WSJ Opinion : Calif income tax on electricity / graduated tax on lighting your home ...........................
WSJ
OPINION
REVIEW & OUTLOOK
May 5, 2023
California’s Income Tax on Electricity
Another Golden State first: a graduated tax on lighting your home.
By The Editorial Board
Climate policies are driving up California electric rates to the point that progressives say they are discouraging the non-affluent from buying electric vehicles and appliances. Now Democrats plan to double down on their policy distortions by charging electric customers based on income.
Democrats snuck this second progressive income tax into a budget trailer bill last year that was ostensibly aimed at boosting grid reliability. The new law authorizes the Public Utilities Commission to restructure electric rates by imposing a fixed charge on an income-graduated basis. No other investor-owned utilities in the country link electricity costs to income.
The income-based charges are drawing attention as utilities last month submitted rate-design proposals to the commission. Pacific Gas & Electric floated charging customers fixed fees ranging from $15 a month for those earning less than $28,000 annually, up to $92 a month for those making $180,000 or more.
These fixed charges would be in addition to “volumetric rates” that customers pay for each kilowatt hour of power they consume. Volumetric rates cover the price of electricity generation, distribution and transmission. But in California they also include subsidies for low-income households, rooftop solar customers, EV chargers and energy efficiency programs. Democrats have shifted this spending to utilities so politicians can spend more on social welfare and public-union salaries.
The result is that California’s electric rates have surged over the last decade to an average of 26.5 cents a kWh -- more than twice as much as in neighboring states -- even though the marginal cost of generating power has remained relatively stable at three to four cents a kWh. California rates can exceed 60 cents a kWh during peak hours.
California’s electric rates are currently both regressive and progressive. Middle- and higher-income folks subsidize discounts for lower-income customers. However, lower- and middle-income households also subsidize the affluent with solar panels and electric vehicles.
Progressives say this Rube Goldberg system of cross-subsidies is making it more expensive for lower- and middle-income folks to shift to electric vehicles, heat pumps and stoves to meet the state’s climate goals. Depending on the time of day, it can be more expensive to fuel an electric car than a gas-powered one.
Thus they want to impose this de facto graduated income tax to light up your home. This is another form of income redistribution, as well as a new tax ratchet to raise money to finance their climate agenda. While lower rates for some consumers may make it cheaper to go electric, they will also reduce the incentive to conserve power and increase the strain on the grid amid a shortfall of reliable electricity.
Utilities will have to spend more to procure power and upgrade their systems to handle the increased load from EVs and electric appliances. Income-based electric charges will invariably rise, as income tax rates always do in Sacramento. The very rich will cope, but the middle class will get soaked, as they always do.
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