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

Summary

  • At the direction of the California State Legislature, the utilities and some aligned organizations are proposing to charge most residential ratepayers a Utility Tax of $30 to $70 per month. Even a $30/month Utility Tax would be three times the national average.
  • This mandatory Utility Tax would increase electricity bills on millions for working Californians who live in apartments, condos, and small homes, have rooftop solar, or work to conserve energy.
  • Solar Rights Alliance and more than 200 other organizations have called on the state Legislature to Stop the Big Utility Tax. A letter from hundreds of groups was recently sent to the Legislature and numerous other groups from environmentalists to taxpayer organizations have spoken out forcefully against the Utility Tax.
  • Thousands of individual Californians have done the same through phone calls to their representatives.
  • In response, a team of state legislators have introduced a bill, AB 1999, to put a $10/month cap back on the Utility Tax. The bill is a great start, although one loophole must be closed to prevent further malarkey from the CPUC.
  • We urge all Californians to call, write, and meet with their state Assemblymembers and Senators to demand they co-author and pass AB 1999.
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.

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—$30 to $70 per month.
  • The average national utility Utility Tax is $10 per month.
  • 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.
  • Even the $30/month Utility Tax 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.
  • They are not telling you the whole story.
  • 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. However, millions of other working and middle income households that don’t qualify for government assistance will see their electric bills increase.
  • With respect to “electrification”, none of the Utility Tax proposals would actually 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.

Legislators have introduced AB 1999 to fix their mistake and Stop the Big Utility Tax

  • In January, a team of state legislators led by Assemblymember Jacqui Irwin introduced a bill to fix the problem.
  • The bill, AB 1999, would revert the law previously was, which allowed for a modest $10/month Utility Tax ($5/month for CARE and FERA customers). The bill also prohibits the Utility Tax from increasing faster than inflation.
  • At the press conference announcing the bill, numerous lawmakers cited the data showing how even a $30/month Utility Tax will increase electricity bills on millions of households. Lawmakers also noted how unpopular the Utility Tax was with their constituents. 
  • AB 1999 is a great start. However, there is one loophole in AB 1999 that needs to be closed in order for it to truly remove the threat of a high Utility Tax. AB 1999 should be amended to ensure that it applies to “all rate schedules”, instead of just one rate schedule. This ensures that the CPUC has no wiggle room to charge a high Utility Tax in any form. 

How you can help Stop the Big Utility Tax

1) Call your state Assemblymember and Senator and tell them to stop the Utility Tax and co-author AB 1999

AB 1999 puts the $10/month cap back on the Utility Tax and ensures it never increases faster than inflation. Legislators created this mess by removing the Utility Tax cap and handing the CPUC a blank check to raise our bills even more. Now they need to fix their mess without passing the buck. You can look up their phone number here.

Here’s a suggested message. Feel free to personalize it:

My name is ___. I live in ___.  I’m calling to ask you to co-author the bill to Stop the Big Utility Tax. The bill is AB 1999. Even a Utility Tax of $30 / month will increase utility bills for millions of working people who live in apartments or small homes that use less electricity. It will also discourage solar and energy conservation. The legislature needs to fix this mess by June 30th to protect millions of people from bill increases. Will you co-author AB 1999?

2) After you make your phone call, head to the Utility Tax Action Toolkit for guidance on taking these three additional actions:

  • Spread the word on social media, email, and through a letter to the editor.
  • Ask organizations you know to join the this open letter to state legislators calling on them to fix the mess they created.
  • Meet face-to-face with your state Assemblymember and Senator. These meetings are already happening, and you can help get more done. 

Contact [email protected] with questions and ideas!

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