California lawmakers on a mission to short-circuit income-based utility charges

Multiple efforts are underway on both sides of California’s political divide to short-circuit a legislative plan to impose income-based fees on customers of Southern California Edison and other utilities.

Both Democrats and Republicans in the state Legislature have crafted separate measures designed to squash a plan to implement a fixed utility charge based on income that lawmakers hastily approved in 2022 in an 11-hour proceeding and then signed by Gov. Gavin Newsom.

Also see: Electric bill based on income? Forget it, lawmakers of both parties agree

Southern California Edison, San Diego Gas & Electric and PG&E would be able to impose the new income-based utility charge on their customers if the state Public Utilities Commission gives the plan a final OK — potentially by this July. Gov. Newsom appointed all five current members of the powerful and unelected PUC.

The state lawmakers involved in the various efforts to overturn the income-based utility charge plan include Democratic Assemblymembers Jacqui Irwin and Marc Berman, and Republican senators Janet Nguyen, Kelly Seyarto, Rosilicie Ochoa Bogh, Scott Wilk, Brian Dahle, Shannon Grove and Roger Niello.

Related: Middle or upper income? Brace for higher electric bills

Several experts led by Ahmad Faruqui, an economist who has consulted with all three of the utility behemoths involved in the proposed fixed fee, have provided an array of reasons why they believe the state PUC should reject the current proposal.

“The proposed fixed charges are way too high compared to the national landscape,” Faruqui and the group of economists wrote. “The fixed charges will be burdensome for many, infeasible to administer, are likely to be challenged in court and are likely to unleash adverse unintended consequences, such as penalizing customers who use energy efficiently and frugally.”

Income-based fee advocates, which include The Utility Reform Network (TURN), and the National Resources Defense Council, argue that the scheme means higher-income customers will tend to pay more while lower-income customers will pay less.

Proponents also claim that PG&E and the other utilities intend to lower the kilowatt-hour rates that they charge customers as a way to offset the fees.

Even so, TURN and the environmental group concede that fixed fees are far from a complete solution.

“Despite our support for an (income-based fee), TURN and the Natural Resouces Defense Council recognize that the development of a progressive fixed charge does not represent a silver bullet and will not, on its own, make customer bills affordable,” the two groups wrote in a filing with the state PUC.

The fixed fees would immediately make California, ominously, the home of the nation’s highest income-based fixed fees.

The nationwide average for such income-based fees is $11.15, according to a report by EQ Research.

The three major California utilities will charge far more:

— Southern California Edison, $51.

— San Diego Gas & Electric, $73.31.

— PG&E, $50.92.

State lawmakers are increasingly alarmed about the proposal.

“Too many Californians struggle to afford their electricity bills at a time when energy is already unreliable, and yet the legislature thought it was a good idea to rip people off more,” state Sen. Wilk (R-Santa Clarita) said in a prepared release this week.

The fixed-income proposal has surfaced at a time when PG&E bills, along with the bills charged by the other two utility titans, have skyrocketed.

“Our constituents have had enough and so have we,” said Assemblymember Irwin (D-Thousand Oaks). “It’s time to put some reasoning back into how we charge for electricity in California.”

Among the major problems that critics of the plan articulate: The state PUC would have to craft a system to analyze the income levels of utility customers.

“Income data is confidential,” Faruqui and the other economists stated in the filing with the PUC. “Most customers would not like their income data to be discovered by a third party acting on behalf of the utility.”

Attempts to dive into income tax filings — normally the purvey primarily of the Internal Revenue Service and in California the state Franchise Tax Board — could unleash questions about the constitutionality of such a procedure.

Plenty of other complications loom, opponents of the plan note.

“Many homes in the state are owned by non-California residents who do not report their income to the state franchise tax board,” Faruqui and the other economists wrote in the filing. “Customers’ incomes vary over time. Incomes that are reported on tax forms are often erroneous and often misreported. Furthermore, the proposed procedure is cumbersome and subject to errors.”

Plus, according to the economists, the IT departments of PG&E and its sibling utility monopolies might be poorly equipped to extract such information from their customers.

The new fixed charge would vary depending on the household income levels of the respective customers. Here’s how the fixed charges would work in the PG&E service territory, based on a four-person household:

— Households earning less than $28,000 a year would pay a fixed charge of $15 a month on their electric bills.

— Households with annual income from $28,000 to $69,000 would pay $30 a month.

— Households earning from $69,000 to $180,000 would pay $51 a month.

— Those with incomes above $180,000 would pay $92 a month.

To offset the fixed monthly charge, there would be a 33% reduction in the electricity rate used to calculate monthly costs, depending on how much electricity a customer consumes during the billing period.

In the real world, however, most customers would likely wind up paying more, despite the assurances of the proponents of the original end-of-session legislation that’s now under fire.

“If the high (income-based fees) proposed by the utilities are adopted, low users in the middle-income brackets will see their bills go up,” the economists stated in their filing. “For example, a PG&E customer with a monthly bill of $50 will see it go up to $124. Customers with a monthly bill of $100 will also see their bills go up. So will customers in the upper middle-income bracket whose bills are under $200 a month.”

The legislation may, paradoxically, accomplish the opposite of its intention, the economists warned.

“In every income bracket, the higher the customer’s usage, the more they will save,” the economists stated in the filing with the PUC. “In other words, low-use customers in each income bracket will see their bills go up and high-use customers will see their bills go down. Efficiency and frugality will be penalized. Inefficiency and waste will be rewarded.”