Utility Bill Credits

Utility bill credits from programs such as cap-and-invest can provide non-ratepayer funding for additional bill assistance.

Table Of Contents
  1. Why This Matters
  2. Policy Solution
  3. Model Policy Features
  4. Potential Limitations & Pitfalls
  5. Complementary Policies
  6. Examples
  7. Resources
COMMUNITY BENEFITAffordability
KEYWORDSAssistance, Utility Bills
REGIONState, Utility
AFFORDABILITY STRATEGYHousehold Protections
OVERSIGHTUtility Commission, Environmental Agency
POLICY MECHANISMLegislation, Regulation, Executive

Why This Matters

A quarter of U.S. households are energy-burdened1—paying more than six percent of income towards utility bills—and could benefit from forms of bill assistance, but the amount of assistance that can be funded by increasing rates on other customers is limited and may have negative impacts on moderate-income households just above the eligibility threshold, suggesting the need for additional funding from other sources. Moreover, in some cases, clean energy investments and greenhouse gas emission regulations may impose additional costs on utilities which get passed on to customers. 

Policy Solution

One mechanism for providing additional bill assistance from non-ratepayer sources is to provide assistance in the form of an on-bill credit, which can optimally be timed to periods when bills are highest. The source of funding for such a credit may vary, but one option is to directly use such a credit to offset any additional costs incurred through climate policies, such as by allocating funds from a cap-and-invest program.

Model Policy Features

  • Annual or bi-annual credits are provided on utility customer bills.
  • Credits can take the form of flat credits for all customers, or include tiered credits adjusted for income level for income-qualified households.
  • Funding may be explicitly tied to offsetting the costs of specific climate policies, such as allocating the proceeds from carbon allowances sold at auction under a cap-and-invest program.
  • The timing of the bill credit may be most effective if aligned with seasons (e.g. summer, winter) when bills are the highest.
  • Bill credits tied to climate-related policies may help improve the broader acceptance of such policies.

Potential Limitations & Pitfalls

  • The provision of bill credits is contingent on identifying a source of funding. See the cap-and-invest policy [hyperlink] for a further discussion of using this program as a funding source. 
  • Bill credits are typically insufficient alone to mitigate high utility bills and need to be coupled with other policies, both to provide additional assistance and to systemically reduce bills. 
  • Credit programs are sometimes designed with flat credit levels, meaning that they are not tailored to the level or timing of need of any individual household.

Complementary Policies

Complementary policies to bill credits include:

  • Cap-and-invest, polluter pays, or other policies to fund bill credits.
  • Percentage-of-income payment plans, bill assistance, and/or low-income rates to more comprehensively and consistently ensure energy affordability.
  • Weatherization, residential solar (+ storage) programs, community solarand other building efficiency and decarbonization measures to reduce household bills.

Examples

1. Washington Families Clean Energy Credit Program – SB 5950: Operating Budget 2023-2025 Supplemental

Details:

  • The program, administered by the Washington Chamber of Commerce, provided $200 in bill credits to low-and moderate income households. 
  • $150 million budget in 2024 was funded by Washington’s cap-and-invest program, the Climate Commitment Act.2
  • Reached 690,000 households in 2024, 90% of which were low-income and 10% which were moderate-income households, across nearly 60 utilities statewide.  
  • In 2024, 75% of participating households were automatically enrolled due to participation in other benefits programs; other households could apply for enrollment.3
  • Bill credits were initially allocated to those making less than 80% of Area Median Income, but this cap could be (and was) increased as the budget permitted.4

LIMITATIONS:

  • Funding was allocated in a single year, but not repeated.
  • Some customers were required to submit applications, although the application process was designed to be easy and allowed for self-attestation of income.

2. California Climate Credit

Details:

  • The California Climate Credit program, led by the California Air Resources Board but also overseen by the California Public Utilities Commission, is provided to all residential and small business customers of investor-owned utilities.
  • Credit level does not vary by income, and does not require an application.
  • Funding comes through the state’s cap-and-trade program (recently renamed “cap-and-invest”): each utility is allocated greenhouse gas emission allowances and can auction unused allowances under the program. These proceeds are then used to fund the climate credit.5
  • Electricity bill credits, paid twice a year (in April and October), vary by utility: in 2025, residential electricity credits ranged from $35–$259—although the largest investor-owned utility credits ranged from $56–$81. 
  • The residential gas credit, paid once a year (in April), ranged from $54–$87 in 2025.6

LIMITATIONS:

  • The California Climate Credit historically appeared on bills in October and April, when bills are lowest, but this was amended in 2025 such that the credits would be allocated when bills are highest, such as late summer and mid-winter.7
  • The credit historically did not apply to customers of public utilities, but this was amended in 2025 to extend to public utilities who received carbon emission allowances.8
  • Credit amounts are inconsistent from year to year since they depend on the auction price for carbon allowances. 

Resources

Written: September 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. Washington State Department of Commerce. (2024). Washington Families Clean Energy Credits Grants Program. ↩︎
  3. Washington State Department of Commerce. (2024). Washington delivers $200 energy bill credits to over 690,000 households.  ↩︎
  4. Engrossed Substitute Senate Bill 5950, 68th Leg., Reg. Sess. (Wash. 2024), ch. 376 (partial veto) (Operating Budget 2023-2025 Supplemental). ↩︎
  5. California Public Utilities Commission. California Climate Credit – Frequently Asked Questions. Accessed: September 22, 2025. ↩︎
  6. California Public Utilities Commission. California Climate Credit. Accessed: September 22, 2025. ↩︎
  7.  AB1207: Climate change: market-based compliance mechanism: extension, 2025–2026 Leg., Reg. Sess. (Cal. 2025) (enacted). ↩︎
  8. AB1207: Climate change: market-based compliance mechanism: extension, 2025–2026 Leg., Reg. Sess. (Cal. 2025) (enacted). ↩︎