Legislative Democrats are running from their own tax-the-rich electricity idea. Why? | Opinion

Many of California’s legislative Democrats are running from their idea to partly base electricity bills on the income of ratepayers. Yes, the idea has its challenges. But the status quo many Democrats seem to prefer is to continue sticking it lower-income Californians rather than making energy bills more equitable.

Climate change has created a property insurance crisis, an electricity crisis, and an overall public financing crisis. None of these crises are close to resolution while rates for Pacific Gas and Electric customers have doubled in just five years, largely driven by costs to fix and expand the grid.

Opinion

California would be the first state in the nation to have most of its electricity bills partly based on one’s income (publicly-owned utilities like the Sacramento Municipal Utility District are exempt). Just like wealthier Californians pay a higher rate on income taxes, the same would be true with the monthly electricity bill as a way to better manage the grid’s skyrocketing costs. But this idea once worth exploring is falling out of fashion in Sacramento, leaving proponents wondering why.

“I think the Legislature is living in this fantasy world where we just need to stop this,” said Severin Borenstein, director of UC Berkeley’s Energy Institute in its Haas School of Business and a champion of the income-based rate idea. “We are on a completely unsustainable track.”

We have arrived at this point because the Legislature and the Newsom Administration have gotten into the bad habit of tagging complex policy legislation into the spring budget-making process. It’s a way to use constitutional deadline pressure to circumvent the bill hearing process and race something through the Capitol.

Two years ago, the Democrats applied the hasty “trailer bill” tactic to change the electricity bills of most Californians. And in the process, they completely screwed it up by passing Assembly Bill 205.

It directed the California Public Utilities Commission to implement an income-based charge onto the residential electricity bills of all the state’s publicly-owned utilities - Pacific Gas and Electric, Southern California Edison and San Diego Gas and Electric. The directive was not to base some of the money collected on energy bills based on the ratepayer’s income.

What Newsom and the Legislature failed to do was give the PUC the tools to make this happen, The legislation left out a required authorization for utilities to gain access to the only state repository of ratepayer income information, the Franchise Tax Board.

So basically the Democrats told the PUC to do a difficult job in just two years without the information to perform the task.

Democrats would now have to run a new bill to fix this problem. Instead, many of them seek to abandon the income-based rate charge altogether.

Assemblywoman Jaqui Irwin, D-Thousand Oaks, is leading a charge with a bill to preserve the status quo intact.

This is unfair to low-income Californians who qualify for lower electricity rates but still pay more than the typical American household, according to Borenstein. PG&E charges 40 cents per kilowatt hour, “which is almost three times the national average,” said Ahmad Faruqui, a respected rate consultant.

“I am still connected with the industry, and everyone is just shocked beyond words as to how can California keep doing this,” he said. Faruqui opposes the income-based charge, however, because he doubts it will achieve its underlying goal of greater economic equity in rates.

Some Democrat proponents of halting the PUC process claim that an income-based charge would disproportionately impact middle-class Californians. Borestein disagrees. “The only people who have done a study is us” at UC Berkeley, he said.

What may be driving the Democrats’ change of heart is a completely different issue, the collapse of California’s rooftop solar industry.

The PUC has been lowering the financial incentives for residents to put solar panels on their roofs by lowering the price utilities have to pay for the power these roofs provide to the grid.

Today’s electricity bills are based on how much power the customer uses. That lowers the bills for the 1.8 million California homes and businesses with rooftop solar that have been lowered even further by generous payments when excess rooftop power goes onto the grid. This has created a growing disparity in electricity costs simply due to whether a ratepayer has a solar roof or not.

The PUC last year dramatically lowered these payments to new solar rooftop owners. Since then, installations have dropped by more than 80 percent statewide.

The benefit of rooftop solar is to lower the electricity bill since virtually all costs are recovered based on how much of the utility’s power a ratepayer uses. But if existing and future rooftop residents had to pay a set monthly charge to the utility based on their income, the financial attraction of those solar panels would decrease even further.

Legislative Democrats “are under extreme pressure from the rooftop solar industry because this would make rooftop solar less attractive,” Borenstein said. “I think that’s the biggest driving force here.”

This bill seems likely to pass the Legislature because of its bipartisan appeals. Republican lawmakers thought basing energy bills on income was a bad idea and have had a field day criticizing Democrats for how they botched their own bill.

Gov. Gavin Newsom, a driving force behind this income-based charge idea, could veto a bill that retreats from it. But that would leave the PUC in a horrible position. It would have to develop an income-based charge knowing very little about the ratepayers’ income.

Utilities know which ratepayers are in two programs for lower-income Californians, and that’s it, said Borenstein. Most ratepayers’ incomes are a complete mystery to the PUC. Were the regulator to impose the same income-based charge on most Californians because they don’t have a smarter way to do it, that may be even less fair than the existing inequitable system, Borsenstein said.

What a mess.

Newsom and the legislative Democrats have done this entirely to themselves.