franchise Tax Board, that already handle financial data and protect customer confidentiality.

“Income verification is an issue with every means-tested program that we have — from Social Security on down,” Baker of the Public Advocates Office said late last year. “So it’s not something that is insurmountable at all.”

Click here to read the full article in the SD Union Tribune

Middle or upper income? Brace for higher electric bills

Column: Solar owners will not escape fixed charges for electricity, either, but low-income households stand to get a break

People, the pain is real.

If you’re one of the 12 million-plus or so households in California that do not have solar panels — meaning you buy electricity from Southern California Edison, San Diego Gas & Electric, or Pacific Gas & Electric — your bills have essentially doubled over the past decade (has your income?). Electric bills in California are now twice the national average, and a new income-based, fixed service charge means they’re headed even higher for many middle- and upper-income folks.

This time, the 1 million-plus or so rooftop solar households won’t be shielded from their neighbors’ pain. Since most solar owners depend on the same infrastructure as everyone else for power once the sun goes down, they should also pay for its upkeep, the thinking goes.

Meet California’s first-in-the-nation, income-based fixed service charge, aiming to lessen the load on lower-income folks. The nitty-gritty details are still being debated — fiercely — but decisions are due by July, to take effect in 2025 or 2026. There are various proposals, but they stand to shrink what we pay for electricity by some 5 to 18%, while divvying up what we pay for the infrastructure that delivers that electricity according to how much money we make.

Low-income households could save some $300 a year, according to plans proposed by the Big Three investor-owned utilities (Edison, SDG&E and PG&E). Top-tier earners, making more than $180,000 a year or so, could see increases of some $500 a year.

“An income-graduated basis for the fixed charge would require higher-income households to pay a larger proportion of overall fixed costs to more equitably share the burden of funding electric system infrastructure,” says a report from the California Public Utilities Commission, which regulates rates. “The
CPUC is leading a proceeding to reform rates to implement this important equity tool.”

Right now, the cost of delivering electricity is largely baked into the rate you pay for electricity itself. One of the ideas here is to bifurcate infrastructure costs from actual power costs, on the theory it’s as expensive to get energy to homes that consume gob-loads of power as it is to get energy to homes that are highly efficient.

Edison, PG&E and SDG&E propose a standard fixed charge on all residential customers’ bills, except for lower-income customers enrolled in the state’s CARE or FERA programs, whose income already qualifies them for bill discounts. Their fixed charge would be lower, said Edison spokesman Jeff Monford, and on average would reduce bills for customers who need the most help.

There’s much critics hate here — including that some lower-income households might end up paying more, not less — but don’t lay blame or thanks for this sea change at the CPUC’s feet. It’s just following orders.

This progressive bit of ratemaking is brought to you via unassuming little paragraphs in a bill passed (with precious little public comment or debate) by the Legislature and signed by the governor last year: Assembly Bill 205. It repeals the existing cap on fixed charges — a wee $10 a month — and requires the CPUC to develop fixed charges “on an income-graduated basis with no fewer than three income thresholds, such that a low-income ratepayer would realize lower average monthly bill without making any changes in usage,” says a Senate analysis of the bill.

One proposal would charge the lowest-income users a fixed $15 a month (Edison and PG&E) or $24 (SDG&E), while the highest-income users would pay $85 a month (Edison), $92 (PG&E) or $128 (SDG&E).

The Public Advocates Office — the in-house Solomon-the-Wise at the PUC, charged with protecting the little guy — favors the change, though proposes smaller, flatter fixed charges than the Big Three investor-owned utilities.

While critics brand this a “utility tax” (highly effective red meat here in California), officials stress that these proposals do not change the amount of money the utilities collect.

Utility profits are set by the CPUC itself at roughly 10%. The easiest way to think about the change is like this: Under the old method, the utility collected $100. Under the new method, the utility will still collect $100 — but who is paying that $100, and how, will shift.

It’s really a modest change meant to lower the price of electricity so folks have incentive to ditch their gas cars and appliances and go all-electric, supporters say. It would also make bills more predictable and transparent.

Critics, from SAVE THE FROGS! to the California Assembly, disagree.

Entrenches high prices, doesn’t fix them

“We, the undersigned organizations and community leaders, are writing in strong opposition to the ‘Utility Tax’ provision embedded into Budget Trailer Bill AB 205 (2022),” says a letter to the governor and state legislators urging its immediate repeal.

“We object to the un-democratic and opaque way in which the Utility Tax was enacted, passed in three days without any public hearings or discussion. The people of California deserve a voice in any major policy change with such wide-ranging consequences.”

The letter summarizes the complaints of many critics and was signed by more than 200 organizations across California, including the Center for Biological Diversity, the California Latino Environmental Advocacy Network, Feminists in Action Los Angeles, Democratic Club of West Orange County, Indivisible San Jose and SAVE THE FROGS!

“Because of this provision, the utilities and other organizations … have proposed the highest fixed charges in the country, between $30 to $70 per month,” it continues. “That would be three to seven times the national average for such a fixed charge. …

“The Utility Tax entrenches the problem of high electricity prices, rather than solving it. Electricity prices are too high mainly due to the increasing costs of unnecessary long-distance power lines, liability when those lines create wildfire risks and generous utility profits that drive this spending. A Utility Tax does not fix that underlying problem because it just rearranges who pays what — harming millions of working-class people in the process.

“The true solution to stabilizing the high cost of electricity is to reduce our overdependence on long-distance power lines through greater conservation and local clean energy.”

Nearly two dozen members of the California Assembly — some quite progressive — fired off their own objections to the CPUC president.

“We have significant concerns about the direction of the CPUC’s implementation of AB 205 and its potential negative impacts on our constituents and believe that, at a minimum, more time will be needed to consider such a significant and far-reaching change in policy that will significantly impact ratepayers with only a theoretical benefit,” says the letter, dated Oct. 27. 

First, the CPUC has rejected a request to hold public hearings on “major changes” to the state’s electric rate structure. Given the breadth of impact to ratepayers, it’s only fair that a full, public process is conducted to hear from all folks who’ll be affected, not just the companies and nonprofits who are party to the proceeding. And, really, what’s the rush? The CPUC was authorized to do a fixed rate charge in 2013 when AB 327 passed, “but has felt no urgency to do so for the past 10 years,” the legislators said. “(W)e believe there is ample time to open this proceeding to the public.”

Second, the legislators worry that this approach could thwart conservation and increase electrical consumption by sending the wrong price signal to ratepayers.

“With these proposals, there would be a decoupling of electricity policy from the volumetric and conservation-based model that the CPUC has long been promoting. For instance, even under some of the lower proposed flat rates, analyses show that those who consume more electricity, such as a single-family home with pool, will receive a discount at the expense of a low-electricity user, such as an apartment renter. There is a very real possibility that these proposals could discourage the kind of conservation that is needed in order to avoid rolling blackouts that have threatened the state too often over the past several years,” the legislators wrote.

A $30 monthly fixed charge would cost lower-income folks an extra $360 a year, and lawmakers worry about the impact to current and future rooftop solar and battery users. Solar industry reps said business has plummeted since the PUC slashed how much new solar systems are credited for the energy they produce, making the payback period longer.

“While we understand that a fixed charge may be needed, we do not believe a policy shift of this magnitude should happen without sufficient time for a wide array of public input,” they wrote. “Further, the majority of the current proposals are unreasonable and the Commission must ensure that any fixed rate being considered be in line with national rates.”

Then there’s the income verification issue. The state knows all about how much money we make — but who wants to give that information to the electric company? There are varying ideas on that, from having a third party handle it to just sticking with the current CARE and FERC discount program rules, but it’s a hot topic that goes directly to privacy.

“Nobody wants to give their tax return to the power company,” writes Jim Lazar, an expert in utility rate design. “Income has no clear correlation to the electric utility cost of service. Poor people in rural areas are relatively expensive to serve; rich people in condos in urbanized areas are cheap to serve.  Does the lack of correlation to the cost of utility service make it a ‘tax’ under the laws of California? In California, most new ‘taxes’ require a different process than the PUC runs, including a public vote.”

Edison said no new income verification process is needed in the proposal put forward by the Big Three. But Lazar, an economist, predicts this effort will fail, and said that’s the fate it deserves.

Solutions?

Solar panels are installed on new homes in the Great Park Neighborhood of Cadence Park in Irvine, CA, on Thursday, June 1, 1970. (Photo by Jeff Gritchen, Orange County Register/SCNG)
(File photo by Jeff Gritchen, Orange County Register/SCNG)

This rejiggering of who pays that $100 and how doesn’t do anything to actually reduce California’s crazy high electricity rates. Hundreds of comments have been filed in passionate opposition.

“This is nothing more than thinly disguised attempt to put the screws to owners who have invested in solar panels,” said Gil Legault of Ladera Ranch. “Instead of incentivizing homeowners to go green, you’re doing the opposite.”

“This fixed rate proposal is a Marxist/Communist idea to make Socialism a reality in our utility companies,” said Donald Grass of Oceanside.

Economist Lazar has some ideas on how to lower California bills more equitably. One: Shrink the profit utilities are allowed to collect.

Mind you, they’re only allowed to collect profit on gridwork and infrastructure, not on power, and that margin is set by the CPUC itself. California utilities are allowed a higher rate of profit than most utilities in the U.S. and Canada, and the CPUC could take this up in a separate proceeding.

Another idea: Cap the amount of executive compensation that comes from ratepayers’ pockets.

These folks are exceptionally well-paid. Even the pauper of the bunch, Southern California Edison’s president and CEO, made $2.8 million in total pay and perks last year. PG&E’s got $3.6 million in cash compensation and another $10 million in stock, while SDG&E’s got $5.7 million in cash comp and $7 million in stock. The latter two both got other forms of comp as well.

Lazar suggests that anything above a certain cap — say the governor’s $224,000 salary? — should come from shareholders’ pockets, not ratepayers’ pockets.

Clcik here to read the full article in the OC Register