As electricity demand increases, California regulators OK change to how power bills are calculated

For most people, the charge will be $24.15 per month and will take effect starting late next year. Others with lower incomes who are enrolled in one of two discount programs will pay less, either $6 or $12 per month.

In exchange for the new charge, the price of electricity will drop by between 5 cents and 7 cents per kilowatt hour. One kilowatt hour is how much power it takes to use a 1,000-watt appliance — a coffee maker or vacuum cleaner, for instance — for one hour.

California now gets most of its energy from things like solar panels and wind turbines as opposed to burning coal and other fossil fuels that pollute the atmosphere. As a result, California's leaders have been asking residents to use more electricity than ever before.

In 2022, California accounted for 37% of the nation's light-duty electric vehicles, or about six times more than Florida, the state in second place, according to the U.S. Energy Information Administration. The state has also pushed policies to encourage people to electrify their homes, like installing electric heat pumps and stoves.

"We're at a time now when our climate goals are not met by necessarily using less electricity. We need to start using more electricity overall," said Alice Reynolds, president of the California Public Utilities Commission.

For people who use a lot of energy each month, the proposal approved on Thursday will likely lower their monthly bills. People who own electric cars and have electrified their homes will save an average of between $28 and $44 per month, according to the commission. That's because the savings they get from the price drop on electricity will be more than the amount they pay for the new fixed charge.

It will also benefit people who live in areas where it gets really hot. People in Fresno — where temperatures can often exceed 100 degrees Fahrenheit (37.8 degrees Celsius) — would save about $33 running their air conditioners during the summer, according to the commission.

Using more electricity has strained the state's supply. In the summer of 2020, demand for electricity was so high that the officials had to order rolling blackouts to make sure the state didn't run out of energy.

State officials have urged people to conserve energy during peak hours, between 4 p.m. and 9 p.m. when energy from solar is less abundant. Opponents worry this proposal, by lowering the price for electricity, will discourage people from doing that.

"If you wanted to design a policy instrument that would send the signal that conservation doesn't count, this would be it," said Ken Cook, president of the Environmental Working Group.

Commissioner John Reynolds noted utility companies are already allowed to increase their rates during peak hours to act as an incentive to conserve.

"The idea that this fixed charge proposal will undermine the motivation to conserve is, quite frankly, laughable," he said. "It's a simplistic way to view this decision, and we all know that our energy situation and rate design are anything but simple."

For people who don't use as much energy, the new fixed charge could increase their bill each month. This includes people who live in smaller apartments, have solar panels on their roofs or who live in cooler areas and don't use air conditioning as much. That's because for them, the decrease in the price of electricity would not be enough to offset the amount of the new monthly charge.

"It's clear that there are better ways to reduce California's extremely high utility rates and encourage electrification," said Stephanie Doyle, California state affairs director for the Solar Energy Industries Association.

Most states already have fixed monthly charges on utility bills to pay for maintenance and infrastructure of the electric grid. But in California — where electric rates are among the highest in the nation — any move that could increase prices for anyone raises alarms among consumers and elected officials.

A bill amended in the state Legislature on Wednesday would limit any increase in the new fixed charge to not more than the increase in inflation. It would also cap the amount of the fixed charge to a maximum of $10 beginning in 2028.

"We must do more to rein in the ever-growing cost of living in our state, not find new ways to add to it," Republicans in the California Senate wrote in a letter urging the commission to reject the fixed charge.

The proposal is much lower than what the state's investor-owned utility companies had asked for, which was a charge between $53 and $71 per month.