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

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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

Comments

  1. Talk about getting screwed by the Politburo in Sacramento.

  2. John T. says

    Vote the Bums out!!!

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