California May Change Electricity Costs for Residents and People Are Not Happy

California regulators are poised to adjust the billing calculations used by some power companies—a move that has already sparked significant unrest. 

New Adjustments in Energy Billing

Two years ago, a comprehensive energy bill quietly sailed through the California legislature, marking a significant shift in how residents are charged for electricity. 

Proposed Billing Model

This pivotal legislation, originally advocated by Pacific Gas & Electric, proposed a new billing structure where Californians would face a steady monthly fee, offset by reduced charges per kilowatt-hour of usage.

Gavin Newsom’s Quick Legislative Win

Governor Gavin Newsom introduced this bill as part of a substantial budget overhaul in 2022. Remarkably, it zoomed through the legislative process—clearing an Assembly committee, gaining approval from both the Assembly and Senate, and receiving Newsom’s signature—all within four days and with minimal public discourse.

Utility Companies Push for Change

California’s three major investor-owned utility companies championed a significant legislative change, arguing it would motivate residents to abandon fossil-fuel-dependent vehicles and appliances in favor of electric alternatives powered by renewable sources like solar and wind. 

Debating California’s Legislative Change

They contended that the new monthly fee system would more fairly distribute fixed costs across all customers. However, critics argue that this change disproportionately benefits the utilities—Pacific Gas & Electric, Southern California Edison, and San Diego Gas & Electric—by financially disadvantaging Californians in smaller homes with low electricity usage, who will end up paying more, while those in larger, high-usage homes will see savings.

The Controversy Over Fixed Monthly Fees

Critics have voiced strong opposition to the policy, labeling it as a step back in conservation efforts. They argue that it sends a message that conservation is no longer valued. 

New $24 Monthly Charge

As the California Public Utilities Commission, with members appointed by the governor, gears up to institute a $24 monthly charge in an upcoming May 9 meeting, some legislators who initially supported the bill are now seeking to retract their endorsements. 

250 Groups Challenge the New Law

A coalition of over 250 environmental and community organizations is protesting the law, citing concerns over an excessively close relationship between the utility companies, regulatory bodies, and policy researchers.

End of the $10 Cap on Fixed Charges

Critics of California’s new energy law are raising concerns over the removal of a $10 cap on fixed charges, a safeguard in place since 2013. They argue that with this cap gone, there’s no barrier to prevent utilities from endlessly increasing these charges. 

Critics point to a broader national trend where utilities shift more costs into fixed fees, ensuring steady income regardless of consumer usage.

Can New Rates Actually Cut Costs?

Terrie Prosper, the CPUC’s director of strategic communications, has defended the new rate structure, claiming it makes the switch to electric power more affordable for everyone—cutting across income levels, geographic locations, and home sizes. 

How the Law Affects Electric Appliance Users

According to the commission’s estimates, individuals who use electricity for all their home appliances and their vehicle could see monthly savings between $28 to $44 compared to the existing billing system. 

It’s important to note, however, that this law does not affect the Los Angeles Department of Water and Power or other municipal utilities.

Peak Hour Charges and Conservation

Prosper also highlighted that the new structure continues to incentivize electricity conservation during peak evening hours, as rates per kilowatt-hour will be higher at these times, similar to existing time-of-use rates. 

She emphasized that the flat-rate model is designed not to increase utility revenues but to redistribute how electricity costs are allocated on bills.

Significant Energy Savings Ahead?

Under the new electricity pricing policy in California, the cost per kilowatt hour is set to decrease by 5 to 7 cents. This reduction will notably benefit those who consume significant amounts of energy. 

Savings on Air Conditioning

For example, residents of Fresno, where summer temperatures frequently top 100 degrees Fahrenheit, could see around $33 in savings on their air conditioning costs alone. This is due to the overall decrease in electricity prices outweighing the new fixed monthly charge.

Benefits for Electric Car Owners

The revised pricing is also favorable for individuals who drive electric cars or utilize electric appliances like heat pumps, potentially saving them an average of $28 to $44 each month.

Given that California represents 37% of the U.S.’s light-duty electric vehicle market, these changes are significant.

Energy Bill Raises Costs for Some

The policy aims to distribute fixed costs more equitably among all customers and encourage the adoption of electric vehicles and appliances. However, for those using less energy, such as residents in smaller apartments or cooler climates who rely less on air conditioning, the reduced electricity prices may not compensate for the increased fixed monthly charge, potentially leading to higher overall bills. 

This structural shift seeks to balance cost distribution and foster greener energy habits, but it may not equally benefit all consumers.

Opposition to Higher Monthly Charges

Opponents of California’s new energy pricing model argue that it could undermine longstanding efforts to promote energy conservation. They contend that introducing a higher fixed monthly charge could signal to residents that energy-saving practices are less important. 

This concern is echoed by Ken Cook, president of the Environmental Working Group, who critically views the policy as detrimental to conservation goals.

California’s High Electricity Rates

California is already known for having some of the highest electricity rates in the country, and any policy that could potentially increase costs is met with significant apprehension from both consumers and policymakers. 

Fixed Charges and Infrastructure Costs

Most states implement fixed monthly charges on utility bills to cover the costs of maintaining and upgrading the electric grid infrastructure. 

However, in a state like California, where financial strain from utility costs is already high, further increases can be particularly controversial.

Congressional Push for Lower Rates

A group of 18 California congressional members has urged the state’s Public Utilities Commission to maintain lower rates, highlighting that the national average for fixed charges is around $11. 

Democrats and Republicans Agree on Energy

The debate crosses party lines, with both Democrats and Republicans in the state Legislature supporting a bill to cap the monthly charge at $10. 

This bipartisan group has expressed concerns about escalating living costs in the state and opposes new charges that could exacerbate this issue.

Utility Fee Debate

Despite the utilities’ initial request for a monthly charge between $53 and $71, the proposed fee is significantly lower. The commission defends the proposal, asserting that it would not deter conservation efforts since utilities can already charge higher rates during peak usage hours. 

This ongoing debate reflects the complex balance between ensuring grid reliability and promoting sustainable energy usage among Californians.

Newsom’s Defense of Fixed Fees

Alex Stack, a spokesperson for Governor Newsom, emphasized that the concept of implementing fixed fees had been thoroughly discussed in various public settings, including meetings and budget hearings, prior to the passage of the energy bill. These discussions framed the fixed fees as a viable strategy to manage escalating electric bills for Californians.

However, when queried about whether the bill was proposed at the behest of utility companies, Stack did not provide a direct response.