Energy 'Equity': California Electricity Companies Propose Billing Based on Income

April 18, 2023

California's electric companies want to charge people based on their incomes rather than their electricity consumption in a bid to make utilities more "equitable."

The state's major electric companies last week submitted an income-based billing proposal to the state government, which last year instructed utilities to "make electric bills more affordable and equitable." Under the companies' proposal, low-income households would pay as little as $15 a month in premiums, while high-income households could pay up to $128 per month. They also must pay for usage.

Pacific Gas & Electric, the state's main utility provider, boasted that the plan will "help to limit the impact on disadvantaged communities, as Californians transition to electrification in support of the state's clean energy goals."

The push for income-based billing highlights a tension between two of California's progressive policy priorities. The state's war on fossil fuels has driven up electricity and natural gas prices over the past year, further straining the low-income Californians whom the state's equity initiatives purport to help. Democratic leaders have responded to soaring energy prices by launching investigations into natural gas companies and penalizing oil refineries.

The utility companies drafted their proposal pursuant to a provision of the 2022 California budget. Regulators are expected to approve a final equitable billing proposal by July 2024. PG&E estimates that its lowest-income customers would see a 21 percent cut in their bills, while high earners would see about a 24 percent hike. The company says it would use the profits from high-income users to fund a variety of green energy initiatives, including the purchase of electric vehicles.

The Biden administration last month greenlit California's plan to ban fuel-burning vehicles by 2045.

Californians have seen their electricity rates rise nearly 70 percent since 2010, when the state started to break from fossil fuels. California households pay nearly 83 percent more than the average for homes elsewhere in the United States.

Residents aren't the only ones paying dearly for the state's green energy push. Regulators have warned that California will likely have to spend more than $9 billion on its power grid to support its switch to renewable energy—all while the state faces an ever-growing budget crisis.

The threat of a financial crisis has not slowed California Democrats' efforts to ban fossil fuels. Earlier this month, California slashed incentives for customers who want to buy efficient natural gas energy systems as the state prepares to ban sales of natural gas heaters and order all new buildings to be fully reliant on electricity. In March, Bay Area regulators banned gas appliances for everyone in the San Francisco region, a move that will require prohibitively expensive home renovations when residents have to buy new heaters.