California Public Utilities Commission Proposes Three Tiers of Income-Based Fixed Charges For Electric Bills

SAN FRANCISCO – Yesterday, the California Public Utility Commission (CPUC) issued a Proposed Decision that would implement monthly fixed electric charges as follows:

• CARE Households – ~$6 – This includes households below 200% of the federal poverty line as well as households who qualify for other income-based assistance programs, approximately 26% of households.
• FERA Households & Anyone in Affordable Housing – ~$12 – Affordable housing where eligibility is income below 80% of area median income.
• Everyone Else – ~$24

This proposal comes two years after the passage of AB 205, which required regulators to implement income-graduated fixed charges (IGFCs) for Californians’ electric bills.

The IGFCs proposed for investor-owned utilities would create small bill savings for most low-income customers, who would pay a $6 fixed charge and see more than $6 per month in volumetric (per-usage) savings. The CPUC resisted proposals from large utilities to impose fixed charges of over $50 on most Californians. The proposed decision would shave approximately 10 percent off of California’s rising volumetric rates, minorly increasing incentives for electrifying homes.

However, some lower-income Californians could see their bills increase under this decision. For example, Tier 2 low-income customers whose electric bills are less than $115 per month could end up paying more, even with a reduction in volumetric rates.* The Commission also lumps customers making $50,000 a year into Tier 3 with multi-millionaires, both of which would pay $24 a month in fixed charges. This is likely to raise monthly bills for low energy usage lower-middle class customers while lowering bills for wealthier consumers who use more energy.

The proposed decision may be revised, and will be finalized by the CPUC on May 9.

In response, Sierra Club and the California Environmental Justice Alliance issued the following statements:

Nihal Shrinath, Associate Attorney for the Sierra Club, said:

“Today’s proposed decision is a mixed bag—while avoiding the worst environmental and equity consequences of poorly designed fixed charges, it leaves significant affordability and electrification gains on the table by employing a conservative, incrementalist approach. The Proposed Decision smartly rejects some bad proposals—like splitting CARE customers into multiple tiers and including distribution costs in fixed charges—but it also misses the original intent of AB 205 in crafting a progressive fixed charge structure and guaranteeing bill savings for low-income customers.

“We will continue to call on the Commission to lower Tier 1 and Tier 2 fixed charges to $0 in a final decision, and to create additional income tiers for wealthier Californians for a more progressive fixed charge structure as soon as possible. More tiering would also allow for greater reductions in volumetric rates to create actual, rather than negligible, impacts on electrification.”

Theo Caretto, Associate Attorney with Communities for a Better Environment and representative for the California Environmental Justice Alliance, said:

“There is so much potential for this reform to deliver urgently-needed bill relief for Californians, but this proposal misses the mark. We know that advancing affordability is one of Governor Newsom’s top priorities, and that’s why it’s so disappointing that his agency isn't going far enough to deliver bill relief for low- and middle-income households. The Commission is protecting the wealthiest Californians at the expense of everyone else. Regulators need to correct course to deliver a progressive proposal that places appropriate fixed charges to high-income Californians, and delivers deeper savings to households that need it.”

*Based on Sierra Club's analysis of bill impacts on FERA and Non-FERA Tier 2 PG&E customers enrolled in E-1 tiered rates