Electric Flat Rates Will Help Address the Affordability Crisis and Enable Household Electrification

On March 27, 2024, the California Public Utilities Commission (CPUC) issued a proposed decision that will reduce bills for low-income customers and provide rate relief to all customers.   The proposal will cut high summer usage rates by approximately 8 to 10% and is nearly identical to a program run by the Sacramento Municipal Utilities District, one of the largest public electric utilities in the state. Additionally, the change will not increase utility revenue or profits.

We support the Proposed Decision because it represents a positive step towards achieving equitable rates and the state’s electrification goals.  The proposed “flat rate” program will have modest effects on the average customer’s electric bill, while ensuring overall bill reductions for low-income households.  Consistent with state law, the flat rate would provide additional discounts to nearly 1 million lower income households enrolled in utility bill discount programs.

Electric costs are currently recovered through electric rates that vary with usage.  These include necessary costs to maintain a functioning grid and subsidy programs, such as customer connection costs and energy efficiency programs.  The proposed flat rate would more equitably distribute these costs that are unrelated to electricity use. An added benefit of the updated rate design is that it would push down the price of electricity usage, which in turn will reduce bill volatility and encourage customers to electrify home appliances and vehicles.

Average Utility Customer Monthly Bill by Component (2022)

Source: CPUC SB 695 annual report (2023) The graph represents customers that are not enrolled in a utility bill discount program (e.g., CARE or FERA).

The overall impact of the proposed flat rate on customers’ bills is modest, with most households seeing reductions in their bills.  For example, for lower income households served by PG&E, average bill savings will range from 60 cents to $18.09.  For all other customers, average bill impacts could range from $6.79 in bill savings to an increase of $11.50 per month.  Bill increases will be concentrated in cooler climate zones, which already see lower bills compared to statewide averages.

The CPUC was tasked by the Legislature with implementing Assembly Bill (AB) 205, which directed the development of an income graduated fixed charge component within electric rates for residential customers.  One of the goals of AB 205 is to produce lower bills for low-income households by requiring different charges for different household income levels.  The Proposed Decision implements these directives with its modest proposal for a flat rate, which is aligned with the flat rates that are currently incorporated into the rates of millions of customers served by public utilities across the state.

Existing and Proposed Flat Rates by Utility

Not implementing the Proposed Decision’s flat rate framework would continue the current inequities in utility rates.  The current design of electric rates penalizes households that have less control of their electricity use, such as those that live in a hotter region or have more residents under one roof.  It also means that electrifying the transportation and building sectors will become more difficult, as households currently have a disincentive to shift their energy use from fossil fuels to electricity.

The CPUC should adopt the Proposed Decision to implement modest flat rates to advance affordability and household electrification.