California elected officials call for repeal of “utility tax”

The California Public Utilities Commission (CPUC) released a proposed decision that would apply an average charge of about $24 a month, adding a fixed monthly fee that is more than double the national average. The charge is adjusted based on household income levels and applies to every ratepayer, regardless of how much electricity they use.

Over 100 California elected officials at every level of state government signed a letter in opposition to the charge, which is being labeled as “utility tax.”

“We object to the un-democratic and opaque way in which the Utility Tax was enacted, passed in three days without any public hearings or discussion,” said the letter. “The people of California deserve a voice in any major policy change with such wide-ranging consequences.”

The coalition of elected officials called for an immediate repeal of Public Utilities Code Section 739.9, which calls for the CPUC to add a fixed charge based on income level.

“The utilities and other organizations have proposed the highest fixed charges in the country: between $30 to $70 per month for any customer not already on CARE or FERA,” said the letter. “That would be three to seven times the national average for such a fixed charge.”

The elected officials allege that the fixed charge would increase bills for renters and those with historically lower electricity use and would discourage energy conservation. Furthermore, the officials said the “utility tax” would not incentivize electrification, and in most cases, it would be more economical for customers to continue to use natural gas at home.

Perhaps the most important feature of the approved fixed charge is that it opens the door for fixed charges with no cap. Utilities will be free to charge as much as they please, and some utilities have already proposed unprecedented fixed charges as high as $128 per month.

Proponents of the bill have justified it in part by lowering electricity rates by about 5 to 7 cents per kilowatt hour. While the volumetric rates have been lowered in this proposal by five to seven cents, this discount is essentially washed out by recent rate increases. PG&E approved a 13% rate hike this year, and the proposed decision does not enshrine caps or freezes on rate increases.

California’s electricity rates have exploded in recent years, far outpacing inflation. From 2014 through 2023, retail electricity bills from California’s three major utilities rose by at least 47%, with San Diego Gas & Electric spiking 104%. In contrast, the Consumer Price Index (CPI) rose by 28% over the same period.

California has an electricity affordability crisis on its hands. Utility filings show that over 20% of customers of the three large utilities are over a month late on their bills, and that number rises to 33% in low-income brackets.

“The Utility Tax entrenches the problem of high electricity rates, rather than solving it,” concluded the letter.