Nash is chair of the Black American Political Association of California, San Diego Chapter, and lives in Southeast San Diego.
Every day in my work with underserved communities, I hear stories of working families struggling to get by in America’s Finest City. With the rising cost of housing, food and other necessities, families are feeling financial stress when they open their monthly bills. Nowhere is this more apparent than with electric bills. Electricity is a necessity that none of us can live without, so it’s critically important for it to remain affordable.
Update:
2:50 p.m. Jan. 29, 2024San Diego Gas & Electric says it contributed to the Black American Political Association of California, San Diego Chapter, in the amounts of $5,000 in 2020 and $5,000 and $2,500 in 2021.
Fortunately, there is a solution on the horizon to address energy affordability, but, unfortunately, many are trying to kill this solution with misinformation and overheated political rhetoric.
The California Public Utilities Commission (CPUC) is currently reviewing proposals for a tiered, fixed-price structure, as directed by state legislation. This important reform was brought forward to bring greater predictability to monthly energy bills, lower the per kilowatt-hour charge for everyone, and help provide financial relief to working families.
Opponents to this approach will tell you the new pricing structure will result in more profit for energy companies. In fact, the fixed charge is not an add-on to our utility bill. Rather it would replace a portion of the existing charges — primarily the cost of delivering electricity to consumers.
These critics will also tell you that your local energy company wants your household income data. The truth is, SDG&E and other regulated energy companies have explicitly stated that they do not want to collect income information from customers to implement this reform. The utilities’ current proposal leverages enrollment data for existing financial assistance programs to structure the pricing tiers. The income information provided by customers on the applications for existing energy bill discount programs (California Alternate Rates for Energy or CARE and Family Electric Rate Assistance or FERA) would be used as the basis to determine what level of fixed charge a customer would pay. Without the need for utilities to collect income information from customers, families who qualify for CARE and FERA would also benefit from more bill predictability and financial relief under a fixed charge reform.
With approximately 3 million Californians enrolled in CARE and 80,000 enrolled in FERA, this proposed rate reform will have widespread benefits for low-income customers. Under SDG&E’s proposal, the lowest-income customers enrolled in the CARE bill discount program would pay a $24 monthly fixed charge. All other customers enrolled in the CARE and FERA bill discount programs would pay $34 a month, and everyone else would pay $73 a month.
Under the current pricing structure, you pay a price for every kilowatt-hour of electricity used, but the price is not just for the cost of generating the electricity. It’s also for building, maintaining and operating the infrastructure (poles, wires, substations) to deliver the electricity to customers, as well as numerous social benefit programs. Collecting more of these costs in a fixed monthly fee rather than based on usage will help stabilize monthly bills.
Electric rates are used to pay for all sorts of mandates, like investments in technology to prevent wildfires, improving energy efficiency and building out the grid to support electric vehicle charging. Today these costs are not shared evenly. As more households adopt rooftop solar to offset their monthly electric bills, they contribute less to these programs, leaving those who cannot afford solar paying an outsized portion of these expenses.
There is one more misconception about the fixed-price proposal that I’d like to address. Some have argued that it will disincentivize conservation. Not true. Customers will continue to pay a portion of their electric bill based on consumption. In other words, you will still see savings if you reduce usage. Conservation has always been an important part of our daily electric use and will continue to be under this program. It’s incumbent upon community organizations and utilities to continue to educate the community on this important aspect and the resources available to help reduce household electricity use.
A tiered, fixed charge aligns with our state’s values of social justice, equity and fairness. This is something that is essential in our society and essential to folks who deserve thoughtful policies to empower those who have been ignored for a long time. This pricing reform will help the communities that desperately need financial relief. I stand with over 5,000 San Diegans and 25 local community organizations who have joined the Predictable Power Coalition in urging the California Public Utilities Commission to not delay the implementation of this important reform. And I encourage anyone who agrees to do the same by visiting predictablepower.org.
FAQs
A tiered, fixed charge aligns with our state's values of social justice, equity and fairness. This is something that is essential in our society and essential to folks who deserve thoughtful policies to empower those who have been ignored for a long time.
How does an electric company's tiered rate system work? ›
This rate plan has two pricing levels, known as “tiers,” which are based on how much energy you use. Energy used within your Baseline Allowance is Tier 1 and billed at the lowest price. Energy used above the Baseline Allowance is considered Tier 2 and is billed at a higher price.
Is electricity a fixed or variable cost? ›
However, the cost of electricity is a variable cost since electricity usage increases with the number of products that are produced or manufactured. In short, if the total cost associated with the cost object changes when the production amount changes, it's likely a variable cost.
What is the difference between fixed rate and variable electricity? ›
In short, with a variable-rate plan, consumers have a bit more control over their energy rate, but less control over their monthly electricity bill – and that works for many people. Fixed-rate customers pay an agreed upon energy rate over a longer period and enjoy a more predictable bill.
How much is the flat fee for electricity in California? ›
Under the new billing structure:
The flat rate will be $24.15 per month, with low-income customers and customers living in deed-restricted affordable housing eligible for discounted flat rates of $6 or $12.
Why do we have a tiered system for electricity? ›
The Tiered Rate Plan is a more traditional billing plan where the best way to keep energy costs low is to limit your total energy consumption.
Why do we have a tiered rate system? ›
Usually, tiered-rate bank accounts will offer higher rates of interest for larger balances to encourage customers to save more and remain loyal to the bank. Banks need to balance attracting customers with maintaining their profitability.
Why are utilities a fixed cost? ›
Utilities– the cost of electricity, gas, phones, trash and sewer services, etc. Some utilities, such as electricity, may increase when production goes up. However, utilities are generally considered fixed costs, since the company must pay a minimum amount regardless of its output.
Are groceries a fixed or variable cost? ›
Grocery shopping is also a variable expense. Your utility bills may also be variable expenses because they may change from month to month. For example, you might spend more on electricity in July than you do in December because of air conditioning.
Is sales commission a fixed cost? ›
Answer and Explanation: The sales commission cost is a variable cost as the amount varies proportionately with the number of units sold for a product, which in turn governs the production volume as well.
Both have their merits. The cost of fixed price tariffs will depend on the conditions of the energy market. Fixed deals become less attractive if wholesale prices are high because suppliers have to charge more. Although a variable tariff may offer the cheapest prices at the outset, it might not in the future.
What is better a variable or fixed rate? ›
The answer: It depends. Variable rates are typically lower than fixed rates at the time of application. A fixed rate is generally higher to accommodate potential increases due to future market conditions. A variable rate can start off lower because it reflects market conditions.
Is fixed rate more expensive than variable? ›
The interest rate for a variable loan is generally lower than a fixed loan, especially when the loan is incurred.
Why is my electric bill so high in California? ›
The reasons for these high rates of increase are numerous. Two of the most important are major upticks in the cost of natural gas used by power plants and rising costs associated with the upkeep of the electric grid.
What is the average California electric bill? ›
On average, California residents spend about $277 per month on electricity. That adds up to $3,324 per year.
What is the $24 flat fee in California? ›
In a unanimous vote Thursday, the agency authorized a flat fee of up to $24.15 and cuts to electricity costs by 5-7 cents per kilowatt-hour. The change stands to affect 11 million customers of investor-owned utilities starting late next year.
How does a tiered interest rate work? ›
Tiered interest is credited at higher rates on larger balances. Calculations can either be (i) stepped or (ii) banded. Banded interest is better for customers, because the higher rates are applied to the entire balance. Most corporate groups also have large numbers of bank accounts.
How does tiered pricing work? ›
Tiered pricing as a model (also known as price tiering) is used to sell your products within a particular price range. Once you fill up a tier you move to the next tier and you will be billed according to the number of purchases you make in those respective tiers.
What does an electric company's tiered rate system charge customers? ›
What does an electric company's tiered rate system charge customers? A tiered rate system charges customers lower rates for first increments of energy and higher rates as the usage goes up.
What is a tiered rate system for electricity use charges customers? ›
A tiered rate system for electricity use charges customers a lower rates for the first increments of electricity used and higher rates as usage rises.
