OAKLAND — A prominent Bay Area energy economist is warning that forthcoming changes to the way PG&E and other power companies in California bill customers could leave many people with sticker shock.
The plan, enabled by state legislation and revealed recently by PG&E, Southern California Edison and San Diego Gas & Electric, envisions the addition of a monthly charge for all residential customers that receive electricity services from one of the three power utilities along with ongoing charges based on how much electricity people use each month.
Ahmad Faruqui, an economist who has consulted with all three of the utilities involved in the revamp and who has testified in proceedings before the California Public Utilities Commission (CPUC), which oversees them, doesn’t like the idea of grafting on a new fixed income-linked fee to the existing system of electricity charges.
“Right now, monthly bills are totally based on energy consumption and user behavior,” Faruqui said. “But this is like a subscription fee. People will have to pay a fee that doesn’t exist now.”
The new fixed charge would vary depending on the household income levels of the respective customers. Here’s how the fixed charges would work in the PG&E service territory, based on a four-person household:
- Households earning less than $28,000 a year would pay a fixed charge of $15 a month on their electric bills.
- Households with annual income from $28,000 to $69,000 would pay $30 a month.
- Households earning from $69,000 to $180,000 would pay $51 a month.
- Those with incomes above $180,000 would pay $92 a month.
To offset the fixed monthly charge, there would be a 33% reduction in the electricity rate used to calculate monthly costs, depending on how much electricity a customer consumes during the billing period.
PG&E and its sibling utilities say the proposal was crafted to help lower-income and middle-income customers cope with fast-rising electricity bills.
But Faruqui recently analyzed the four income brackets and found that in many scenarios, bills would actually wind up being higher.
“In just about every case, if you are a low electricity user today, with a relatively low bill, you are going to see a higher bill once this plan is in place,” Faruqui said. “If you are middle- or upper-income, you will see a higher bill.”
“Customers will be very irritated,” Faruqui said. “No one wants to see their bill go higher. They will be paying more for electricity not because their behavior changed but because California is changing the rules.”
The plan, which is expected to take effect in 2025 but must be approved by the CPUC first, comes in the wake of the state legislature’s approval of AB 205, which Gov. Gavin Newsom signed into law last year.
The bill included an array of provisions related to utility energy rules. The fixed-income provision was among the items in the legislation.
“The bill would require a fixed charge to be established on an income-graduated basis, as provided, with no fewer than three income thresholds so that low-income ratepayers in each baseline territory would realize a lower average monthly bill without making any changes in usage,” a key passage in the bill stated.
But the forbidding prospect of higher electricity bills due to the revamp alarmed some customers.
“I’m concerned that this proposal will increase how much I pay for electricity,” said Alexis Wodtke, an Oakland resident. “As ratepayers in low-income levels pay less, people in higher-income brackets will wind up paying more.”
But the utilities say bills might be lower or the same for some customers.
“These are not new charges, but a restructuring of the components of providing and delivering power,” PG&E said in a post in the Currents section of the utility’s website.
And some economists say the concept of a fee that would increase depending on household income makes sense.
Severin Borenstein, director of UC Berkeley’s Energy Institute at Haas, co-authored a 2022 report that found some benefits to an income-based fixed charge. UC Berkeley academics Meredith Fowlie and James Sallee were the other authors.
“The introduction of income-based fixed charges would increase equity and efficiency at the same time,” Borenstein and his colleagues wrote in the report. “As an example, the authors consider a system of income-based fixed charges that would mimic the progressivity of the state’s sales tax.”
Still, many customers are reeling from a winter of soaring PG&E bills and wary about what they may pay in the future.
“The cost of living has gone up and up and up, and our electricity bills are going up,” said Teresa Miller, a Livermore resident. “This idea is awful.”
Electricity costs paid by Bay Area consumers — essentially PG&E ratepayers — soared by 13.6% during the 12 months that ended in February, federal officials reported in recent weeks. That annual increase was more than double the overall inflation rate in the Bay Area of 5.3%.
Solar customers, in particular, worry their currently very low electricity bills could rise considerably.
“We pay $10 a month or less to PG&E for electricity because we installed solar panels,” said Trudy Nicholls, a San Jose resident who lives in The Villages residential neighborhood. “If we have to pay $31, $51, $92 a month, that will exceed our total current bill very quickly. People who put solar panels on their roofs will be hit very badly by this.”[c
PG&E acknowledged the proposed revamp is likely to trigger higher monthly bills for people with solar panels.
“Solar customers will still pay a total lower bill than non-solar customers, but they will pay a little more than they do now to pay closer to their fair share for grid maintenance and upkeep,” said Lynsey Paulo, a PG&E spokesperson. “We all benefit from the grid, and solar customers rely on it at night, on cloudy days, and to sell their excess power back to other non-solar customers. This proposal would ensure that everyone who uses the grid more accurately pays for its maintenance and upkeep.”
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