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California Electric Companies Propose Higher Earners Pay Greater Fees Than Lower Earners Under New State Law

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California Power Use To Hit Record During Heatwave Electrical transmission towers at a Pacific Gas and Electric (PG&E) electrical substation during a heatwave in Vacaville, California, US, on Tuesday, Sept. 6, 2022. California narrowly avoided blackouts for a second successive day even as blistering temperatures pushed electricity demand to a record and stretched the state's power grid close to its limits. Photographer: David Paul Morris/Bloomberg via Getty Images Bloomberg / Contributor
David Paul Morris/Bloomberg/Contributor via Getty Images

Three electric utility companies in California proposed a fixed-rate billing plan under which high-income households would pay more than low-income households.

California Democratic Gov. Gavin Newsom signed a bill last summer requiring energy utilities to impose a “rate component” in their power bills to collect revenues to fund the state’s energy infrastructure. According to the Los Angeles Times, the law requires “a fixed monthly charge based on household income.” Pacific Gas and Electric, Southern California Edison, and San Diego Gas and Electric recently introduced a proposal intended to reduce fees for most households by imposing higher costs on wealthier families, a plan which the California Public Utilities Commission must approve by the middle of next year.

“We have listened to and heard from our customers that fundamental change is needed to provide bill relief,” SDG&E CEO Caroline Winn said in a statement. “When we were putting together the reform proposal, front and center in our mind were customers who live paycheck to paycheck, who struggle to pay for essentials such as, energy, housing and food.”

California households with income less than $28,000 per year would pay a $15 fixed fee on their monthly electric bills in SCE and PG&E areas, while those in SDG&E areas would pay $24 per month. Families with annual incomes between $28,000 and $69,000 would pay $20 per month in SCE areas, $34 per month in SDG&E areas, and $30 per month in PG&E areas. Those with income between $69,000 and $180,000 would meanwhile pay $51 per month in SCE and PG&E areas and $73 per month in SDG&E areas.

The most severe monthly fees would occur for households with annual income above $180,000, which would pay $85 per month in SCE areas, $92 per month in PG&E areas, and $128 per month in SDG&E areas, according to details of the plan published by local news outlets.

“We understand that our customers are dealing with rising costs of all kinds and are working to keep customers’ bills as manageable as possible,” SCE CEO Steven Powell said in another statement. “SCE believes an income-based fixed charge will provide benefits to millions of customers, particularly those most in need of energy bill relief. It will also make it easier for more Californians to afford clean energy technologies.”

The legislation says that California, while a “leader in driving the affordable and equitable transition to a clean reliable energy system,” experiences grid disruptions from “extreme events from climate change, including heat waves, wildfires, and drought, combined with other factors, such as supply chain disruptions.”

With an effective tax rate of 13.5%, California is among the most heavily taxed states in the country, according to an analysis from the Tax Foundation. The state also has among the most progressive income tax systems in the nation, meaning that wealthy households supply an outsized portion of state revenues relative to other households, according to another analysis from the Institute on Taxation and Economic Policy.

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Voters in California recently rejected a millionaire tax hike on a ballot measure during the midterm elections but approved a measure that imposed a “mansion tax” for the sale of certain luxury real estate. More recent legislative proposals include a “worldwide wealth” tax that would impact both current and former California residents, who would have to pay based on the value of assets such as stocks, savings accounts, art collectibles, and pension funds.

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