How to go green without going broke? That's the latest challenge in the alternative energy capital of California, where Democrats propose taxing the rich to make energy more equitable and affordable. To do so, lawmakers mandated utilities statewide begin billing ratepayers based not on how much electricity they use, but on how much money they make.
"This would be the first state to charge people based on their income rather than what they actually just use," said Shon Hiatt, director of the USC Business of Energy Transition initiative.
"The problem here has been affordability. While California has focused almost completely on clean energy, it has disregarded reliability and affordability, and costs have continued to escalate. So, one of the (ways) they thought to address affordability (was), 'Let's just consider a tax and begin taxing people based on their income to address electricity rates.'"
The California Public Utilities Commission (CPUC) has until July 1 to impose the new rate structure. The state's three main utilities — Pacific Gas and Electric, Southern California Edison and San Diego Gas and Electric — proposed a tiered rate plan.
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Households earning $28,000-$69,000 would be charged an extra $20 to $34 per month. Those earning $69,000-$180,000 would pay $51 to $73 per month, and those earning more than $180,000 would pay a $85-to-$128 monthly surcharge.
That's a lot considering California’s electricity rates are already among the highest in the nation. People living in California have been paying 32 cents per kilowatt-hour compared to the national average of 18 cents, according to Energy Sage, which has monitored energy prices nationwide. It claimed California residents have been paying $273 per month on average for electricity, or $3,276 per year.
The proposal is creating havoc for Sacramento Democrats, especially among higher-earning Californians along the coast. More than a dozen state Democrats have been trying to unwind their votes, echoing some Republicans who opposed the "graduated income fixed charge rule."
"Our constituents have had enough and so have we," said Thousand Oaks Democrat Jacqui Irwin. "It’s time to put some reasoning back into how we charge for electricity in California. At a time when energy conservation is badly needed to avoid rolling blackouts, this dramatic policy shift could actually result in increased usage by some Californians."
Irwin voted for the bill last year but changed her mind after constituents complained that middle-income residents who conserve energy may be paying more than neighbors who use more energy.
There's also the issue of privacy and income verification. It’s unclear who or which agency would be required to obtain ratepayers’ tax information to determine their electric bills.
"It would be nearly impossible to implement given the many legal and privacy challenges that there would undoubtedly be to accurately determine every taxpayer in the state's income," Irwin said.
"The assumption is, 'Well, if you're making $100,000 in the state, you must be super-wealthy,'" Hiatt remarked. "But what if you have five or six kids? Will they be treated the same as a single head of household?"
Why did California entertain this bureaucratic nightmare? Many critics have blamed Gov. Gavin Newsom and his strict energy mandate that the state be carbon-free by 2035, along with the Democrat’s insistence that lawmakers fast-track the bill with no discussion.
Terrie Prosper, a CPUC spokeswoman, told a local TV station that implementation of the bill marked a critical step toward California's climate goals because a lower usage rate would lower costs for consumers to charge an electric vehicle or run an electric heat pump.
Underscoring all of this is California's rush to embrace clean energy, which, contrary to what Californians were told, has not proven cheaper than fossil fuels.
"This electricity will be clean electricity," Vice President Kamala Harris said in January 2023 while dedicating a power line to carry green energy into California, "and the energy delivered by these lines will not just be cleaner, it will also be cheaper."
A year earlier in Carlsbad, while dedicating a solar plant, President Biden said, "It's also now cheaper to generate electricity from wind and solar than it is from coal and oil, literally cheaper."
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That is not proving true in California, where electric rates have been higher than in virtually every other state.
"Renewable energy is not cheaper than natural gas or coal or other types of baseload energy," said Hiatt. "The problem with intermittent renewables is that they're not on all the time. You still need natural gas or battery backup."
