Editorial | New fixed fee, recent rate hikes burdening PG&E ratepayers

By EDITORIAL BOARD | editorial@santacruzsentinel.com | Santa Cruz Sentinel

June 11, 2024

In a previous Editorial, we discussed the challenges PG&E is facing with increased demand for electricity and the cost of undergrounding power lines in fire-prone areas. We also noted recent rate hikes and how they are burdening ratepayers already having to deal with the high cost of living in California.

California already has the nation’s second-highest electricity rates. Only Hawaii’s are higher.

Customers also are facing new fixed monthly fees — part of an energy bill passed by legislators in 2022 with little discussion. This charge is assessed to households each month in exchange for lower rates for every kilowatt hour of electricity they use. The California Public Utilities Commission approved the $24 monthly charge last month.

The state’s three major utilities, including PG&E, say the monthly fees will encourage Californians to ditch fossil fuel appliances and vehicles while allowing the companies to more evenly allocate fixed costs among customers. The utilities also say they need some kind of fixed charge to help pay down wildfire and other rising fixed costs.

Opponents describe the charges as a financial gift to the utilities, and will end up causing millions of Californians who live in small homes or apartments to pay more for electricity. They complain the new monthly fee eliminates a $10 cap on fixed charges that had been in place since 2013, and there is nothing in place to prevent the utilities from raising it higher.

CPUC officials said in a statement, however, that the new rate structure “makes going electric more affordable for everyone, regardless of income, geography, or the size of their home.” Customers who power all their home appliances and their vehicle with electricity would save an average of $28 to $44 a month compared with the current billing structure, the commission estimates.

The fixed charge was originally inspired, according to news accounts, by a 2021 report written by professors at UC Berkeley’s Energy Institute at Haas, which is partly funded by utility companies.

The paper detailed how costs for building renewable energy plants, burying power lines to reduce the risk of wildfire ignitions and compensating fire victims had pushed electric rates so high that they were discouraging Californians from buying electric cars and replacing gas appliances.

The paper also said the rising number of homes with solar panels meant fewer households were paying for increasing expenses that go into calculating the rate per kilowatt hour charged by utilities. The authors proposed the rate per kilowatt hour be reduced while a new fixed charge be added to bills.

That charge is now in place, so where do frustrated ratepayers go from here?

Mark Toney, executive director of The Utility Reform Network, recently told CalMatters there not only needs to be a cap placed on utility rate hikes but that regulators should ensure utilities are not given a “credit card with no limit and a guarantee that someone else is going to pay.” TURN is backing the Utility Accountability Act, a bill that would require utilities to document and disclose their spending.

Other ideas the utilities should consider are assessing where undergrounding is most necessary and holding off for other areas and creating a shareholder fund that would take the burden off consumers for improvements to the grid.

PG&E officials recently told the Sentinel Editorial Board the company understands the impacts of rate increases and urged customers who qualify to take advantage of income-qualified programs that can ease the monthly cost burdens. The fixed fee and rate hikes allow PG&E to be stable financially and attract new investment, they said, while meeting the demand for electricity, expected to increase 70% by 2040.

Of every dollar received, they told us, less than 1 cent goes to shareholders; 31 cents pays for state mandates; 32 cents goes to pass-through costs for power; 22 cents to maintenance upgrades; five cents to taxes; and 10 cents to authorized earnings.

PG&E realized a $2.5 billion profit in 2023, and the company’s top executive was granted a $14 million bonus.