California PG&E joins proposal to set utility rates based on income
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This seems so obvious, but I am curious why someone thinks this is a good idea? My only guess is the people driving this change don't have the power to do it 'right' so this is the closest they can do?
The US is a highly progressive taxation country. By comparison, Scandinavian countries are far less progressive on taxation, the burden is spread wider, you're made to pay for eg your healthcare costs in said countries via high taxation. Also compare the typically modest US sales tax levels vs the high VAT taxes across Europe and elsewhere.
Here are the facts for the US taxation profile.
Top 1% of income earners - share of all income: 22%, share of all income taxes paid: 42%. Average income tax rate: 26%.
So you've got the top 1% paying 42% of all income taxes. If they actually controlled taxation (ie if the US system of government worked by bribery as is so often incorrectly claimed), it's very clear that wouldn't be how things work.
5% to 1% bracket - share of all income: 16%, share of all income taxes paid: 20%. Average income tax rate: 17%.
10% to 5% bracket - share of all income: 11%, share of all income taxes paid: 11%. Average income tax rate: 13%.
25% to 10% bracket - share of all income: 21%, share of all income taxes paid: 15%. Average income tax rate: 10%.
50% to 25% bracket - share of all income: 19%, share of all income taxes paid: 9%. Average income tax rate: 7%.
Bottom 50% - share of all income: 10%. Share of all income taxes paid: 2%.
Taxpayers in the US earning under $42,000 had an average income tax rate of 3%.
Similarly talking about progressive income tax and ignore other forms of taxation is silly. Way more than 3% of the lower 50% income goes to taxes they just aren't federal income tax.
“Income taxes” are only about 57% of federal taxes on income. And the other 43% are bottom-weighted payroll taxes.
This is incorrect. The claim was always pays a lower tax rate (federal), because the tax rate for capital gains is less than earned income.
How does this work? Suppose that someone donates $1 million to charity. They don't pay income tax on that money -- but they no longer have the money. I suppose that they could try to get clever about it by making a "buy yachts for our donors" charity, but that's explicitly illegal under the 501(c)(3) requirements.
Rent control is a great example. It decreases housing supply, so it increases returns on investment for real estate in California, and increases homelessness. However, the politicians get to claim it does the opposite of those things because basic macroeconomics are too nuanced for campaign slogans.
https://www.theatlantic.com/ideas/archive/2021/03/signature-...
Developers building non-rental housing don't care about rent control. In fact, they benefit from rents being high, and from there being a housing shortage, as it makes non-rental housing more financially attractive.
Developers building rental housing shouldn't care much about it, either, as their financing is dependent on what they are going to rent the units out for, not what some grandma who lived in her apartment for 30 years is paying. Grandma's not part of the tenant market for new units, L5 SWEs making 400k/year are.
Rent control isn't the reason you can't build.
Can you explain why builders are paying rent control tenants to leave [0]? And where does the payoff money come from? Future rent? Future home buyers?
[0] - https://www.nytimes.com/2015/12/25/nyregion/new-york-builder...
It's not the first, second, or even fifth reason for the supply-side shortage. The costs are passed on to the buyers/renters, and despite that, demand continues to massively exceed supply.
As you said, eliminating rent control would lower prices by 2% on average (saving future residents millions) and helps projects be built faster (by removing red tape).
But everyone throws their arms up, because the tenant can't afford market rent. A battle in court proceeds and the tenant ends up receiving a $100k buyout to leave.
Based on this relatively common situation, rent control prevents more housing from being built and causes prices to increase (the $100k buyout needs to come from somewhere).
[0] - https://www.nytimes.com/2015/12/25/nyregion/new-york-builder...
The underhanded "rent would be lower so everyone would pay less" is fundamentally flawed. Certainly you can argue some people pay more due to rent control but we cannot pay more on average unless you decide to ignore that getting rid of rent control would also increase demand while increasing supply.
The point is to deal better with the economics of established widespread distributed generation and to avoid disencentives to displacing existing residential gas use with electricity, and to similarly improve the incentive structure of home-charged BEVs vs. gasoline vehicles. Doing that takes splitting payment for generation (per kW) from connectivity (fixed) rather than inflating per kW costs to capture the average costs of connectivity.
After all, a lot of the costs aren't in generation but delivery.
CPUC can change utility fees statewide, but any statewide tax change would take legislation, and if it includes an increase of any kind, anywhere, would take a supermajority in both houses of the legislature, and changing that would take a Constitutional amendment.
Government can create incentives for the people through taxes, but the people create incentives for government through Constitutional structures.
Of course, once CPUC has the proposed set up, and before it goes into effect, nothing stops the legislature (which is above CPUC), if it can find the votes, from eliminating the income gradated fixed fee portion of the rate, funding utilities the average cost of that out of state funds for all hookups, and adopting appropriate additional taxes to cover it (or any of a variety of other ways of moving the income gradation into the tax system), and while that would be a better way to do things, its better to do it the way proposed than not at all, which is the more likely result of relying on a legislative supermajority.
The issue is that there are elected officials that support this proposal, but not UBI.
San Francisco, actually. CPUC has HQ in SF with Sac and LA field offices.
> just like a UBI would be.
The revenue for a UBI would take a legislative supermajority (because of Constitutional rules related to taxation), a change in utility rates takes a CPUC majority. Its a smaller margin in a different body.
So, no, the approval is not “just like a UBI would be”.
The amount they charge won't make a dent in the .1% - but it'll be a hit to many people in the top 10%.
An extra $100 in taxes a month to a family making $180k (with house prices and taxes as high as they are in California) is not peanuts. That's literal line-items for middle class families: the cable bill, the car insurance, your kid's music lessons, etc.
$100 is peanuts to someone in the top .1%, though. That's just another Breakfast at Tiffany's.
The same thing happened with Obamacare, affordable for everyone meant almost free if you are poor and crazy expensive if you are making >50k. Meanwhile improving infrastructure or addressing why stuff is expensive is not even part of the discussion.
To do this, folks will need a financial incentive to switch, which means an effective tax, but utilities can't really do that, so the idea is to just have everyone pay a large base for electricity, and then have diminishing returns on usage... where that doesn't exist for gas usage.
Think about your typical California resident's home set up. They have wall plugs, but then they will have a gas stove, gas heater, and gas water heater... and because of the "historic" nature of CA (non)development, many of these appliances literally belong in wasteful era of the 1960s.
The new structure will be painful for folks unwilling to switch to induction/electric range/stove, heat pump, and electric water heater, which is where the income-based rates become relevant. Every person of every income will have an incentive to switch to electrification, but a flat-tax would basically wreck poor folks, while providing zero incentive to change for wealthier folks.
In theory, I honestly think it's a pretty smart way of doing things, but there are some notable priors and caveats. The first prior I have is that climate change matters, and swapping natural gas usage for electric will actually notably reduce GHG emissions (I think this is the case). The caveats are that they need to come out and say this is about climate change (they do in the actually detailed texts -- https://www.cpuc.ca.gov/-/media/cpuc-website/divisions/energ... -- but they don't actually address it when discussing it. The second caveat I have is that this actually fucks over renters pretty hard.
I think it's an abominable proposal and PG&E should simply be shuttered or nationalized by the CA govt.
If there's no economic incentive to save power, people will tend to do it less.
If you want to help the poor, directly subsidize solar panels and batteries for them (thorough the state and federal gov, not the investor owned utility), or community utility scale renewables and storage where on site generation and storage is infeasible.
(Designing a 20kw ground mount expansion for a friend outside of Sacramento on SMUD to work towards going off grid if needed)
Reducing actual demand for PG&E electricity is not in the best interest of regulators, that much is clear.
Residential solar is being mandated by policy, slightly reducing the incentive to build it by shaving off a portion of the per kWh charge and replacing that portion with a connection fee wouldn’t kill it even if the mandate wasn’t there. Which, again, it is.
Is this…a thing California could even do? Is there some state-actionable version of nationalization that I’ve never heard of?
A quick search turned up this article[1] talking about an attempt to do exactly what we’re talking about here, but it was ultimately settled out of court and as far as I can tell it’s still an open question as to whether a state government can legitimately exercise eminent domain in this context.
This can't come soon in enough in CA where a huge number of people don't have the option of rooftop solar because they are apartment and condo dwellers and/or renters. Apparently a law was finally passed in 2022 to allow community solar [1], but Energy Sage community solar searches [2] turn up nothing in any of the populous zip codes I entered.
1. https://www.cpuc.ca.gov/industries-and-topics/electrical-ene...
2. https://www.energysage.com/local-data/community-solar/ca/
The Californian government is famous for all its well-run programs. "The trains are always on time in California", as they say.
I support the goal here, but I don't like the implementation. Something such as a fixed monthly cost for grid-tied systems would make much more sense.
Both of those things are still true in this proposal - it's not proposing a fixed price for electricity based on income. Electricity will still be priced per kWh (although at a slightly lower rate) over and above the flat income-based fee, and the price will continue to vary by time of day (AKA time-of-use) instead of by income.
The income-based fees will cover all the state-mandated programs run by the utilities to provide support for low-income residents, among other things. Yes, that's effectively a redistributive tax that should be done via regular state legislation and state programs to help lower income people install solar and batteries, thereby increasing their resilience and decreasing their dependency on utility rates.
But such measures are unpopular because nobody will vote for a tax raise to help poor people pay for equipment to help them save money on electricity bills. That's a privilege for the well-off. These issues are left between the conflicting interests of a shareholder owned utility and the state.
> Achievement of California’s GHG reduction goals increasingly require more electricity consumption via building electrification and electric vehicle (EV) adoption. It is imperative that the Commission takes steps to reduce volumetric rates. IGFCs can reduce volumetric rates in a manner that eases affordability pressures on low-income customers and improve access to electrification, when done correctly.
from pages 4-5 of this doc: https://www.cpuc.ca.gov/-/media/cpuc-website/divisions/energ...
Are we going to run out of Sun?
It seems like with the criticism of non-renewables, the current zeitgeist has convinced everyone of degrowth ideology wholesale. The debate about renewables and non-renewables is orthogonal.
Humans IMO should have an ambition to consume all the wasted energy radiating out in outerspace by the Sun and capture it for our use.
Energy conservation has religious cult-like faith-based undercurrents. Brainwashed.
No, but this is the same orgiastic mentality that prevailed when oil was cheap in the 90s. It bit us in the ass when demand increased.
Just because capacity exists doesn't mean we should maximize usage.
> consume all the wasted energy radiating out in outerspace
That's not wasted, it's just not captured. Capturing it requires strip-mining of the planet for the materials needed to build the damn panels, just so we can do dumb shit like generating fake money and running air conditioners with the windows open because it has no apparent cost to us ("free energy from the sun!").
Your logic literally drove the buffalo to near-extinction. People were killing and leaving them for dead just because they could. It's parasitic behavior.
It will under the proposal, though that cost is less than without it. Its splitting the rate to a fixed and variable component, not going all fixed.
> If there's no economic incentive to save power, people will tend to do it less.
Part of this is shifting incentives from non-electric-grid energy use (natural gas appliances, ICE cars) to grid electricity use (electric appliances, BEV cars).
We don't want people to save grid electricity by using more polluting energy sources, and overpricing per-kW grid use incentivizes that undesirable behavior.
Basic physics is fairly strict about all of this.
Some of us were briefly allowed to do this in Texas (and presumably some other regions). I was on griddy for a few years and was strongly incentivized to pay attention to my consumption patterns. My bill "ticked" every 5 minutes.
Nothing educated me more about how much power my appliances suck down than a proper, real-time variable rate plan. Any other form of conservation "education" is going to pale in comparison to real time economic pressure. If you had a lot of time to worry about money, you could make your power bill cheaper than a MVNO phone bill.
The reason some think variable rates are broken or won't work could probably be traced back to the fact that very few grid participants (outside of a few industrial partners) are impacted by the actual, real-time cost of electricity.
The thing that pissed me off more than anything was watching the politicians in my state cast variable rate plans as an attack on the poor. Nothing could be further from the truth in my own mind, but only if one is willing to explore the incentives & side effects at every step along the way.
That's only "fair" if you're limiting your view to the specific transaction at hand.
The reason we try to make systems like this is because many of us recognize that when you zoom out, your definition of "fairness" has to change.
If you look at the whole current socioeconomic system, it's very clear that it is not fair to charge a family of 5 living on a minimum-wage salary (or even two or three) the same amount for a basic necessity like power as you charge a Silicon Valley billionaire—unless the amount you're charging is zero.
Of course whether fully dynamic or futures-hedged pricing is more common or even dominant would be down to buyer/seller preference.
Exactly. Give me the option to play in traffic and I'll be happy. Let everyone else ride the more stable path if they prefer.
As it stands, variable rate plans are now illegal in my jurisdiction.
For bathrooms with a shower, I set the timeout to 10 minutes so it doesn't go dark when someone is in the shower. If their shower is longer than 10 minutes, they get punished with darkness, so that has helped save water too. Everywhere else the timeout is 1 minute.
For showers, I actually managed to find an ultra low flow shower that feels amazing, better than some high flow heads I've used in the past. I blogged about it here: https://pdx.su/blog/2023-01-30-a-good-shower
Value based is definitely the option to get as much money as possible out of citizens.
Finally on the right side of history these guys. In this instance, they're right. It makes the economic incentives to conserve electricity and invest in rooftop solar completely backward. You're undermining conservation efforts and clean energy all in one swoop, just so more profits can be reaped by the power companies
The utilities are pulling the same move the cable companies did -- rapidly increasing prices as competition (solar in this case) encroaches on their turf. It's a classic attempt to increase short term profits while ignoring the long term effects, not to mention doing it in the most lazy way possible (increasing the price instead of lowering costs).
If they anger all of their rich customers they will drive them away even faster (to solar and batteries, and they won't even need to be on the grid). I'm sure with regulatory capture they'll be able to get a law passed that requires houses to be connected (and pay the $95+ fees every month), if they haven't done that already.
> In the power companies’ joint submission to the California Public Utilities Commission, they suggest these fixed fees for each customer’s income range.
> Households with incomes earning less than $28,000 a year would pay a $15 monthly fee in the Edison and PG&E service territories and a $24 monthly fee in SDG&E service territory.
> Households earning $28,000 to $69,000 a year would pay $20 to Edison, $30 to PG&E or $34 to SDG&E each month. Households earning $69,000 to $180,000 would pay $51 to Edison or PG&E, or $73 to SDG&E.
> Households earning more than $180,000 would pay $85 to Edison, $92 to PG&E or $128 to SDG&E.
Additional quotes that for some reason seem funny to me from the article.
> But the utility companies say the measure would reduce electricity bills for the lowest income customers. Those residents would save about $300 per year, utilities estimate.
> California households earning more than $180,000 a year would end up paying an average of $500 more a year on their electricity bills, according to the proposal from utility companies.
It seems like this is just a fee the utilities companies want to charge that is based on income. Am I misunderstanding that? Is this intended to incentivize something or help anyone? It just seems to give more money to the utility companies.
That’s $744 a year. The incremental cost of going full off grid vs. solar + batteries is about $20K. So, if this were the only way PG&E screwed over you, it would take 26.4 years for a full off grid system to pay for itself.
I’d guess the true time to ROI will be under 10 years if this passes. At that point, the grid will probably start a death spiral, just like the landline phone network.
Add a UBI or negative income tax if you need to get more coverage for under-/un-employed.
I think the overhead of interventions like this is strongly under appreciated.
I have powerwalls because PG&E are fricking terrible at actually supplying power. Doing a quick check on the app shows me I have had 10 power outages this year so far, with the longest being >24 hours.
If PG&E want to charge me an extra $500/year (their estimate, so double that in reality) then they ought to get their service working better first. It's a rare day that the outage tracker on their website shows no outages...
Perhaps if they invested the money into infrastructure instead of executive bonuses, their service might work better.
[rant end]
How so? Did you not invest in solar in order to decrease your carbon footprint?
If you did it to save money, the evidence is pretty clear that without subsidies a lot of green industries are unsustainable. Government policy can change on a whim.
Selling solar as a means to lower your costs in an environmentally friendly way, then raising prices in a way that cancels out those savings and smugly telling angry people that they were supposed to do it for the environment without concern for cost to themselves is only going to make them less receptive to your cause.
The usage is a big cost for any utility provider, but another huge part is keeping everything maintained and connected across the entire grid. That costs man hours, materials, you name it.
If you swap to solar and pay 0$ per month, yet you still incur costs to your utility to keep lines running to your home and your county, then a flat monthly fee to charge for that unused connection to cover your capacity to use it when needed makes sense.
Something had to give, idk if the path they’ve chosen is the right path however
It was kind of shady how everybody was rushing to get solar earlier this year so they could get grandfathered in before NEM 3 took effect, making all these complicated long-term ROI calculations, but this other new policy that would invalidate all those calculations was kept secret until after NEM 3 took effect.
1. PG&E adds a monthly surcharge that disproportionately affects those with high incomes
2. This makes those with high incomes switch to off-grid to avoid the surcharge
3. Assuming that high-income is a decent proxy for politically influential, now nobody who is politically influential cares if the grid is properly maintained
4. The poor now have an unreliable grid, while the wealthy are off-grid.
Since this surcharge is independent of usage, this shouldn't affect the solar calculation, right? That is, if you don't install solar you pay $USAGE + $SURCHARGE, if you do install solar you pay $USAGE+$SURCHARGE-$SOLAR. The total dollars saved with solar should be identical, unless you were banking on a per-kWh increase.
I knew that and then forgot it over the course of commenting on the article.
Anyone in the thread who is saying the plan is "insane" clearly doesn't understand it. There are plenty of reasons to discuss why it's imperfect, but the folks screaming bloody murder obviously haven't looked at it or considered the second-order effects this will create.
There is not enough electricity for everybody, and it seems like conservation is not an option. So these companies will try to squeeze the working class even more. The problem, there is not enough juice left for me to give.
That is not the issue. The issue is that distributed generation (i.e., rooftop solar) has become so popular that charging only by per-kW charges has become a subsidy from working class (who are less likely to participate in such generation) to wealthier segments who do.
> So these companies will try to squeeze the working class even more.
This proposal would reduce total bills for the working class, by splitting the rate into a mix of fixed fee and a (lower than current) is per-kW rate, and giving the working class a discount on the fixed fee.
It would raise total costs for those generating their own power (because of lower per-kW rates) and for the wealthy (who would pay above the average cost on the fixed fee, and particularly on people who are both.)
This would reduce the incentive to new distributed generation slightly (but then, given that both widespread adoption has been achieved and there is now a residential construction mandate for that, the effect of incentives is less.)
I sure hope so, but I still doubt whether it will happen. I'm sorry for my ignorance on the topic, and I need to research it more. But it is counter-intuitive to me.
We pay much more than the rest of the country already. We are the utility's source of revenue. We should get a fair price if we generate enough electricity through solar and other means by switching to market rates.
Why can't they just adjust the expense for those who generate electricity? Or directly lower the incentive by removing tax cuts and credits since the widespread adoption is ongoing anyway. I am still trying to understand why I have to share costs with wealthy people without clear benefits.
You aren’t sharing costs with wealthy people.
The proposal is to split rates into fixed connection costs and variable electricity costs, rather than, as the status quo does, lumping it all into the latter and setting rates high enough that on average the connection costs are covered by the surplus of the per-kW charges.
The effect of the status quo is that net metering over-rewards net-metered distributed generators (which was a plus to drive adoption, but no longer needed an excess incentive because of widespread adoption and a construction mandate) but it also creates an artificial disincentive to moving residential natural gas use to cleaner electric and against moving gasoline vehicle use to cleaner BEVs.
Dropping the per-kW rates and separating out the connection charge deals with that problem.
> Why can't they just adjust the expense for those who generate electricity? Or directly lower the incentive by removing tax cuts and credits since the widespread adoption is ongoing anyway.
Because distributed generation is only part of the issue, and that doesn’t deal with the disincentived to electrification of current fossil fuel use created by the currently-inflated per-kWh charge.
proposal asks you to pay not for electricity, but for maintaining grid infra, which they keep for you even you don't utilize it much. Cut yourself from the grid and you will pay nothing.
Not hardly. 180k household income is working class in California. This will drastically increase bills for many working class folks, those same working class that has been screwed over already with the lie sold about solar reducing costs. Because let’s be realistic here, a vast majority of people that installed solar did it for electricity bill reduction. It did, until this years.
This state is simply and completely captured by industry. We should not be passing laws to boost profit for a for-profit company.
The correct lesson is to make power (et al.) affordable[0]: Tax people to make electricity cheaper - sure, but cheaper prices would mean PG+E makes less money.
[0]Like it is in much of the country
Just checking this isn't another situation where gas went from 8c/l to 11c/l and every lost their minds.
For my 1 br apartment living alone the total bill has been about $100-$150 but can jump to up to $250 during summer months. Sounds like this will almost double my costs for most of the year.
I don't know about PG&E specifically, but Equifax et al. have subsidiaries like The Work Number to get your income from employers and share it with whoever asks. The government isn't handing over anything-- even they go through Equifax when verifying income for food stamp eligibility.
The threat is real.
It introduces fixed fees to bolster a private utility with little oversight.
I struggle to understand why California allows its utilities to behave the way they do.
Any time the vested interest is saying that its own pricing structure is unjust and needs to be amended... and that the change is "unlikely to increase or decrease its profit" you should be reeling from the amount of bullshit in the air.
1. Low and moderate income families should be able to afford their energy bill, and the "basic" energy use going forward may need to be higher esp as people need AC more of the year, etc.
2. There's a push to move people off natural gas appliances and onto electric appliances sooner rather than later, with the intention that eventually almost all of that electricity would be from green sources, and similarly to encourage people to switch to EVs. In order to do that, they partly want the marginal cost of electricity to be lower for everyone, even for people who end up paying more per month than they do currently. Everyone's supposed to feel an incentive to switch appliances.
3. There's a claim that the current pricing structure means that people with PV setups aren't paying their fair share for grid/infrastructure maintenance. Paying ~$0 for power b/c you use ~0 kwh shifts the 'burden' for maintaining the grid to people that don't have the ability to install solar.
You can be in support of point 1 ... but we already have subsidies for low-income residents. If we need to expand those, we should have those conversations!
But part 2, lowering the marginal cost of power by use has multiple downsides:
- it _does_ penalize people who conserve energy. My own PG&E bill may roughly triple, in a small, well-insulated urban condo without AC. And because the income brackets are _so wide_, someone who makes substantially more money and who uses substantially more energy (e.g. private pool, EV, large house) can see their bill _decrease_ due to this change!
- it's not clear that incentivizing people to replace appliances (or vehicles) before the end of their useful lives is a net carbon-saving move; the intrinsic carbon is real
- for the medium term, a substantial fraction of CA power does still does come from natural gas; increasing home electricity use which does not replace home natural gas use (e.g. just running your AC more days b/c it becomes cheaper) will in some cases mean _more_ emissions
- as an incentive structure, it's not even clearly effective; e.g. landlords won't be pushed meaningfully to update appliances which would lower their tenants energy bills
- if it worked really well, and everyone tried to move to all electric appliances and EVs next year, the grid may not be able to handle it anyway
Part 3 is a concern, but I don't think this is the way to address it. This says that people making over 180k would be paying up to $1536 just to be connected to the grid, before they draw their first kwh of power. People who are within reach of generating enough power to live off of will be nudged to consider disconnecting entirely. If they take that exit ramp, are the rest of us better off in any way?
Lastly, of course, a fee that basically everyone in the state will be obliged to pay, which is based on income ... seems a lot like an income tax, but it's going to a private company. In my case, that company is a felon with multiple convictions.
Whenever I fill this stuff out, I feel vulnerable and exposed. This is way more than anyone needs to share with the IRS or anyone else. I've declined financial assistance from hospitals because they'd need to dig deeply into my finances the same way.
This may be a great way to tax the rich and stick it to Elon Musk, but I feel like any such program had better be optional, and what happens to all those juicy financial records they receive, when they start leaking?