CPUC approves fixed rates and lowers usage rate

Thursday, May 9, the California Public Utilities Commission (CPUC)
unanimously approved a change in how large investor-owned utilities may
bill for electricity in California.

In late 2025, electric bills will be the total of a fixed or flat rate
and a usage charge. Current bills are based on usage alone. The change
introduces the separation of the electric bill into two costs.

The flat rate portion would be based on the cost to build and to
maintain the electric grid, that is, the industry’s infrastructure, such
as power lines between stations and to and from structures, such as
homes.

The charge for usage will be 5 to 7 cents less kilowatt-hour for all
residential customers, according to the CPUC’s news release.

The flat rate charge will be $24.15 per month, as proposed in the March
tentative decision. Low-income customers and customers living in
deed-restricted affordable housing will be eligible for discounted flat
rates of $6 or $12, the CPUC said.

The chosen flat rate is toward the lower end of the recommendations
submitted to the CPUC. The Solar Energy Industries Association
recommended a flat rate of $9.72, the lowest of eight recommendations.
San Diego Gas and Electric suggested a flat rate of $73, the greatest
recommendation. Southern California Edison (SCE) and Pacific Gas and
Electric (PG&E) recommended a rate of $51. It is the same as the
Sacramento Municipal Utility.

The new billing plan will become effective in late 2025 for SCE and San
Diego Gas and Electric and in early 2026 for PG&E. However, before it is
implemented, the CPUC and the utilities will provide information to
educate the public in advance of the new bills.

CPUC estimates that a customer who powers their home and vehicle with
electricity would save an average of $28 to $44 monthly compared to
today’s billing structure. The commission believed the new rate
structure would encourage people to buy electric vehicles and replace
home gas appliances.

“This new billing structure puts us further on the path toward a
decarbonized future, while enhancing affordability for low-income
customers and those most impacted from climate change-driven heat
events,” said CPUC President Alice Reynolds. “This billing adjustment
makes it cheaper across the board for customers to charge an electric
vehicle or run an electric heat pump, which will spur greater uptake of
these technologies that are essential to transitioning us away from
fossil fuels.”

The new billing structure does not introduce any additional fees or
generate extra profits for utilities. Instead, it redistributes existing
costs among customers. This approach aligns with billing practices
employed across the nation and by most other utilities in California.

This change in the rate structure is the result of Assembly Bill 205,
which became law June 30, 2022. It gave the CPUC until July 1, 2024, to
develop a new rate structure.

The text of the bill, in section (3) of the introduction states, “… The
bill would eliminate the cap on the amount of the fixed charge that the
PUC may authorize. The bill would require the fixed charge to be
established on an income-graduated basis, as provided, with no fewer
than 3 income thresholds so that low-income ratepayers in each baseline
territory would realize a lower average monthly bill without making any
changes in usage …”

The new rate provisions still maintain both current income-based
discounts for electricity customers.

The California Alternative Rates for Energy (CARE) low-income assistance
program enrollees will have a $6 reduction applied to the flat rate on
their bills. Currently, CARE offers a 30 to 35% discount in rates based
on income and family size. For example, a family of four with an income
of less than $60,000 would qualify for some reduction. About 30% of the
customers of large, independently owned utilities qualify for these
reductions.

Customers who are part of the Family Electricity Rate Assistance program
will receive a $12 reduction for their flat rate. Families in this
program live in deed-restricted affordable housing with incomes at or
below 80% of the area median income.

Customers with roof-top solar also will be shifted to the new billing
plan. The CPUC noted that these customers also rely on the grid to store
and to transmit the power generated from the solar equipment.

Leading up to the decision, many opposed the change. In the past several
months, strong and vocal opposition has been expressed more frequently
and publicly. The largest — a coalition of several hundred groups,
including Center for Biological Diversity, Environmental Justice
Coalition for Water, Western Center on Law and Poverty, Howard Jarvis
Taxpayers Association, and Utility Consumers’ Action Network — have
protested and written a letter to the governor and legislative leaders
in both the state Senate and Assembly. Members of California’s
Congressional delegation have independently supported the coalition.

Just this week, California Senate Republicans wrote the CPUC opposing
the decision and strongly criticized the fixed rate provision. “This
proposal comes at a time when Californians are already facing sky-high
electricity prices, with rates that are the third highest in the nation,
only behind Hawaii and Rhode Island. We must do more to rein in the
ever-growing cost of living in our state, not find new ways to add to
it.

“Beyond its excessive nature, the concept of a fixed charge is
inherently flawed. First, it contradicts the principles of fair pricing
and consumer protection. Customers should primarily pay for the
electricity they use, plain and simple.

“Furthermore, the fixed charge discourages energy conservation, as
customers will be forced to pay $24.15 extra, regardless of their energy
use,” Republican state senators, including Kelly Seyarto representing
the Hill’s District 32, wrote in their letter to the CPUC days before
the decision.

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