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California Introducing Fixed Electricity Rate For Energy Savings

Photo Courtesy Alexandru Boicu

On May 9, the California Public Utilities Commission (CPUC) approved a proposal that reduces residential electricity prices to a fixed rate across the state. The update will give the Golden State affordable electricity usage rates, helping those on a limited income and those living in regions with extreme weather. The bill is also expected to accelerate California’s clean energy portfolio. 

The rate will be reduced by 5 to 7 cents per kilowatt hour (kWh) for all residents starting in late 2025 and into early 2026. CPUC says this change will make it more affordable to electrify homes and adopt electric vehicles (EVs). Running a heat pump or charging an EV is less pricey than fossil fuel-based electricity. 

A portion of fixed infrastructure costs for items like power line maintenance and equipment will become a separate fee on electricity bills.

It will be listed as a “Flat Rate” and will charge $24.15 monthly. Customers living in affordable housing are eligible for discounted flat rates of $6 or $12. 

State politicians said the revenue from the fixed charge would be paired with around a 20% reduction in rates. They will ascertain how many kilowatts of power each home or business uses and will combine the money with the flat-rate income. 

Photo Courtesy Cedric Letsch

According to the Energy Information Administration, as of February, California has one of the highest electricity rates in the U.S., averaging around 31.2 cents per kWh. These high rates have energy experts concerned. Many believe that the cost of power is slowing the state’s adoption of EVs and heat pumps, which would relieve the strained California grid. Residents also are still using gas-powered stoves and cars despite the state government prioritizing green living, such as the gas-powered car ban going into effect in 2035. 

“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,” Alice Reynolds, CPUC president, said in the official release.

“This billing adjustment makes it cheaper across the board for customers to charge an electric vehicle or run an electric heat pump, which will spur greater uptake of these technologies that are essential to transitioning us away from fossil fuels.”

A fact sheet compiled by CPUC says that the flat rate includes the cost of infrastructure connecting customers to the state grid. It also breaks down the electricity rates customers will pay per provider and how CPUC’s flat rate compares to others. 

CPUC pointed out that California isn’t like other states. Investor-owned utilities don’t have flat rates for infrastructure or maintenance costs. This decision would lower the prices of Pacific Gas and Electric, Southern California Edison, and San Diego Gas & Electric. However, the new billing system doesn’t include additional charges for customers. The money will be redistributed to cover existing costs among customers. 

Photo Courtesy Titus Aparici

All Californians will experience this drop in electricity prices, regardless of income. However, those on limited incomes can apply for the California Alternate Rates For Energy program. Once enrolled, customers will pay the $6 flat rate charge. Those enrolled in the Family Electric Rate Assistance Program will qualify for the $12 rate. 

CPUC says it will work with utility companies to educate citizens about the new rates in the year and a half before implementing the new billing structure. 

It’s important to remember that even with lower electricity rates, customers must still be mindful of their consumption. There is concern this legislation will demotivate homeowners to invest in solar or geothermal energy. However, the tax credits from the Inflation Reduction Act coupled with a lower electricity bill may be enough financial incentive for high-income homeowners. The CPUC approval allows all Californians to benefit from low-cost electricity.


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