Low-Income Rates

Discounted rates for low-income households can help bring down utility bills.

Table Of Contents
  1. Why This Matters
  2. Policy Solution
  3. Model Policy Features
  4. Potential Limitations & Pitfalls
  5. Complementary Policies
  6. Examples
COMMUNITY BENEFITAffordability
KEYWORDSUtility bills, Utility rates 
REGIONState
AFFORDABILITY STRATEGYHousehold Protections
OVERSIGHTUtility Commissions
POLICY MECHANISMLegislation, Regulation

Why This Matters

About a quarter of U.S. households face high energy cost burdens, paying more than 6% of their income towards energy bills.1 An inability to pay for utility bills leads to difficult trade-offs between paying for energy bills or for other essential needs, including food, medicine, and housing. Lack of utility bill payment can also lead to utility disconnections, which put vulnerable populations such as children and the elderly at particular risk.

Policy Solution

Discounted utility rates for low-income households lower the price per unit of energy (e.g. $/kilowatt-hour) which may also include a discount on utility fixed charges. 

Model Policy Features

Key policy components that make discounted rates for low-income households effective include:

  • Providing a discounted rate for electricity and/or gas for income-eligible households (e.g. under 200% of the Federal Poverty Level).
  • Coupling with discounts on fixed charges, particularly in places where fixed charges are a high proportion of the bill. 
  • Making rates stackable with other forms of assistance, such as federal Low-Income Home Energy Assistance Program (LIHEAP) assistance in winter months. 
  • Enabling households to self-attest income.
  • Automatic eligibility for low-income households receiving other benefits (e.g., food assistance, Medicaid). 
  • Requiring minimal paperwork for enrollment and recertification.
  • Eliminating application requirements that may put mixed status households at risk.
  • Including provisions for regular data reporting and public transparency (e.g., public-facing data dashboards, program evaluation, audits to ensure meaningful benefits reach intended populations). [see: data and transparency policy hyperlink]
  • Ensuring sufficient funding to cover all income-eligible households, without a waiting list. 
  • Conducting ongoing engagement efforts with eligible households, including in multiple languages and to recipients of other benefits programs.
  • Integrating non-energy benefits, both to the low-income households and to society at large, such as reduced loss of housing and reduced cost of shelter and emergency room visits, into program accounting for benefits of increasing affordability

Potential Limitations & Pitfalls

  • Discounted rates alone do not address the root causes of energy affordability.
  • Discounted rates lower overall bills, but for households in places with high base energy rates and/or facing high energy demand—whether due to extreme weather, renter status, or inability to afford energy efficiency measures—these bills may still leave households with high energy cost burdens (unlike a Percentage-of-Income Payment Plan [hyperlink], which sets an upper cap in all cases). 
  • As for many public assistance programs, policy design can significantly impact enrollment levels—and therefore effectiveness—of discounted rate programs.
  • Does not affect bills for propane, wood, or fuel oil.

Complementary Policies

Policies that can support effective implementation of low-income rates include:

  • Bill credits, arrearage management plans, graduated fixed charges, and disconnection protections to further help households pay for bills and reduce the impacts of late payments.
  • Weatherization, residential solar+storage programs, efficient residential electrification and community solar to help systemically reduce energy demand and, in turn, energy bills and the overall funding required for a discounted rates program. 

Examples

1. California Alternate Rates for Energy (CARE) and Family Electric Rate Assistance (FERA) Programs – CPUC CARE/FERA Programs

Details:

  • Households qualify for CARE and FERA if they make up to 200% and 250% of the Federal Poverty Level, respectively. 
  • Households qualify by self-certifying income levels, by self-certifying that they receive support from other assistance programs (e.g., food assistance, Medi-Cal), or through automatic enrollment after participation in related energy programs.
  • CARE participants receive 30–35% off their electric bill and 20% off their residential gas bill and FERA participants receive 18% off their electric bill; CARE participants in smaller utility territories receive a 20% discount.2  
  • Funded through a surcharge on other customer utility bills.
  • Applies to investor-owned utilities overseen by the California Public Utilities Commission. 
  • CARE was first established by the state legislature in 19883 and consistently reports enrollment from the majority of eligible customers;4 in 2024, utilities reported CARE enrollment at 95% for PG&E,5 104% in SCE,6 106% in SDG&E territory as a percentage of estimated eligible customers.7 Enrollment over 100% is possible because eligibility numbers are estimated and because categorical enrollment (due to participation in other programs) includes some households with incomes over the 200% Federal Poverty Level threshold. 
  • Although FERA is also decades old, enrollment is much lower: PG&E had an estimated 2024 enrollment of 25% of eligible customers. Survey results suggest that this role enrollment may be partially attributable to the narrow eligibility band of FERA customers and findings that nearly half of eligible households do not think they are eligible for low-income rates. FERA also recently expanded eligibility to 1-2 person households.8
  • California’s Low-Income Oversight Board advises on program design.9 
  • Newly enrolled customers are also given materials about the Energy Savings Assistance Program, which provides funding for whole home efficiency measures.
  • California also recently approved an income-graduated fixed charge, called a base services charge, which is set at $6/month for CARE customers, $12/month for FERA customers, and $20/month for everyone else.10

LIMITATIONS:

  • FERA enrollment rates are much lower than CARE rates.
  • High baseline electricity and gas rates and high energy demand in certain areas—particulary for homes with low access to energy efficiency programs and hot weather in the Central Valley—still have very high bills.
  • Because of these still-too-high bills, California is also running a four-year Percentage-of-Income Payment Plan pilot project, which caps combined electricity and gas bills for CARE customers at 4% of household income, with a goal of reducing disconnections, encouraging enrollment in energy efficiency programs, improve access to energy, and control program costs.11

Written: November 2025

  1. Drehobl, A., L. Ross, and R. Ayala. (2020). How High Are Household Energy Burdens? Washington, DC: American Council for an Energy-Efficient Economy. ↩︎
  2. California Public Utilities Commission. California Alternate Rates for Energy. Accessed: November 25, 2025. ↩︎
  3. California Public Utilities Commission. Electric Rates. Accessed: November 25, 2025. ↩︎
  4. LIHEAP Clearinghouse. (2016). State PBF/USF History, Legislation, Implementation: California. ↩︎
  5. Pacific Gas and Electric. (2025). Annual Report of Pacific Gas and Electric Company (U 39 M) on the Results of Its Energy Savings Assistance, California Alternate Rates for Energy and Family Electric Rate Assistance Programs. ↩︎
  6. Southern California Edison. (2025). Annual Report of Southern California Edison Company (U338-E) on Energy Savings Assistance and California Alternative Rates for Energy Programs for 2024 ↩︎
  7. San Diego Gas & Electric. (2025). Annual Report Activity of San Diego Gas & Electric Company (U 902 M) on Energy Savings Assistance, California Alternate Rates for Energy, and Family Electric Rate Assistance Programs for 2024. ↩︎
  8. Evergreen Economics. (2025). FERA Study An Assessment of Achievable Enrollment and Program Efforts. ↩︎
  9. California Public Utilities Commission. California Alternate Rates for Energy. Accessed: November 25, 2025. ↩︎
  10. PG&E. Base Services Charge. Accessed: November 25, 2025. ↩︎
  11. Low-Income Oversight Board (LIOB) Subcommittee Meeting. (2022). Percentage of Income Payment Plan (PIPP) Pilot. ↩︎