California environmentalists are divided over plans to change utility rates.that’s why

On May 9, the California Public Utilities Commission plans to vote on whether to let the state’s largest electricity provider charge a new flat fee to most customers.You can think of it like paying for a subscription service, except instead of paying a monthly fee to watch old shows friends episode, this episode lets you enjoy the comforts of 20th century life.

Additionally, under the proposed rule, utilities would be required to reduce the rates we pay for each unit of electricity consumed.

On average, electricity bills don’t go up or down, but most households’ bills aren’t exactly average. Under the proposed changes, people who use less electricity will pay a little more for electricity, while people with higher electricity bills will save money due to lower usage.

The basic idea is not new, although it is widely controversial in California. Most utilities across the country already charge a flat fee. But the proposed regulation has a distinctly California twist: The flat fee would vary based on income, with higher earners paying a $24 fee and lower-income households paying $6 or $12.

The proposed rates are significantly lower than those proposed by the utility last spring, which would top out at $128 a month for top earners. But considering the national average is about $11 per month, the $24 fee under consideration is still on the high end. Although most households will be compensated, at least in part, by lower interest rates, this price shock has caused a lot of political outrage.

Republicans don’t like it because the income-varying nature of the charge smacks of a progressive income tax. Many Democrats also harshly criticized the idea because lower electricity usage would reduce incentives for people to be mindful of their electricity use. Utilities say they need some kind of fixed fee to help cover wildfires and other rising fixed costs.

Councilmember Jacqui Irwin, D-Thousand Oaks, joined 21 others in writing that those who consume more electricity, such as single-family homes with swimming pools, will receive discounts but pay less for their electricity. Users, such as apartment tenants.

Irving is also the lead author of a bill that would impose tight limits on fixed charges, capping them at $10 for most customers and $5 for those participating in the state’s largest energy assistance program.

What makes the debate particularly unusual is that some of the most influential environmental interest groups have expressed opposition to the proposal. That is, both sides. The Natural Resources Defense Council supports this. The California Department of Environment objected. The Sierra Club calls it a mixed bag.

There was a time when environmentalists agreed on the best way to use the grid: less was more.

Now, depending on which green activist you ask, the regulatory proposals are either a utility-backed break from states’ longstanding eco-conscious tradition of encouraging energy conservation or a necessary step toward electrifying homes and vehicles. the first step.

Even a decade ago, the grid was powered primarily by fossil fuels, said Mohit Chhabra, an analyst with the Natural Resources Defense Council who supports the proposal. Now the question is, as the mesh gets cleaner, when should more mesh be used?

As the commission prepares for a vote early next month, the debate is the latest sign that California’s changing power generation economics are also beginning to upend traditional grid politics.

Fixed fee status

The origins of the current debate date back to at least 2021, when three energy economists at the University of California, Berkeley, published a report on California’s electricity price problems.

The report is full of jargon, but the point is simple: interest rates are too high.

Severin Borenstein, one of the report’s authors, said this is not a populist view; This is an economic and environmental issue. Providing energy through states’ increasingly saturated solar and wind power grids is not only cheaper than getting the same amount of energy from burning gasoline or methane, it’s also more environmentally friendly.

But he said that because retail electricity prices in California are among the highest in the country, filling up my Prius at the gas station costs about the same as filling up a Tesla — but it shouldn’t be. We are sending completely the wrong price signal and undermining decarbonization.

Borenstein believes the reason for the gap between the price California households pay and the actual cost of producing energy is that many of the costs faced by large utilities—costs that have nothing to do with actual generation of electricity—are baked into electricity bills. Pay per kilowatt hour. Those costs include paying for wildfire-related lawsuits, investments aimed at preventing future fires, rebates for low-income customers, electric vehicle charging stations, payments to rooftop solar panel customers and maintenance of the grid itself.

Utilities say they need some kind of fixed fee to help cover wildfires and other rising fixed costs.

Borenstein believes that the best way to pay for many of these costs is to spend them from the state budget – which is politically unfeasible. The report proposes an alternative: lower rates and make up the difference through a flat fee on each electricity bill. Even better, to be fair, the flat fee changes based on household income – a kind of income tax but paid monthly to the utility company.

Some argue that consumers will still be affected, but at least the bill won’t stop Californians from buying electric cars and induction cooktops.

The next year, Gov. Gavin Newsom revised his budget proposal to include language allowing state utility regulators to do just that. Budget documents say income-tiered fixed charges would generate better price signals to enhance widespread electrification efforts.

A month later, the measure was included in a 21,000-word budget bill that generated little public discussion. It wasn’t until late last year, after the Public Utilities Commission began soliciting feedback on proposals entrusted to it by the Legislature, that lawmakers began to sound the alarm and introduce new legislation to reverse the situation.

Newsom’s office declined to comment on the current legislation.But in January, an administration spokesman told reporters the governor looked forward to seeing committee proposals consistent with the language of the 2022 budget bill

Electrification and conservation

It’s no coincidence that utility companies in ecologically conscious, politically blue California are among the few electricity providers nationwide that don’t charge a flat fee. Giving larger bills to high-energy users (believed to be high-income households) always seems to be in line with states’ economic advancement tendencies. Charging more per unit of electricity can also improve energy efficiency.

Environmental advocates opposed to the change are not keen on easing the current financial penalties for energy consumption.

Laura Deehan, director of the California Department of the Environment, said during a digital press conference on Tuesday that this will have the undesirable effect of encouraging waste of energy and encouraging people to buy the biggest cars, the biggest houses and leave the lights on. Always on. She warned the change would also further hinder the adoption of rooftop solar panels.

It’s been a painful few years for California’s rooftop solar industry. In 2022, the Public Utility Commission slashed the payments panel owners receive for sending excess power back to the grid. This year’s changes will further reduce the benefits of solar power by reducing the cost of electricity per unit that panel owners forgo, while also leaving these households with unavoidable monthly bills.

Bernadette Del Chiaro, executive director of the California Solar and Storage Association, explained in an email that high fixed fees determine winners and losers. The winners are the high-energy users. The losers are the low energy users. Adding solar and batteries to your home can also make you a low-energy user. So, yes, we have a dog fighting.

But the number of non-solar users affected is much larger, she said.

winners and losers

Who the affected customers are is a hot debate in itself. The biggest losers will be middle-income households who just missed the discount deadline and currently have small energy bills. The biggest winners will be the biggest users.

High-usage customers tend to be wealthier people who can afford to pay for that energy, said Josh Plaisted, founder of engineering and regulatory consulting firm Flagstaff Research. bill.

He said a house in Walnut Creek with a backyard pool under the flat-fee proposal was shocking.

Supporters counter that while households with higher incomes do tend to use more energy, the relationship is not as consistent as one might think.

Of all the factors that determine whether a home uses a lot of energy or a little, Chhabra said, income is not as important as local climate, household size and building efficiency. Wealthier households are more likely to have better-insulated homes, have solar panels on their roofs, and live in expensive coastal cities, all of which tend to result in lower electricity bills.

Once you start looking into the details, he says, such general assumptions no longer hold.

The CPUC estimates that a typical home that goes entirely electric could save $12 to $19 per month on its electric bill as a result of the new rate changes.

For now, the debate may be more symbolic than meaningful. While the biggest winners and losers under the proposed policy would see changes of hundreds of dollars in their annual utility bills, both supporters and opponents acknowledged that most customers would fall somewhere in the middle. Many people may not even notice the change. At the same time, this change will not affect commercial or industrial customers at all.

For most people, this won’t be enough to break the bank, but it’s also unlikely to make a difference for households weighing gas versus electric water heaters. Plaisted says connecting a fixed charge to this makes electrification sound hollow.

The CPUC estimates that a typical all-electric home — replacing a gas-powered space and water heater, oven and dryer with grid-powered alternatives — will save $12 to $19 per month on its electric bill because of the new rate changes.

Chhabra believes the impact of lower rates on conservation is also likely to be negligible. California still has the highest electricity prices in the country, except for Hawaii, right? He said. So there’s still enough signal there.

But as California continues its movement to transition away from fossil fuels, divisions between environmental advocates and other members of the Democratic coalition that sets state energy policy are unlikely to disappear anytime soon.

Chhabra said we are trying to balance conservation, efficiency, electrification and equity. And you can’t be the best at everything at once.

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