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Reductions of up to 18%! California's Electricity Rate Market Sees Huge Changes

published: 2024-05-14 16:32

On May 12, California utility regulators decided to allow the state's largest electricity provider to charge its customers a flat rate and lower electricity charges.

The change is a response to the country's climate change policy and a dramatic change in the way millions of households pay their electricity bills, which has been widely discussed and debated.

Under the new policy, California customers will pay lower electric bills each time they use electricity.

According to an analysis by the Public Utilities Commission, the rate reductions will range from 8 percent to 18 percent, depending on the electricity provider, the season, and different times of the day.

This means that California customers will have more flexibility in their electric bills. The policy encourages customers to use electricity during times of the day when rates are lower, thereby managing grid loads and conserving energy more efficiently.

In order to compensate for the potential loss of revenue to utilities as a result of lower electricity rates, the California government has decided to introduce a "fixed monthly rate" system.

This is a new type of billing that distinguishes California's longstanding electric billing tradition of "pay as you go".

Under pay-as-you-go, California households pay only for the amount of electricity they actually use. A“Flat Rate”means that households pay a fixed monthly fee regardless of how much electricity they actually use.

Southern California Edison SCE, San Diego Gas & Electric SDG&E and Pacific Gas & Electric PG&E will begin charging a flat rate in late 2025 and early 2026.

While the average monthly charge in most of the U.S. is $11, California's new rate will be $24 for most customers, but low-income households that qualify for tariff discounts will be charged a $6 or $12 fee.

The introduction of the flat rate illustrates the California government's attempt to ensure that utilities are able to reduce electricity prices while still generating a steady stream of revenue to maintain the sustainability of grid operations and services.

Proponents of reforming California's electricity rate structure argue that adjusting billing practices is a necessary step to lowering the state's high electricity rates. California's electricity rates are among the highest in the U.S., which poses a challenge to environmental goals such as promoting electric vehicles and electrified home devices.

At the same time, energy-conscious consumers as well as households with rooftop solar are likely to spend more on their electricity bills. It's also a blow to the development of home-storage solar in California.

But on the other hand, the policy will give a boost to electricity demand management in California. Energy storage during the low electricity price period to realize more economical power use may become another major trend in the future development of California household storage.


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