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California electric bills are some of the highest in the USA, but in the next few years, as part of the state’s efforts to decarbonize the power sector, California will start charging high-income residents a higher basic rate for electricity while reducing basic charges for lower-income customers. At the same time, the state’s three big for-profit utilities would reduce the metered cost of electricity use, making it more affordable for people to switch from gas heat and stoves to electric, and rewarding energy efficiency and the adoption of rooftop solar.
Rich people aren’t happy, of course, because why should they pay more so non-rich people can have more affordable power? Well, because you can, and spreading out the costs of decarbonization benefits everyone. You’ll benefit (really, you and all future generations on the planet will benefit) from everyone pumping less carbon into the atmosphere. The sooner, the better, for all of us.
A short ‘splainer, via the Guardian:
Electricity bills are made up of fixed costs as well as fees that vary based on the amount of electricity residents use. Last year, the state passed a law giving the California public utilities commission a 1 July 2024 deadline to determine a fixed charge for household electric bills based on people’s income.
The new income-based electricity bills could hit residents’ mailboxes as soon as 2025. Based on proposals currently under consideration, residents who make more than $180,000 a year could pay about $500 more annually on their electricity bills, while Californians who make less than $28,000 annually could save up to $300 a year. The law is part of the state’s answer of how to equitably transition away from carbon as an energy source.
One of the reasons California electricity is so expensive is that utilities have higher costs for paying off damage done by wildfires that were caused by their crappy maintenance. (And climate change.) Those costs have been passed on to all utility customers in the form of higher electricity prices based on use, which has made methane gas (you know it as “natural”) stoves, heaters, and water heaters more attractive, especially to lower income ratepayers. High electricity costs may also be a disincentive to adoption of electric vehicles, although even California’s higher electric rates are a huge savings over gassing up an internal combustion vehicle.
(Yes, yes, even better to seize the costs of wildfires directly from PG&E shareholders, at gunpoint maybe, but piracy remains illegal unless you’re a pirate with a PAC.)
As the Washington Post (gift link) explains
That’s where the new law, which passed last summer as part of a larger energy bill, comes in. First proposed by researchers at the University of California at Berkeley and the nonprofit Next 10, the plan would split utility costs into two buckets: Fixed charges, which everyone has to pay just to be connected to the grid, and variable charges, which depend on how much electricity you use. Proponents say that the creation of fixed charges would cover things like wildfire preparedness and grid updates — and would also lower electricity costs based on usage. In theory, that would make it easier to convince Californians to electrify.
Adjusting the monthly fixed charges based on income helps overcome the regressive nature of having all ratepayers pay the same fixed charge, said UC Berkeley economist Meredith Fowlie, one of the proposal’s co-authors. “If you can mimic an income tax, it’s less regressive,” she said.
This is where we make you watch this video from Tabs this morning, which explains why it’s pretty bogus when for-profit utilities claim that home solar increases electricity costs for the poor. That’s only a problem when utilities react to customers adopting solar by imposing the same higher monthly user fees on everyone to “make up” for the revenue they don’t reap from selling power to people who are making their own with home solar.
As video host Matt Ferrell explains, higher monthly fees with lower rates for use can actually leave lower income people paying a proportionally higher amount for electricity while more well-off customers pay less for electricity even if they don’t reduce their usage. While Ferrell doesn’t discuss California’s plan for income-based monthly user fees in the video, it stands to reason that progressive user fees based on income would cover the utility’s fixed costs more equitably, while still helping home solar pay off through reduced use of power. Maybe a little piracy?
UC Berkeley prof Severin Borenstein, another co-author of the Next 10 report, didn’t use the words socialism or redistribution in explaining it to the Guardian, but that was the gist of the plan for shifting costs from rates to progressive user fees.
Everybody can’t put in solar if we’re paying for all of these other costs through per-kilowatt-hour charges. That just gets you into a death spiral where prices go higher and higher. And we know who will be the last people that have solar. It will be poor people.
So hell yes, this sounds like a good idea: Rich people pay a little more, less-wealthy people pay a little less (and can afford an ebike or a down payment on home solar) and while we’re at it let’s do a second climate bill that subsidizes ebikes, funds wider energy efficiency upgrades in low-income housing, and more community solar for low income neighborhoods, too.
Here comes the part where I remind you to stop by Friday for Part 4 of our Wonkette Book Club, where we’re reading Kim Stanley Robinson’s 2020 climate novel The Ministry for the Future. More on the book club and this week’s reading (Chapters 51 through 69, nice) here!
[Guardian / Designing Electricity Rates for an Equitable Transition (Next 10) / WaPo (gift link) / Newser / Undecided with Matt Ferrell on YouTube]
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