Finance
California has one of the highest fixed utility rates in the country
(Bloomberg) — California regulators have voted to impose one of the nation’s highest monthly fixed energy costs in a sweeping effort to change the way customers in the Golden State pay for electricity.
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Utilities owned by PG&E Corp., Edison International and Sempra will be able to charge many customers about $24 a month starting at the end of the year to cover their infrastructure costs, according to a decision Thursday by the California Public Utilities Commission.
In exchange for the higher monthly amount, which was capped at $10, customers also pay 5 to 7 cents less per kilowatt hour consumed. The fixed monthly amount will be lower for customers with a low income.
The change comes as California grapples with what consumer advocates call an affordability crisis for the state’s utilities, which now average the second-highest energy rates in the country.
Rates have doubled for many customers who are paying for utilities to spend billions of dollars modernizing their aging power grids and working to reduce the risk of their power lines sparking more catastrophic wildfires.
The new billing structure was allowed by a law signed two years ago by California Governor Gavin Newsom that required fixed electricity rates to be based on income.
State regulators say the new rates will make it more affordable for customers to electrify their homes and use plug-in cars. Critics of the proposal say it will increase bills for those who live in small apartments and don’t use much power, as well as for rooftop solar customers who can offset their energy bills by generating their own electricity, since they are still required will have to pay the fixed monthly amount even if they receive credits for their excess power.
“The CPUC expects the cost redistribution will encourage electrification, but we believe it could further undermine rooftop solar in the state,” ClearView Energy Partners wrote in a research note after the decision.
Last year, California regulators sharply reduced incentives for new rooftop solar customers, saying it would help lower bills for those who can’t or don’t have solar panels, and pay for those who do do well. That has led to a sharp decline in the number of residential solar installations in the largest US market.
Utilities have supported the idea of increasing fixed monthly charges as a way to spread infrastructure costs more evenly among their customers. Fixed charges would almost exceed those imposed by investor-owned utilities, according to an analysis by Ahmad Faruqui, an expert on utility rates.
(Updates with analyst commentary in eighth paragraph)
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