Under the new policy, utilities will be required to reduce the price households pay for the electricity they use every time they charge a phone or run an air conditioner. That rate cut will vary from between 8% and 18%, depending on the utility, season and time of day, according to the commission’s analysis.

To make up for the lost revenue, regulators have introduced the concept of a “fixed charge,” a break from California electric billing tradition. For decades electric bills from Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric have been the “pay as you go” variety, with households only paying for the electricity they use. 

Starting in late 2025 for SCE and SDG&E customers and in early 2026 for those with PG&E, the state’s investor-owned utilities will be able to charge customers a monthly fee regardless of how much power the customer draws from the grid. So-called fixed charges are a mainstay of electric billing across most of the country, with an average fee of roughly $11.

The new California charge will be $24 for most customers, but lower income households, who already qualify for discounted electric rates, will see fees of either $6 or $12.

The unanimous vote by the California Public Utilities Commission comes after months of heated debate that pitted Assembly and Senate Democrats and Republicans against legislative leadership and the governor’s office, advocates of rooftop solar against labor unions representing utility workers and environmental advocates against one another.

Backers of the billing change say it’s a necessary step to bring down electricity rates in California, which are among the highest in the country. California regulators want all new cars sold to be electric by 2035 and are taking steps to discourage gas-powered indoor appliances. Those goals are hard to square with sky-high electric prices.

The state’s planned “transition to all electric homes, cars and trucks is truly transformative,” said CPUC President Alice Reynolds at today’s hearing. Under the proposed change all customers “will be better off financially if they electrify — whether that’s purchasing an electric vehicle or switching out a gas appliance with an electric one.”

Opponents argue that the change in billing policy won’t move the needle for most households considering dumping their gas-powered cars and appliances, which can cost tens of thousands of dollars, but will instead needlessly discourage energy conservation efforts while punishing rooftop solar customers.

The policy is a departure from 50 years of regulatory precedent in California, which is “if you use more you pay more and that encourages conservation,“ said Loretta Lynch, a former CPUC president and critic of what she sees as a “pro-utility” bias on the current body. Reducing the penalty on high energy use will also have “huge cost consequences down the road” for a grid that already struggles to keep up with summer-time demand, she said.

The ultimate impact of the policy change may be more muted than either side wants to admit, said Merideth Fowlie, a UC Berkeley economist and one of a handful of researchers to initially float the idea in 2021 of an income-graduated fixed charge as one way to pay for reduced electricity rates. 

The three-tiered CPUC-approved change doesn’t vary much by income and its promised rate reductions are relatively modest, said Fowlie.

“Clearly, I’m disappointed, because I don’t think it comes close to where I think we should be in terms of reductions,” she said. “If this forces another conversation — which is, ‘Why are we paying for wildfire risk mitigation, which is essentially climate change adaptation, or some of these major investments in decarbonisation, on bills?’ — I think that’s an important conversation to have.”

Winner and losers in new California utility fee

Though utilities won’t earn any more revenue or profit as a direct result of the change, there will be winners and losers under the new billing program.

The reduced price of electricity will likely save money for people who use a lot of electricity, such as a large household in an AC-dependent part of the state or the owner of an electric SUV, a heat pump and an induction stove. That reduction will be more than enough to offset the cost of the new fee. Many, if not most, low-income households who qualify for the discounted fixed charge will also emerge as financial winners.

But there are sure to be plenty of losers, too. Smaller households, Californians living along the temperate coast, energy conscious customers and people with solar panels on their rooftops are all more likely to see their total utility bills rise. 

That group makes for a powerful political bloc that has fiercely rallied against the regulatory change for months. Many showed up or called in at the commission hearing. 

“The big utility tax will increase monthly utility bills on four million households while doing nothing to encourage electrification,” said Yvette DeCarlo, speaking on behalf of a coalition of environmental nonprofits, tenant rights groups, liberal advocacy organizations and anti-tax activists. 

Severin Borenstein, another Berkeley economist who co-authored the 2021 study with Fowlie, said modeling suggests that the lower electricity rates under the policy will only increase electric vehicle purchases by roughly 5% above what they would otherwise be. 

“It’s in the right direction, though, and I think that we can’t get to where we need to go unless we start,” he said.

The fixed charge policy was included in a budget proposal by Gov. Gavin Newsom’s administration in 2022, but it wasn’t until last year that many state legislators woke up to it. Twenty-one coastal Democrats, led by Thousand Oaks Assemblymember Jacqui Irwin, introduced a bill ordering the CPUC to reverse course. So too did Senate Republican leader Brian Jones. Both efforts were quietly put on ice at the behest of legislative leadership.  

In a letter Jones and the rest of the Senate GOP caucus sent to CPUC president Reynolds earlier this week, the San Diego Republican expressed some skepticism that the state regulatory body could be trusted to keep the fixed charge at its current level.

“We are particularly concerned that this will only be the beginning,” the letter said. “The CPUC has been granted unchecked power to increase this new charge at any time. If the $24.15 plan is approved, the next proposal may see the fixed charge hiked to $50, $100, or even higher!”

More shade directed at the rooftop solar industry

For California’s residential solar industry, the vote is just the latest regulatory broadside. 

Over the last two years, the CPUC has slashed the payments that utilities are required to give to single family homeowners, apartment buildings, schools and businesses that install solar panels. 

That’s based on the argument, advanced by the commission, the regulated utilities and many energy economists, that relatively well-to-do solar customers have been overcompensated in California since the early 2000s, which has had the effect of off-loading the costs of running the grid onto non-solar households.

Advocates for the fixed charge say assigning solar customers an unavoidable monthly charge is yet another way to balance out who pays for major utility line items like wildfire prevention, subsidies for low income households, EV charging networks and distribution system upkeep. 

“What the fixed charge does is ensure that we’re no longer going to have freeloaders,” Scott Wetch, a lobbyist who represents many unionized workers employed by California’s for-profit utility companies, told CalMatters earlier this month.

Outraged homeowners with solar panels were well represented among those who called in to give public comment.

“I have solar panels on the home, which we got right away to cooperate with California’s move to have 100% renewable energy. But yet we’re getting hit with this unfair tax,” Joy Frew, a self-described senior citizen from San Diego County, told the commission over the phone.

“People that really invested in solar trying to do the right thing for the planet — all of a sudden we’re being slapped in the face for doing it,” said a caller named Steve Randall from San Clemente.

Not that every Californian with a solar panel above their head is opposed to the fixed charge. Fowlie, one of architects behind the idea, said her family hopped on the solar bandwagon as a way to bring down their monthly utility bill. 

“I’m gonna be the biggest loser under this proposal,” she said, prior to today’s vote. “I would be in that higher income bracket and I have solar, so my bills would go up. But I think it’s a win for California, so I’m a big supporter.”

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The fee would impact those who get their electricity from the California Public Utility Commission-regulated Pacific Gas and Electric Company, Southern California Edison and San Diego Gas and Electric Company, according to Los Angeles Daily News.

However, the proposed fee is facing some major pushback by local SoCal lawmakers who aim to stop the implementation of the $24 monthly charge.

According to KTLA, the CPUC has offered a reduction of 5 to 7 cents per kilowatt an hour in exchange for the fee. However, Assemblymember Jacqui Irwin (D-Thousand Oaks) told KTLA that’s not enough to offset “skyrocketing” electricity rates.

“Our constituents have had enough and so have we,” she said in a press conference. “It’s time to put some reasoning back into how we charge for electricity in California.”

According to LA Daily News, over the past decade, “PGE rates have increased 127%, SCE rates have increased 91% and SDGE rates have increased 72%.”

To combat the rising rates, Irwin introduced Assembly Bill 1999, which is currently in committee. If the bill passes, the CPUC’s ability to impose the extra fee would be revoked.

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But that’s what concerns many Pacific Gas & Electric Co. customers who cannot afford to pay their soaring utility bills. As of February, more than 1 million of them were behind on payments.

The California Public Utilities Commission, tasked with regulating private utilities, just approved another rate hike last month, on top of a previous increase that took effect in January, amounting to a roughly $400 annual bump for the average household. The staggering energy costs have rocked residents and business owners, who are exasperated by the inability of state leaders and commissioners to ease their financial pain.

With rates becoming increasingly unsustainable, the long-term repercussions for those already living paycheck to paycheck seem dire. More broadly, could these elevated costs serve as an impediment to wider adoption of all-electric vehicles and appliances? Will PG&E or the CPUC commissioners who approve these outrageous increases face any consequences? 

The utility’s negligence and aging infrastructure has led to loss of life, property and – in the case of Paradise – an entire California town. Nevertheless, consumers are paying the price for the consequences of their mistakes and the cost of preventing future ones. 

“They’re outraged and they’re frustrated,” Assemblyman James Gallagher, a Chico Republican and Minority Leader, said of his constituents. Over the years, Gallagher has authored multiple laws to compensate wildfire survivors and help communities recover. 

“The cost of living is already so high, and to add another rate increase, people are very angry about it,” he continued. “They don’t understand it. Why is it that rates keep going up, when you have a company that made (more than) $2 billion in profit last year?”

So far, answers to such pressing questions remain elusive, and potential solutions far from assured. 

In February, Gallagher, along with Republican Assemblymember Joe Patterson, introduced legislation that would order the CPUC to cut electricity rates by 30%. If Assembly Bill 2205 is pushed through, Gallagher hopes it will ease the burden on families and businesses. 

“We’re putting the PUC in a position where they’re proactively looking out for consumers and not looking out for utility companies,” he said.

In response to public outcry, the state’s utility regulators proposed a new, tiered billing structure designed to make the price of electricity less expensive for residential customers. Under the proposal, customers of PG&E, Southern California Edison and San Diego Gas & Electric would pay an income-based rate, helping reduce bills for lower-income customers.

According to the CPUC, the billing structure would include a flat rate of $24.15 per month for most households, which would reduce the price of electricity by 5-7 cents per kilowatt hour. If approved, it would go into effect late 2025 and early 2026.

This proposal, however, has already sparked fierce debate, and comes on the heels of a prior recommendation for a fixed rate. That proposal also received pushback from lawmakers who argued that the pricing structure might do more harm than good for low-income households.

Some legislators, including Jacqui Irwin, a Thousand Oaks Democrat who recently called the CPUC “completely out of touch,” want to repeal the proposal establishing an income-graduated fee and replace it with Assembly Bill 1999, capping the fixed charge at $10 ($5 for low-income customers).

Legislative maneuvering aside, affordable energy and climate advocates like Mark Toney, executive director of The Utility Reform Network, believe that placing a cap on utility rate hikes is just one part of the solution. Regulators should also require utilities to exercise fiscal discipline on spending, he said. Utilities, Toney explained, should not be given a “credit card with no limit and a guarantee that someone else is going to pay.” 

TURN is backing the Utility Accountability Act, a sensible bill that would prohibit utilities from using funds collected from ratepayers to pay for advertisements, political activities or membership dues of trade associations engaged in lobbying. It would also require utilities to document and disclose their spending.

Another sticking point is charging utility customers for climate initiatives that reduce wildfire risk or expand clean energy. With its ambitious climate goals, California can ill afford to discourage people from helping reduce the impacts of a warming planet.

By increasing the cost for using electricity, “that’s not rewarding people for good behavior,” Toney said. 

Gallagher contends that climate mandates can be costly requirements passed onto consumers, and routinely hears from constituents exhausted by the rate spikes and sometimes one paycheck from losing everything. PG&E failed to modernize and keep up with vegetation management, but now wants to place more underground utility wires and send consumers the bill. 

Undergrounding, he added, doesn’t have to be done everywhere just yet.

“There needs to be a greater focus on modernizing this infrastructure, but how do we go about that without putting all the burden on consumers?” Gallagher said. “A shareholder fund could be part of that, or maybe some state interest in modernizing the grid. All these things should be brought to the table.”

For Ahmad Faruqui, an energy economist based in Danville, a remedy cannot come soon enough. The No. 1 concern of friends and neighbors remains the exorbitant cost of electricity, which has been rising faster than the rate of inflation. People are just “doing their best to pay the mortgage, car payments and their children’s education,” he said. 

At some point, though, customers will grow too weary of the financial strain. Faruqui predicts there could be a “huge backlash” for the governor and legislators if it’s not brought under control.

“We are paying for their blunders,” Faruqui said of PG&E.

Californians deserve better than what they’re getting from the state’s largest and most expensive utility company – and the commission charged with regulating it. With no relief in immediate sight, more people will be faced with impossible choices, contemplating which necessities should be sacrificed just to light up their homes at night. 

Those are choices no utility customer should ever have to make. 

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