On May 9, the California Public Utilities Commission is scheduled to vote on whether to let the state’s largest power providers slap most customers with a new fixed charge. Think of it like paying for a subscription service, except instead of forking over a monthly fee to watch old Friends episodes, this one lets you enjoy the comforts of 20th century living.
Also, according to the proposed rule, the utilities will be required to lower the rate we all pay for each unit of power we consume.
On average, electric bills won’t go up or down, but most households aren’t exactly average. Under the proposed change, people who use less electricity will pay a bit more as a result of the fee, while those who rack up large power bills will save thanks to the lower usage rates.
The basic idea isn’t novel, even if it’s wildly controversial here in California; Most utilities across the country already collect fixed charges. But this proposed regulation comes with a distinctly California twist: The fixed charges would vary by income, with higher earners paying a $24 fee and lower-income households paying either $6 or $12.
The proposed charges are significantly less steep than ones proposed by the utilities themselves last spring, which topped out at $128 per month for the highest earners. But with a national average of roughly $11 per month, the $24 fee under consideration is still on the high end. Though most households will be compensated, at least partially, through lower rates, that sticker shock has engendered plenty of political outrage.
Republicans don’t like it because the income-varying nature of the charge smacks of a progressive income tax. Many Democrats have lambasted the idea, too, because the lower volumetric rates will water down the incentive to mind one’s electric usage. The utilities say they need some kind of fixed charge to help pay down wildfire and other rising fixed costs.
“Those who consume more electricity, such as a single family home with (a) pool, will receive a discount at the expense of a low electricity user, such as an apartment renter,” wrote Jacqui Irwin, an Assemblymember from Thousand Oaks, along with 21 of her fellow Democratic colleagues last fall.
Irwin is also the lead author of a bill that would put a tight lid on fixed charges, capping them at $10 for most customers and $5 for those enrolled in the state’s biggest energy assistance program.
What makes the debate especially unusual is where some of the state’s most influential environmental interests have come down on the proposal. Namely, on both sides. The Natural Resources Defense Council is for it. Environment California is against it. The Sierra Club called it a “mixed bag.”
Once upon a time, environmental interests shared a united view about the best way to make use of the grid: The less the better.
Now, depending on which green activist you ask, the regulatory proposal is either a utility-backed break from the state’s long, eco-conscious tradition of encouraging energy conservation, or a necessary first step toward electrifying our homes and vehicles for the sake of the planet’s future.
“Ten years ago, even, the grid was mostly powered by fossil fuels,” said Mohit Chhabra, an analyst with the Natural Resources Defense Council, which backs the proposed change. “The question now, as the grid gets cleaner, is ‘When should you use more?’”
As the commission prepares for its vote early next month, the debate is the latest sign that the changing economics of electricity generation in California are beginning to upend the traditional politics of the grid as well.
The case for a fixed charge
The origin of the current debate dates back to at least 2021 when three UC Berkeley energy economists published a report on what’s wrong with California’s electricity prices (PDF).
The report is heavy on jargon, but the gist is simple: Rates are just way too high.
Severin Borenstein, one of the report’s authors, said that isn’t a populist argument; it’s an economic and environmental one. Providing energy through the state’s increasingly solar- and wind-saturated electric grid is not only cheaper, but vastly more environmentally friendly than getting an equivalent amount of energy by burning gasoline or methane.
But because California has some of the highest retail electric rates in the country, “the cost of fueling my Prius at a gas station is about the cost of fueling a Tesla — and it shouldn’t be,” he said. “We are sending entirely the wrong price signals and it’s undermining decarbonisation.”