Utility regulators in California on Thursday changed the way most residents will pay for energy by adding a new fixed monthly charge and reducing the rates that apply to energy use. Officials said the change would reduce monthly bills for millions of residents and support the use of electric vehicles and appliances that run on electricity, rather than fossil fuels.
The California Public Utilities Commission's decision will apply to rates charged by investor-owned utilities, which supply power to about 70 percent of the state. Starting next year, most customers of those companies will have to pay a monthly fee of $24.15. Low-income customers will pay between $6 and $12 a month.
Regulators said revenue from the fixed charge would be combined with a roughly 20 percent reduction in rates assessed based on the number of kilowatts of energy used per hour by a home or business. (The average American home uses about 1,000 kilowatt-hours in a month.) California's residential electric rates, which averaged 31.2 cents per kilowatt-hour in February, are the highest in the country after Hawaii, where rates were about 44 cents, according to the federal Energy Information Administration. The national average in February was 16.1 cents.
Some energy experts have argued that California's high rates for energy use are likely deterring some people from purchasing electric vehicles, heat pumps and induction stoves to replace cars and appliances that run on gasoline and natural gas.
“This new billing structure puts us further on the path to a decarbonized future, while improving affordability for low-income customers and those most affected by heat events caused by climate change,” said Alice Reynolds, president of the public services commission.
Utilities across the country have long pushed for fixed charges to help cover the cost of maintaining and upgrading grid equipment such as power lines and substations. Those improvements have become more critical in recent years as storms and heat waves overload the grid and people and businesses use more electricity to power electric vehicles, heat pumps and data centers.
Other states already use fixed charges to help cover the cost of utility equipment. But in some places regulators have taken steps to reduce those charges because they can discourage people from using energy more efficiently. They could also prevent homeowners from adding solar panels to their roofs because doing so won't save them as much money since a portion of their bill doesn't change regardless of how much energy they use or produce.
“It is universally recognized, based on decades of experience and studies, that flat charging will increase costs for Californians who use less energy and reward those who use more,” he said. Edson Perez, California policy leader for Advanced Energy United, a group whose members include energy producers, solar panel installers and businesses that use electricity. “It will mean less solar energy and fewer home batteries. And it will mean fewer smart, flexible devices, from thermostats to electric vehicle chargers, that can help the grid when we need it most.”
