Month Bills Fixed or Variable: Consumer Choice

By
Branko Terzic

 

The controversial new charge is a $24 monthly fixed charge on residential consumers who get their electricity from PG&E, SCE and SDG&E. Qualifying low-income residential customers will pay a lower charge of either $6 or $12 per month depending on their classification. A requirement for a low-income fixed charge is per new California legislation. The increase in monthly fixed charges would be accompanied by a reduction in the price of electricity usage by 5 cents/kWh to 7 cents/kWh.

The three CPUC regulated investor-owned utilities: PG&E, SDG&E and SCE had proposed fixed charges of $53, $74 and $49/month, respectively. The CPUC chose much lower numbers even though the higher fixed charges would have been accompanied with even lower energy (per kWh) rates.

The size of an electric bill is determined by usage and the electricity rate. Since California has a mild year-round climate, California electricity consumption is low compared to other parts of the U.S. in California the average electric bill for a three-bedroom house in September of 2023 was $178 per month.

Since customers were writing checks on average for a monthly total of $178 it would seem that a change in the fixed charge to $24 would hardly be noticeable except for maybe the lowest consumption customers. Keeping in mind that a low electricity consumption customer could be a wealthy retired banker couple spending half the year at their cabin.

I note all this after coming across an article with the headline:
“Cable TV Packages Now Cost an Average of $217.42 Per Month & Costs More Than Water, Power, & Trash”

А little bit of web surfing came with the following averages for the monthly bills paid by typical US residential consumers for the services provided. Average size of U.S. family is slightly above 3 persons.

Monthly Bill Averages and ranges:

• Electricity: $149.95
• Natural gas: $61.69
• Water: $45.44
• Sewer: $66.20
• Trash: $25–$100
• Internet: $59.99
• Cell Phone: $141 per phone (three $423)
• Landline telephone: $60-$76
• Streaming services: $48.25
• Cable TV: $83 average $50 - $250

Of these bills only electricity, natural gas and maybe water have a low fixed charge with the rest of the bill being related to usage. However, most electric and gas utilities also have a “budget billing” option which divides the customer's annual bill into 12 monthly charges with a true-up at the end of the year. This converts the entire bill into a fixed monthly charge.

Cell telephone, wireline telephone, and cable are usually purchased as monthly packages, a fixed charge, without much regard to usage except exceeding maximums. Trash and the internet are likely the same.

My conclusion is that most consumers are both familiar with and probably comfortable with a fixed charge bill. I acknowledge that there are many who would prefer full volumetric rates to send price signals for reductions in consumption. But the issue is apparently more complicated than that as the CPUC may have concluded.

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The Honorable Branko Terzic is a former Commissioner on the U.S. Federal Energy Regulatory Commission and State of Wisconsin Public Service Commission, in addition to energy industry experience was a US Army Reserve Foreign Area Officer ( FAO) for Eastern Europe (1979-1990). He hold a BS Engineering and honorary Doctor of Sciences in Engineering (h.c.) both from the University of Wisconsin- Milwaukee.