PD Editorial: Roll back plans for income-based electric bills

State lawmakers have heard Californians’ complaints about a half-baked electricity-pricing plan. A group of Democrats, including San Francisco Sen. Scott Wiener, introduced legislation last week to block income-based fees.

A 2022 law directed the California Public Utility Commission to authorize a new fee structure by July 1 this year. The system favored by utilities and regulators would make high-income households pay more for the same amount of electricity as low-income households. The wealthy would subsidize the not-so-wealthy.

Wiener and colleagues figured out that “high-income households” in this case would sweep in a lot of middle-class Californians, increasing their energy bills by as much as $830 a year. Other proposals would have smaller impacts but still are alarming impositions for uncertain gains.

Assembly Bill 1999, which Assemblymember Jacqui Irwin of Thousand Oaks introduced along with Wiener and others, would call things off for now. While the bill meanders through the Capitol, the CPUC should slow down and bring more Californians into the discussion with extensive public hearings about how to equitably shepherd the state into a more-electrified future.

Republicans warned from the outset about the unintended consequences of the new fee arrangement. Without debate, though, Democrats shoved the provision into wide-ranging energy legislation signed by Gov. Gavin Newsom two years ago. The provision removed state caps on the “fixed charge” portion of residential electricity bills. The CPUC was directed to approve a fixed charge on an income-graduated basis so low-income ratepayers “would realize a lower average monthly bill without making any changes in usage.”

The concept was appealing in theory: Ease the impact of California’s excessively high power rates on low-income households by having well-to-do households absorb more of the fixed costs of providing electricity and reducing everyone’s kilowatt charges.

Fixed costs include not only operation and maintenance of the electrical grid but also such things as wildfire mitigation and solar subsidies. The revised charge would be tiered, with the amount increasing according to a household’s presumed ability to pay. Utilities aren’t supposed to reap more profits.

In practice, the scheme would disincentivize conservation. Using electricity would not have much effect on the electric bill because so much would be fixed costs. Moreover, as we noted in an editorial last year, the new system raises concerns about privacy as utilities would need to verify the correct income tier for each household. Few Californians, we suspect, would trust PG&E with their tax returns or other financial data nor would they want to pay the extra overhead utilities would pass onto them for managing the program.

Lawmakers in 2022 were acting quickly in the face of increasing electric costs that hit the budgets of low-income households hardest. Over the past 10 years, PG&E rates have soared 127%. More than one-fifth of customers are behind on their bills.

The 2022 law, and the current talk of a roll back, are reminiscent of events in the 1990s. Then, lawmakers also acted quickly and with little transparency to deregulate utilities. Their laudable goal was to make electricity more affordable. Instead, that disastrous legislation led to Enron’s market manipulations, skyrocketing prices and rolling blackouts.

Perhaps there’s a lesson there for lawmakers about haste and good intentions.

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