Summary
- Starting in 2026, most residential ratepayers will see a new Utility Tax of $24 per month on their bill. This tax is uncapped; utilities have said they intend for it to increase to $70/month or more. Even a $24/month Utility Tax would be twice the national average.
- This mandatory Utility Tax was aggressively pushed by the Newsom Administration, and will increase electricity bills on four million households who live in apartments, condos, and small homes, have rooftop solar, or work to conserve energy.
- In response to a massive public outcry, more than twenty state legislators introduced bills to cap the Utility Tax (AB 1999 and SB 1326). Both bills were killed under pressure from Gov. Newsom: AB 1999 was not allowed for a single vote by Assembly Speaker Robert Rivas, while SB 1326 was voted down by lawmakers in its first committee.
- Utilities got their way, despite broad public opposition to the Utility Tax, and a big coalition.
- However, please do not stop fighting this Tax. Once Californians see the new $24/month Tax on their bills in 2026, the public will erupt once again, and lawmakers could realize that their inaction was a huge mistake. That could finally give them the spine to reverse course and roll back the Tax.
Please call both your Assemblymember and Senator today and tell them they MUST find a way to stop the big Utility Tax.
What happened: In 2022, the state lawmakers mandated a new, uncapped Utility Tax without any public discussion
- In 2022, at the last minute and without any public discussion, the California Legislature passed AB 205, a large “budget trailer bill” that included a little-noticed provision for a Utility Tax. Here is how each legislator voted.
- AB 205 removed the existing $10 per month cap on Utility Taxes and mandated that a Utility Tax be imposed on all ratepayers. This new Utility Tax will have unlimited potential to grow.
- This Utility Tax would apply to all residential ratepayers of PG&E, SoCal Edison, and SDG&E, including customers of CCAs.
- AB 205 requires the Utility Tax to be based on income.
Note: The utilities and regulators refer to this as a “fixed charge”. We’re calling it a “Utility Tax” because it both fits the dictionary definition of a tax and is more straightforward.
In 2024, the CPUC approved a big, uncapped Utility Tax
- The CPUC approved a $24 per month Utility Tax for most residential ratepayers, starting in 2026. The average national utility Utility Tax is $10 per month.
- You will pay this Utility Tax no matter how little energy you use.
- The Utility Tax is uncapped. This means $24/month today could rise to $70 per month or more over time.
- Electricity rates (per kilowatt hour) would be lowered somewhat in exchange for paying the Utility Tax, but that would only be temporary. Rates will continue to increase.
Proposed Utility Tax would increase utility bills on four million households
- High utility taxes penalize households that do not use a lot of energy.
- Even a $24/month Utility Tax proposal will increase utility bills on four million households that do not consume much electricity.
- This includes people who live in an apartment or small home, or have invested in solar panels or other forms of energy conservation.
- See detailed analysis of Utility Tax impact
What do the utilities and other Utility Tax proponents say?
- Utility Tax proponents claim that the Utility Tax will reduce electricity bills for low-income people. They also said it will incentivize ratepayers to switch from gas to electric appliances and electric cars.
- They are not telling you the whole story. In fact, bills will increase on four million working and middle income households that do not use much electricity and don’t qualify for government assistance.
- Utility Tax proponents hide this fact by only talking about average energy consumers—ignoring the millions of households that have a small energy footprint.
- Meanwhile, households receiving California Alternate Rates for Energy (CARE) or Family Electric Rate Assistance Program (FERA) would only see small and temporary decreases in their monthly electricity bills. As soon as rates increase again (and they will), those small savings will get wiped out.
- The Utility Tax will not incentivize electrification because it will still be cheaper for consumers to operate a gas appliance than an electric one.
- There are many, better, proven ways to make electricity more affordable for lower-income Californians and incentivize people to switch appliances.
- See detailed analysis of the original proposals and updated analysis of the CPUC proposal.
Proposed Utility Tax entrenches the problem of high electricity prices
- Electricity prices are too high because of utility overspending on poles and wires.
- A Utility Tax does not fix that underlying problem. It simply shifts around who pays what for an overly expensive and unreliable system. It rearranges deck chairs on the Titanic, so to speak.
- What’s worse, a high Utility Tax would mean there’s no incentive for the utilities to reduce those costs. A Utility Tax would entrench the root problem and force residents to foot the bill for more expensive and dangerous long distance power lines.
- The solution to stabilizing the high cost of electricity is to reduce spending on poles and wires. This can be accomplished by reducing the amount of electricity we need from the grid. That includes more conservation, efficiency, rooftop solar, and batteries. More rooftop solar and batteries could reduce the cost of the grid by $120 billion over the next thirty years. Energy efficiency has saved ratepayers more than $100 billion over the past 20 years.
Legislation to Stop the Big Utility Tax was killed by legislative leaders.
- In response to public outrage over the Utility Tax, more than twenty state legislators introduced bills in early 2024 to cap the Utility Tax (AB 1999 and SB 1326).
- Both bills are now dead: AB 1999 was not allowed for a single vote by Assembly Speaker Robert Rivas, while SB 1326 was voted down by lawmakers in its first committee.
But lawmakers have plenty of chess moves left. Where there’s a will, there’s a way.
- But the window to stop this Utility Tax has not fully closed. In politics, where there’s a will, there’s a way.
