In This State, Your Electric Bill Could Drop by $300 per Year -- or Go Up by $500

Most people in the United States are charged for utility usage -- when you receive your electric bill, the cost is based on how much you used. But that will soon change in California. Residents of the Golden State will be charged fixed-rate fees based on income and will also be billed for their electricity usage. This change is due to a state law aimed at simplifying billing and addressing equity. Low-income households are expected to save money on electricity costs once the changes are implemented. Here's how it will work.

Electricity billing changes are coming for California residents

Changes are coming to how residential electric customers are charged for electric service in the state of California. Assembly Bill 205 requires California's three investor-owned utility companies to adopt income-based fixed-rate fees for all residential electricity bills. 

Southern California Edison, Pacific Gas & Electric, and San Diego Gas & Electric have submitted a fixed-rate fee structure proposal. The proposed flat-rate fees would be added to customer bills, in addition to usage charges, to cover maintenance and operational costs for the state's electric grid. It's worth noting that these fees have not yet been finalized. 

The following per-month, fixed-rate fee structure has been proposed:

Lower-income households could save $300 a year 

Many utility companies across the country charge additional fees on top of electricity usage costs, but an income-based structure for these fees is not the norm. Not every Californian is happy about the proposed fee rates. 

Some higher earners argue that they're more likely to spend more on energy-efficient home upgrades, yet will pay more in fees. Some who disagree with the proposal feel they would be unfairly penalized with a flat-rate fee despite making efforts to conserve energy. 

How much could these proposed fee changes impact the checking accounts of Californians? According to a recent article from The Washington Post, California households earning more than $180,000 could pay an average of $500 more on their yearly electricity bills. The lowest-income residents would save an estimated $300 yearly on electricity costs.

While higher-income residents would see an increase in their electricity bills, residents at all income levels could benefit from reduced usage rates. With an income-based fixed-rate fee structure, electricity companies could reduce usage rates for all customers. 

Lower fees could be a win for some Californians' wallets 

The California Public Utilities Commission has until July 2024 to make an official decision regarding these fixed-rate fees. If such fixed-rate fees were approved, many lower income California residents could benefit financially by freeing up more income for other goals. 

As living costs continue to rise throughout the country, any money saved can make a difference in improving one's personal finance situation. Residents paying lower fixed-rate fees could have greater flexibility to tackle other financial goals, like paying off debt or putting more money toward building a solid emergency fund.