What is the Big Utility Tax?

The Utility Tax is a monthly flat fee that big utilities and their allies want to add to everyone’s electricity bills. The Utility Tax cannot be avoided or reduced — no matter how little electricity you use. 

Your monthly electricity bill would include the cost of electricity you use in a given month, fees the utility charges for delivering the electricity to you, other miscellaneous charges, plus a brand new Utility Tax.

In exchange for the Utility Tax, the per kilowatt rate you are charged for the electricity you use would get a one-time reduction. However, the new Utility Tax would be so high that overall electricity bills would still increase for four million working and middle class families.

On May 9, the California Public Utilities Commission (CPUC) voted to approved a $24.15 monthly Utility Tax every month. This tax would increase electricity bills for people living in apartments, condos, and small homes such as:

• A single mother making $40,000 per year.

• A family of four making $76,000 per year

• Seniors on a fixed income

• Cops, firefighters, nurses, teachers, and other working people struggling to make ends meet under California's high cost of living

In addition, both the Utility Tax and rates are completely uncapped. Over time, the utilities will keep hiking up both rates and the new Utility Tax. In fact, language in the CPUC’s proposal makes it clear that $24 a month is just the beginning. The utilities always find a way to keep raising electricity bills.

Why do Pacific Gas and Electric (PG&E), Southern California Edison (SCE), and San Diego Gas & Electric (SDG&E) want a high monthly, fixed tax?

California’s monopoly utilities want to charge all households a Utility Tax in order to guarantee revenue sources and secure their yearly profits and stock prices. 

PG&E, SCE, and SDG&E incorrectly claim the Utility Tax will help reduce electricity costs for low-income customers and incentivize people to switch from gas to electric appliances and heat pumps. 

In reality, none of that adds up. Instead, millions of working and middle class consumers would actually see their electricity bills go up considerably.

Who will have to pay the Utility Tax?

ALL residential customers of PG&E, SCE, and SDG&E will have to pay the Utility Tax, no matter how little electricity they use. This includes customers of local community choice energy providers.

How much is the Utility Tax?

Most consumers will pay a monthly Utility Tax ranging from $24 per month. The yearly totals add up to $290.

Consumers who are on California Alternate Rates for Energy (CARE) or Family Electric Rate Assistance Program (FERA) will pay a lower tax ranging between $6 and $12 a month respectively.

The amount of the Utility Tax can be raised over time, without any limits—in addition to the per kilowatt hour rate.

Does the Utility Tax help low-income households?

No. People on the CARE or FERA programs will see little to no decrease in their monthly bill. And, the decrease would be temporary, as utility rates always go up—along with the new Utility Tax.

Meanwhile, electricity bills will increase on millions of struggling households living in small homes or apartments who do not qualify for CARE or FERA — and are already paying the highest utility rates in the nation.

Does the Utility Tax encourage consumers to move from gas to electric appliances?

No. There is zero proof that a Utility Tax will encourage more people to go electric. In fact, with the Utility Tax, it will actually be cheaper to stick to gas appliances — anywhere from $40 to $400 cheaper a year.

A majority of consumers surveyed say a Utility Tax will make them less likely to install electric appliances and buy electric cars.

Does the Utility Tax promote energy conservation and help fight against climate change?

No, and no. Because a Utility Tax reduces the ability of consumers to control their electricity bills, people are dis-incentivized to take steps to use less energy. In fact, the Utility Tax rewards excessive and inefficient energy use, instead of conservation. It becomes cheaper to consume more energy, and more expensive to conserve energy.

Furthermore, the Utility Tax also hurts California’s progress towards clean energy to fight against climate change by making rooftop solar a less affordable option for consumers.

Why do electricity bills in California keep going up?

Because utility spending is out of control and because utilities keep asking for rate increases, and regulators keep giving it to them.

Take PG&E for example. This year, PG&E increased their rates by 13%. Millions of Californians saw their bill go up by about $32.50 or more each month, and that is just the beginning.

PG&E is asking the CPUC for another 7.2% increase in March 2024. If approved, customers will have to pay $48 more a month, or $576 a year.

Over the past 10 years, utility rates have increased 8% annually on average with some years topping double digit increases.

Nothing in the Utility Tax decision gets at the root cause of uncontrolled utility spending that leads to these unprecedented rate increases. In fact, by opening the door for utilities to charge high fixed fees makes matters even worse for consumers.

How would California’s Utility Tax compare to everywhere else in the U.S.?

The current national average for fixed fees on electricity bills is about $10 a month, or $120 a year. The Utility Tax approved by the CPUC is more than twice that, at $24 a month. The utilities originally asked for the Utility Tax to be as high as $50-70 a month, so you know where this is going.

What is a better solution to make electricity more affordable?

More effective ways to help lower electricity bills for all consumers include:

• Control utility spending and preventing big utilities from constantly raising rates;

• Expand eligibility for programs like CARE and FERA;

• Encouraging more people to switch to clean solar energy, with battery storage, which reduces the need to build expensive long-distance transmission lines that drive up electricity rates.

How did this happen?

PG&E, SCE, and SDG&E came up with the Utility Tax. With their political power and influence, they were able to quietly slip the tax into a fast moving budget bill (AB 205) in 2022. The language for the tax was buried and not carefully reviewed or considered. The bill was approved by both the Assembly and Senate just three days after it was inserted into the bill, with no committee hearings or open debate about the idea of a monthly Utility Tax.

AB 205 opened the door to outrageous proposals by removing a reasonable $10 monthly cap on fixed charges that the legislature put in place in 2013.

Since AB 205 passed, hundreds of organizations and community leaders have come together to oppose the Big Utility Tax.

What can I do to stop the Utility Tax?

California state legislators can fix this problem by passing AB 1999, which would cap the utility tax at $24 a month, and end it after 2028 if it does not achieve it’s stated goals.

Go to our Take Action page for information on how to contact your state legislators and encourage your legislator to pass AB 1999.