California Will Add a Fixed Charge to Electric Bills and Reduce Rates

Utility regulators in California on Thursday changed how most residents will pay for energy by adding a new fixed monthly charge and lowering the rates that apply to energy use. Officials said the shift would reduce monthly bills for millions of residents and support the use of electric vehicles and appliances that run on electricity, rather than fossil fuels.

The decision by the California Public Utilities Commission will apply to the rates charged by investor-owned utilities, which provide power to about 70 percent of the state. Starting next year, most customers of those companies will be required to pay a $24.15 monthly charge. Low-income customers will pay $6 to $12 a month.

Regulators said the revenue from the fixed charge would be paired with a roughly 20 percent reduction in rates assessed by how many kilowatts of energy were used per hour by a home or business. (The average American home uses around 1,000 kilowatt-hours in a month.) California’s residential electric rates, which averaged 31.2 cents per kilowatt-hour in February, are the highest in the country after Hawaii, where rates were about 44 cents, according to the federal Energy Information Administration. The national average in February was 16.1 cents.

Some energy experts have argued that California’s high rates for energy use are very likely discouraging some people from buying electric vehicles, heat pumps and induction stoves to replace cars and appliances that run on gasoline and natural gas.

“This new billing structure puts us further on the path toward a decarbonized future, while enhancing affordability for low-income customers and those most impacted from climate change-driven heat events,” said Alice Reynolds, president of the utilities commission.

Utility companies across the country have long pushed for fixed charges to help cover the cost of maintaining and improving grid equipment like power lines and substations. Those improvements have become more critical in recent years as storms and heat waves tax the grid, and people and businesses use more electricity to power electric vehicles, heat pumps and data centers.

Other states already use fixed charges to help cover the cost of utility equipment. But regulators in some places have moved to reduce those charges because they can discourage people from using energy more efficiently. It could also prevent property owners from adding solar panels to their roofs because doing so will not save them as much money since a part of their bill doesn’t change regardless of how much energy they use or produce.

“It is universally recognized, based on decades of experience and study, that the fixed charge will increase costs for Californians who use the least energy and reward those who use the most,” said Edson Perez, the California policy lead for Advanced Energy United, a group whose members include power producers, solar panel installers and businesses that use electricity. “It will mean less solar energy and fewer home batteries. And it will mean fewer of the smart, flexible devices, from thermostats to E.V. chargers, that can help the grid when we need it most.”