As the July 1 date for California’s revolutionary new electric rate structure – which includes a graduated income tax in addition to traditional volumetric rates – approaches, a group of Democratic lawmakers are trying to reverse course.
On Feb. 12, 20 California Assembly Democrats led by Rebecca Bauer-Kahan introduced AB 1999, aimed at repealing AB 205, the June 30, 2022 law that established the restructuring of electric rates based entirely on the amount of electricity used by customers of the states three large, investor-owned utilities (Pacific Gas & Electric, Southern California Edison, and San Diego Gas & Electric).
Bauer-Kahan represents California’s 16th assembly district, a largely suburban East Bay area including the Berkeley Hills, Walnut Creek, and Livermore. According to Wikipedia, it is “the most affluent State Assembly district. Bauer-Kahan won the seat in 2018, defeating Republican incumbent Cathrine Baker with 51% of the vote, or a margin of 4,539 votes out of 217,905 votes cast.
Baker narrowly won the nonpartisan primary over Bauer-Kahan and the two faced off in the general election. She has easily won reelection in the two elections since.
The official digest of AB 1999 says, “Under existing law, the commission may authorize fixed charges for any rate schedule applicable to a residential customer account. Existing law requires the commission, no later than July 1, 2024, to authorize a fixed charge for default residential rates. Existing law requires these fixed charges to be established on an income-graduated basis, with no fewer than 3 income thresholds, so that low-income ratepayers in each baseline territory would realize a lower average monthly bill without making any changes in usage.
“This bill would repeal the provisions described in the preceding paragraph.”
AB 205, which established the “income graduated fixed charge” (inevitably referred to as the IGFC) and was supported by Democratic Gov. Gavin Newsome, was designed to reduce the impact of the states extremely high electric rates on low-income customers. It was based on a 2021 paper by the Energy Institute at UC Berkeley’s Haas School of Business and Next 10, a California public interest group focused on energy and environment and founded by venture capitalist and philanthropist F. Noel Perry.
The crux of their argument is that California’s skyrocketing electricity prices “are driven in part by a shifting burden of fixed cost recovery. Currently, 66 to 77 percent of the costs that California IOUs recover from ratepayers are associated with fixed costs of operation that do not change when a customer increases consumption.” The utilities collect these costs by including them in the financial base that determines their rates and their profits.
An October 2023 letter from the 20 Assembly Democrats to the California Public Utilities Commission surfaced the bubbling discontent over the IGFC. They wrote that “the new law could ultimately steer the state away from a conservation focus to that of increased electrical consumption, by sending the wrong signal to rate payers. With these proposals, there would be a decoupling of electricity policy from the volumetric and conservation-based model that the CPUC has long been promoting. For instance, even under some of the lower proposed flat rates, analyses show that those who consume more electricity, such as a single family home with pool, will receive a discount at the expense of a low electricity user, such as an apartment renter.”
“An innocuous clause in Assembly Bill 205 has unleashed a fury among Californians that no assembly member could have imagined.” — economist Ahmad Faruqui.
In an Energy Central post last September, economist Ahmad Faruqui noted, “An innocuous clause in Assembly Bill 205 has unleashed a fury among Californians that no assembly member could have imagined.” He wondered whether the new tax is necessary. “California already subsidizes low income customers by giving them a 35% discount on their electric bills,” he wrote. “The total subsidy is probably the highest in the US. California also has a progressive state income tax code. Furthermore, the IGFC subsidy to low income customers won’t be large enough to make electrification affordable. Heat pumps and electric vehicles (EVs) are expensive, and low priority investments to low income customers who often rent their homes, and many don’t own cars.”
So far, no legislative action has occurred on AB 1999.
–Kennedy Maize