If done correctly, Californians can save on utility bills by creating income-based charges

Electricity bills in California are increasing at an unprecedented pace, putting enormous strain on low-income households.

In just three years, residential rates have spiked 63% for Pacific Gas & Electric customers, 52% for Southern California Edison customers, and 13% for San Diego Gas & Electric customers. One in five households served by the state’s largest investor-owned utilities are now behind on their bills.

To provide relief for working-class households, the California Legislature passed a bill in 2022 that paved the way for regulators to adopt a more equitable rate structure known as an “income graduated fixed charge.” Done correctly, this reform would lower bills for most Californians by shifting some of the cost of maintaining the state’s electricity grid to higher earners who can afford it. 

The California Public Utilities Commission, or CPUC, is now considering a range of proposals for how to craft an income graduated fixed charge. But before the state has gotten the chance to put forth a proposal for how to structure this reform, a misguided effort from lawmakers has sprung up to roll back the CPUC’s authority to move forward. 

If the legislation proposed by lawmakers to kill rate reform succeeds, the state will miss out on a critical opportunity to get bills under control for low- and middle-income households. Sending California back to square one will hurt the households lawmakers have a responsibility to protect. 

The California Environmental Justice Alliance has proposed the most fiscally progressive income graduated fixed charge now before the CPUC. The proposal would equitably distribute costs by shifting more of the financial burden onto very wealthy customers. 

CEJA’s proposal would set up strong protections for low- and moderate-income customers through a five-tier income-graduated structure that excludes a fixed charge for low-income households. They would only pay for the electricity they use. If adopted, it would immediately lower bills for over 85% of California households by ensuring multimillionaires pay their fair share. 

On the flip side, PG&E, Southern California Edison and SDG&E have put forth a proposal that would actually increase bills for many low-income households, lumping households who make $65,000 into the highest income tier along with millionaires. That’s unacceptable – and more importantly, it would not comply with the letter of the law. 

The CPUC must get the details of this reform right by rejecting proposals that fail to pave the way for the more equitable energy system we need. But leaving California’s regressive rate structure untouched – as the lawmakers are proposing – should not be on the table. 

California’s current rate system recovers fixed system costs, including wildfire hardening, grid infrastructure and public benefits programs, from everyone at the same rate based on how much energy they use. This is regressive because California’s low-income customers foot the same bill per kilowatt hour as millionaires just to access electricity for basic needs.

Under a reformed system, all customers would pay much lower volumetric rates offset by fixed charges based on income. As a result, low- and moderate-income households would see bill savings, while more affluent customers would pay more.

California is facing a unique set of circumstances that call for transformational rate reform. 

We already pay two to three times more for electricity than it costs to produce, and more per kilowatt hour than most states. And upward pressure on rates is expected to increase in coming years as California overhauls the grid. 

Meanwhile, ensuring all communities have affordable access to renewable energy and clean electrification is critical for combatting the climate crisis. Our electricity billing structure is a barrier, especially for low-income households that spend a disproportionate amount of their income on utility bills. 

By lowering the volumetric price of electricity, income graduated fixed charges could make it more affordable for low- and moderate-income households to upgrade to an electric vehicle or heating system.

California leaders have an opportunity to make a meaningful difference in the lives of households who fight every day to keep a roof over their heads in an economy that is already rigged against them. Enough is enough. California needs to transform its outdated, regressive rate system.