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 flat monthly fee and lowering the rates applicable to energy consumption. Officials said the change would reduce the monthly bills of millions of residents and support the use of electric vehicles and appliances that run on electricity, rather than fossil fuels.

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

Regulators said revenue from the flat rate would be matched by a roughly 20% reduction in rates, assessed by the number of kilowatts of energy used per hour by a home or business. (The average American home uses about 1,000 kilowatt-hours in a month.) California's residential electricity 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 of energy consumption are most likely discouraging some people from buying electric vehicles, heat pumps and induction heaters to replace cars and appliances that run on gasoline and natural gas.

“This new billing structure puts us further on the path to a decarbonized future, while improving affordability for low-income customers and those most impacted by heat events caused by climate change,” said Alice Reynolds, president of the Public Service Commission.

Utility companies across the country have long been pushing for the introduction of flat rates to help cover the costs of maintaining and improving grid equipment such as power lines and substations. These improvements have become more critical in recent years as storms and heat waves weigh on the grid and people and businesses use more electricity to power electric vehicles, heat pumps and data centers.

Other states already use flat rates to help cover the cost of utility equipment. But regulators in some places have moved to reduce such charges because they can discourage people from using energy more efficiently. They could also prevent property owners from adding solar panels to their roofs because doing so wouldn't save them as much money since a portion 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 studies, that the flat rate will increase costs for Californians who use less energy and reward those who use more,” said Edson Perez, California policy director for Advanced Energy United, a group whose members include energy producers, solar panel installers and businesses that use electricity. “It will mean less solar energy and fewer home batteries. And that will mean fewer smart, flexible devices, from thermostats to electric vehicle chargers, that can help the grid when we need it most.”

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