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Utility Rate Changes: Fixed + Usage = Your New Bill

CPUC Decision:

Starting later this year, there will be a new fixed charge on most utility bills throughout the State.  On May 9, 2024, the California Public Utilities Commission (CPUC) approved a proposal to allow the IOUs (Investor-owned utilities) to include a fixed rate for maintaining the electric grid, along with continuing to charge for usage by the kilowatt hour. 

The fixed fee will start at $6 for CARE customers, $12 for FERA customers, and will top out at $24.15 for all other customers. 

The per kilowatt hour rate will be reduced by $0.05 to $0.07, which IOUs claim will offset the fixed charge. 

Some say that the fixed rate is an unfair surcharge on customers who have solar panels, have energy-efficient or smaller homes, and choose to conserve energy. Customers with larger homes and bills will not have an incentive to conserve energy, as their bills are expected to go down with this decreased per-kilowatt-hour plan. 

This decision is not without controversy. Currently, customers pay for electricity based on their usage alone, and the fixed costs of grid infrastructure are covered by those usage charges. 

The CPUC indicates that this new billing structure is a redistribution of existing fees, not an introduction of additional fees. Customers will be charged a fixed rate for maintaining the electric grid, and a variable usage rate for each kilowatt hour of electricity used. By lowering the usage rates, they’re hoping customers will install electric appliances and buy electric vehicles instead of gas versions of those items. If this is accurate, those customers will end up saving money by making the switch. 

For customers who plan to keep their current appliances and vehicles? They will pay the fixed charge, the usage rate, and gas for their homes and cars. They will likely pay more overall.

Our Perspective:

Without being able to forecast customer usage, and future rate hikes, it’s impossible to know the true outcome of this decision. Some taxpayer and ratepayer groups characterize the fixed rate as “uncapped” and predict the rate skyrocketing over time. Their opponents decree that the next phase of fixed charges could go even lower for low-income households. The bottom line is, we don’t yet know how this will affect customers and we will need to wait and see over time.  

The CPUC has created a landing page for this decision, including a fact sheet and press release that further outline the fixed charge billing structure.