On May 9, the California Public Utilities Commission (CPUC) issued a decision that fundamentally changes the way electricity is billed to all customers who receive their power from the California-regulated utilities.

California is introducing a new fixed monthly charge on residential electric bills starting late 2025 for most customers. This change, mandated by Assembly Bill 205, aims to achieve a more equitable cost structure for maintaining the state’s electrical grid. 

While the CPUC is getting criticized for the new structure, its creation was mandated by the California legislature in what can only be called a politically-fraught process. At the heart of the issue is whether the high fixed charge achieves its goal of helping low-income customers without discouraging energy-saving investments by other customers.

Background

Policymakers wanted a way to ensure low-income residents were not disproportionately burdened, especially as the state pushes for clean energy initiatives like electric vehicles. A 2021 University of California white paper proposed a novel solution: income-graduated fixed charges (IGFC). This meant wealthier households would pay a higher fixed charge, while low-income customers would receive significant discounts.

A law was slipped into the 2022 budget package in Assembly Bill 205 (AB 205), with no public hearings or even acknowledgment from an unknown author that required the CPUC consider implementing such a charge.

The CPUC faced challenges in implementing AB 205. While the income-based discounts were intended to protect low-income residents, concerns arose about the potential for higher fixed charges burdening them even with discounts. Additionally, some argued that low-energy users would not benefit from the per-kWh reduction, potentially facing overall bill increases.

Opponents of the fixed charge argue that it unfairly burdens low-income customers, even with the discounts offered. They express concern that low-energy users, like those in mild climates, will see their bills increase disproportionately.

What’s the Charge?

The fixed charge will be $24.15 per month for most customers. However, there are income-based discounts:

Customers enrolled in California Alternate Rates for Energy (CARE) or the California Low-Income Home Energy Assistance Program (LIHEAP) will pay a discounted rate of $6 per month.Customers enrolled in the Family Electric Rate Assistance (FERA) program or living in deed-restricted affordable housing will see a discounted rate of $12 per month.

Edward G. Poole is with the San Francisco law firm of Anderson & Poole and serves on WMA’s Utility Task Force. He can be reached at epoole@adplaw.com. Dr. Richard McCann is with M.Cubed, which provides economic and public policy consulting services to public and private sector clients. He can be reached at mccann@mcubed-econ.com.