Electricity Subscription

Starting in March 2026, to comply with CA AB 205, all California residential utility companies will charge their customers (so, everyone that lives in the state) a Base Services Charge, including PG&E, my utility company. This base services charge is \$24 per month per household (less for low-income customers) but PG&E claims that this will lower the cost of electricity per kilowatt-hour. But does this change actually save their customers money, or will it incentivize saving energy?

Energy Cost Savings

First let's find out how much the cost of energy will decrease. PG&E doesn't explicitly state this, but it is implicit based on their examples provided. In their examples, the cost of electricity will decrease by about \($0.05/\text{kWh}\), which agrees with other utility companies.

Calculate Energy Bill

The old bill $B$ is simply a function of the cost per unit of energy, let's call that $c$ times the units of energy $E$ used that month.

$$B_\text{old}=c \times E$$

The new bill is the new cost of energy (with the 5-cent discount $d$) times the units of energy used that month, plus the base services charge $b$.

$$B_\text{new}=(c-d) \times E+b$$

$$B_\text{new}=(c-0.05) \times E+24$$

Energy Balance

Assuming you used the same amount of energy before and after March 2026, how would your bill change? For example, let's say I use about $E=200\text{kWh}$ and my utility charge is about \(c=$0.40/\text{kWh}\). We can calculate my old and new bills with this information.

$$B_\text{old} = 0.40 \times 200 = $80$$

$$B_\text{new} = (0.40 - 0.05) \times 200 + 24 = $94$$

An increase of \$14?? Not looking good. What if I used $E=600\text{kWh}$?

$$B_\text{old} = 0.40 \times 600 = $240$$

$$B_\text{new} = (0.40 - 0.05) \times 600 + 24 = $234$$

A decrease of $6. Interesting, so this change does decrease the energy bill for some customers, but increases the bill for other customers. At what point is my energy use enough to make the new bill cheaper than the old bill?

$$B_\text{old} > B_\text{new}$$

$$c \times E > (c-d) \times E + b$$

$$(c-(c-d)) \times E > b$$

$$d \times E > b$$

$$E > \frac{b}{d}$$

That means that the energy used must be greater than the base services charge divided by the discount provided, but it doesn't matter what your original cost per unit energy is. (Isn't that interesting?)

$$E > \frac{24}{0.05} = 480\text{kWh}$$

Conclusion

That means that in order to be saving money after this change, you must be using up at least 480kWh per month. The more energy you use, the more you'll be saving. Let's answer my questions from the beginning. Can this save customers money? The answer is yes technically, it can. But for the average user, I'm making a bold statement that you will not be saving money.

My second question was, will this incentivize saving energy in your home? I'm going to make a bold statement here and say no, it doesn't. For customers already using a lot of energy, they will be seeing a decrease in their energy bill, which might even incentivize them to use more energy. For customers not using a lot of energy, they may not have as many areas where they can further save energy.

This change disproportionately impacts low-income customers and punishes those who are already making an effort to save energy. The customers who already consume large amounts of energy, likely from large, expensive houses (also likely to be high-income) will be seeing decreases in their energy bill. This may incentivize them to care less about energy-saving measures.

Rebuttal

While I am overly-critical in my writing, I want to present another side of this argument. The high-income earners that may be seeing decreases on their energy bill may instead use the money saved to start new green-energy projects in their homes, such as installing solar or backup batteries, and may even use that to contribute energy back to the grid.

Another point I would like to mention is that while this extra energy "subscription" (or tax) does increase the bill for most customers, it is not a profit to the utility companies. The base services charge will be used by the utility companies to pursue state-mandated energy efficiency projects, maintain the growing grid infrastructure, hardening against wildfires, which is a normally massive expense that will be saved with this charge. It may help California achieve its mission of electifying the state and bring us closer to net zero.