SMUD, PG&E customers could see an increase on electric bills if Gavin Newsom’s budget passes

Customers of the Sacramento Municipal Utilities District along with other California ratepayers could see a modest electricity rate increase on their monthly bills as part of the pending state budget proposed by Gov. Gavin Newsom.

The proposed allowable increase meant to boost the California Energy Commission’s operating budget would cost the average household about 32 cents a month and generate about $150 million in annual revenue, according to the state legislative analyst.

The governor’s proposal, which was attached to California’s upcoming budget as a trailer bill, comes at a time of historically high rates, particularly for customers of the state’s investor owned utilities, Pacific Gas & Electric, Southern California Edison, and San Diego Gas & Electric.

Vocal opponents of the rate increase include the California Municipal Utilities Association, which represents SMUD, as well as representatives of the rooftop solar industry.

The move is “not appropriate during a time when rates are skyrocketing and utilities are facing pressures from inflation, state mandates, and other external factors,” wrote the association in a letter to legislative budget leaders this month.

“Our customers are still carrying past due balances since the pandemic,” the business association wrote, “and we would never advocate for policies that would make the cost of electricity more expensive.”

The California Energy Commission oversees many of the state’s energy programs and projects, including grid upgrades, clean energy regulation and electric vehicle charging infrastructure. Its main operating budget is funded through a surcharge on retail electricity sales across the state.

That charge was originally set at $0.0001 per kilowatt hour (kWh) back in 1974 and then raised to $0.0002 sometime between 1984 and 2002, according to a report by the legislative analyst. Today the surcharge cap is $0.0003 per kWh, and currently costs the average resident $2 a year.

But the Legislative Analyst’s Office (LAO) has warned for the last several years that the agency is in a structural deficit and could become insolvent by 2027, noting that many residents who used to pay into the revenue stream are now exempt after installing home solar.

The governor’s proposal would raise the allowable cap to $0.00066 per kWh, tie it to inflation and extend it to households with rooftop solar. The administration has argued that the increase would distribute costs more equitably, but downplayed its impact to consumers.

“This will result in a net savings for Californians, who have already saved over $100 billion to date in reduced energy costs, lower bills and more because of programs like this that make energy consumption more efficient,” said spokesman for the governor’s office Alex Stack. “This measure does not propose a rate increase, it would only raise a potential cap by sixteen cents.”

California’s rising electricity costs have been at the center of political uproar in recent weeks after utility regulators changed the way millions of households pay their electric bills.

Under the new rules, 11 million customer’s of the state’s investor-owned utilities — not including municipal utilities like SMUD — will see a roughly $24 fixed charge on their bill to cover utility infrastructure costs, coupled with lower electricity prices.

Proponents of that change said it’s needed to keep rates down while meeting state climate goals. Opponents warned that it discourages energy conservation and could harm low-income customers.

What’s indisputable is that Californians currently pay the second-highest electricity rates in the nation after Hawaii. While SMUD customers have been largely immune, PG&E customers saw new rate hikes this year, with the average household paying an additional $34.50.

Ethan Elkind, director of the Climate Program at UC Berkeley’s Center for Law, Energy and the Environment, said customers could consider this modest rate increase as a smart investment in work the state’s Energy Commission does to help reduce electricity rates overall.

Elkind said getting more electric vehicles on the grid, a key aim of the Energy Commission would mean utilities have less new investments to make. He also made a case for the agency’s technological research, arguing it is needed to keep the energy grid running efficiently.

“It’s a pretty negligible amount,” he said of the increase. “But there’s no doubt we’ve got rising political and economic pressure to try and stop the increase with rates.”

The state Legislature is currently in negotiations, and must pass a budget by June 15.