Middle-Class Californians Set To Pay Electricity Premium As State Makes Electric Car Push

Gov. Gavin Newsom (Justin Sullivan/Getty Images)
May 10, 2024

Millions of middle-class California households are poised to pay an extra $24 per month for electricity, regardless of how much electricity they use. Regulators are hoping this utility billing policy will rescue their agenda to move everyone to electric cars and appliances by redistributing the massive costs of the state’s electric grid so utilities can lower their usage rates.

But critics say the income-based premium will likely further hike utility costs for millions of Californians—nearly one-fifth of whom are already behind in paying their bills after household electricity rates almost doubled in the last decade—and likely won’t do much to cut the state’s sky-high electricity rates. The premiums are supposed to subsidize lower-income household electricity costs, which will be reduced by 5 cents to 7 cents per kilowatt hour, in a bid to make charging EVs and using electric heaters and appliances cheaper.

The policy comes as California Democrats struggle to reconcile their goals of ridding the state’s energy grid of fossil fuels in favor of costly wind and solar—a push that has led to massive spikes in electricity costs—while also forcing households to swap gas cars and appliances for electric versions.

But critics say the price-per-kilowatt hour reduction plus the premium won’t move the needle on making it more affordable for Californians to replace their fossil fuel use with electricity. Analysis from the pro-renewable energy group Clean Coalition said the lower rate still can’t compete with "modern high efficiency gas appliances" and won’t come close to justifying the expense of replacing them.

"It’s not going to bring down the rate enough to improve the economics of electrification," said Jenn Engstrom, state director for the California Public Interest Research Group.

The premium could hit Californians as soon as next year. California households that don’t qualify for subsidies—those earning $62,150 for a family of three—will be charged the additional $24 per month. Lower-income households will pay fixed fees ranging from $6 to $12 a month depending on their income.

The policy has been criticized by the public, advocates, and politicians spanning the political spectrum, and comes as Californians already pay the second-highest rates in the nation behind Hawaii. Ahead of the final vote, residents said their electricity costs have already "exceeded the level of tolerance" and they can’t afford another increase. Others complained that switching to solar power promoted by the state has led to higher bills. It is backed by the state’s major utility companies as a way to help fund the costs of electrifying their grid and following California’s energy mandates.

State regulators said the policy will lower people’s bills while boosting California’s electrification agenda.

"This billing adjustment makes it cheaper across the board for customers to charge an electric vehicle or run an electric heat pump, which will spur greater uptake of these technologies that are essential to transitioning us away from fossil fuels," California’s utility commission president Alice Reynolds said in a prepared statement.

Governor Gavin Newsom (D.) has stood by the policy, saying it will help fight "climate change" by encouraging people to convert move to EVs and electric appliances. The rule was mandated by a provision tucked into a sprawling state budget bill passed in 2022.