Proposed Utility Tax would increase electricity bills for millions, undermine rooftop solar, and discourage conservation

• Last year, 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.

What’s being proposed: highest Utility Tax in the U.S.

• The CA Public Utilities Commission (CPUC) is now deciding what the Utility Tax should be. They will make a final decision around June 2024. They refuse to hold public hearings on this issue.
• The Utilities and other aligned organizations have proposed that the CPUC adopt the highest Utility Tax in the country—$400 to $1,500 per year.
• The average national utility Utility Tax is $120 per year.
• Turning off the lights, installing energy efficient appliances, or getting solar panels and batteries will not reduce or eliminate the Utility Tax.
• Electricity rates (per kilowatt hour) would be lowered somewhat in exchange for paying the Utility Tax, but that would only be temporary. AB 205 says nothing about freezing or lowering electricity rates.
• You can see all the Utility Tax proposals at this CPUC website.

Proposed Utility Tax would increase utility bills for millions of people who do not consume a lot of energy from the grid. This includes people who live in apartments, condos, and small homes, solar users, and pretty much anyone else who works to conserve energy.

• High utility taxes penalize households that do not use a lot of energy.
• The proposal would increase utility bills for millions of Californians who happen to live in an apartment or small home, or have invested in solar panels or other forms of energy conservation.
• That’s terrible for both working communities and the environment!
• Source: Clean Coalition testimony to the CPUC, pp. 7-11

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 and incentivize all ratepayers to switch from gas to electric appliances and electric cars.
• But none of the proposals can actually make the math work.
• 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, while millions of other working and middle income households that don’t qualify for government assistance will see their electric bills increase.
• None of the Utility Tax proposals would lower bills for consumers who switch from high efficiency gas appliances to electric ones. In fact, it will still be $40 to $400 cheaper annually to stick with gas.
• There are many, better, proven ways to make electricity more affordable for lower-income Californians and incentivize people to switch appliances.
• Source and alternative proposal: Clean Coalition testimony to the CPUC, pp. 12-14

Proposed Utility Tax entrenches the problem of high electricity prices

• Electricity prices are too high because of two things. First, the cost of building and maintaining long distance power lines. Second, the cost of liability when those lines spark wildfires. (Source: CA Public Utilities Commission, Utility Costs and Affordability of the Grid of the Future)
• 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 long distance power lines and other large-scale grid infrastructure. 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.