Why Your California Utility Bill Could Increase Under Trump's Tax Plan

California’s soaring electricity rates could get worse if Republicans pass their version of President Donald Trump’s tax and spending cuts megabill.

A new analysis warns that electricity bills for households in California could increase 7.2%, while business utility bills would spike as much as 8.5% over the next decade if Congress repeals clean-energy tax credits created by the Inflation Reduction Act (IRA).

That’s because tucked within the partisan reconciliation bill are provisions that call for the construction of energy-related projects to begin within 60 days of the bill’s passage to receive a credit. Developments must produce electricity by the end of 2028 to be eligible for certain energy credits.

From just $107.88 $24.99 for Kiplinger Personal Finance

Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues

CLICK FOR FREE ISSUE

Sign up for Kiplinger’s Free Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of expert advice - straight to your e-mail.

Sign up

The tight deadline couldn’t come at a worse time for the Golden State.

California utility bills have skyrocketed in recent years, with some residential areas seeing energy costs climb as much as 67%. Most of the approved rate hikes are intended to help investor-owned utilities build underground power lines and mitigate wildfire damage.

It also comes as many Californians impacted by the Eaton and Palisades fires are still in the thick of rebuilding their communities. While the 100th day mark of the fires was in April, homeowners and business owners are still struggling to recover.

Higher electric bills are just the tip of the iceberg.

As California Gov. Gavin Newsom and the Trump administration clash over the Golden State’s federal funding. Here’s what else is on the line when it comes to your finances.

GOP proposes energy tax credit changes

Senate Republicans plan to release their version of Trump’s major tax cuts and spending bill dubbed the ‘big, beautiful bill’ soon, but some GOP lawmakers are showing signs of regret.

Thirteen House Republicans in support of the megabill are urging Senate Republicans to roll back some provisions tied to clean energy credits. The internal political pushback could signal that the major 1,000-plus page reconciliation bill passed through the House floor in a rush.

“While we were proud to have worked to ensure that the bill did not include a full repeal of the clean energy tax credits, we remain deeply concerned by several provisions,” said Republicans in a letter, led by Rep. Jen Kiggans, (R-VA).

House GOP lawmakers pointed to provisions they would reconsider, “including those which would abruptly terminate several credits just 60 days after enactment for projects that have not yet begun construction,” as well as “restrictions to transferability.”

The concerns allude to certain amendments passed by the House version of the reconciliation bill, which would target the investment tax credit (ITC) under Section 48E and production tax credit (PTC) under Section 45Y.

In brief, they would:

• Make these credits unavailable for solar, wind, battery, and other technology projects that begin 60 days after the bill is enacted.
• The measure would impose a placed-in-service deadline of Dec. 31, 2028, or else no credit would be available.

“This approach jeopardizes ongoing development, discourages long-term investment and could significantly delay or cancel energy infrastructure projects across the country,” the representatives wrote.

It’s important to note that the energy tax credits could still face revisions as they move through the Senate.

California’s electricity prices could rise further

The proposed legislative changes to the Inflation Reduction Act (IRA) ‘technology-neutral’ tax credits would lead to higher electricity and natural gas prices, job losses, and a significant economic slowdown in California over the next decade.

If these federal tax credits are repealed, higher utility bills are just one pressure point Californians will have to face, according to the National Economic Research Associates (NERA) study.

• Job loss: The economic impact would result in 44,200 fewer jobs between 2026 and 2032, and a $4.78 billion decrease in the state’s gross domestic product.
• Gas prices: Natural gas prices would increase in households and businesses by 2.3% and 3.5%, respectively.
• Electricity bills: Meanwhile, electricity bills would climb by 7.2% for households and 8.5% for businesses within the next decade.

According to the Center for American Progress (CAP), federal investments from the IRA helped stimulate job creation in manufacturing clean energy projects, building electrification, and other tech across the country.

Newsom threatens withholding tax money from the federal government

Adding to the economic uncertainty in California are ever-growing tensions between Gov. Gavin Newsom and the Trump administration.

• The Trump administration announced plans to claw back a large portion of federal spending in California, according to CNN.
• This would include the “full termination” of major grants for the University of California and California State University Systems, which would begin as soon as this month.

The Democratic governor was quick to bite back, threatening to boycott federal tax payments.

“Californians pay the bills for the federal government. We pay over $80 BILLION more in taxes than we get back,” Newsom wrote in a social media post. “Maybe it’s time to cut that off.”

Californian residents and businesses contributed about $83 billion more in federal taxes in 2022 than they received from the federal government, a recent study showed. That was after the state paid $692 billion in federal taxes and received $609 billion in federal funding.

The Golden State is the largest donor state in the nation, far outpacing New Jersey, which contributed about $28.9 billion, and Massachusetts at $27 billion.

U.S. Treasury Secretary Scott Bessent responded in a post on X that Gov. Newsom was “threatening to commit criminal tax evasion” and “leave California residents on the hook for unpaid federal taxes.”

What’s next for California

Higher electricity bills may be the last issue Californians want to deal with right now.

Utility bills in the Golden State have skyrocketed nearly 50% for residential customers in recent years, surpassing inflation and the national average, according to the state’s nonpartisan fiscal and policy advisor.

The sharp increase in electricity bills is due to the growing threat of wildfires, the state’s Legislative Analyst’s office said. Higher rates allow utility companies to work on wildfire mitigation projects, like building underground powerlines.

Senate Republicans still have the opportunity to revise amendments on the GOP version of Trump’s ‘one big beautiful bill’ before the bill reaches a vote. Potential changes to energy tax credits can impact your everyday utility bills, so stay tuned.

Related Content

• Trump’s ‘One Big, Beautiful Bill’ With Trillions in Tax Cuts: What to Know
• California Tax Deadline Extension: What to Know for 2025
• California Fires: How to Recover Tax Records and Other Important Documents
• Save More with Tax Credits for Energy-Efficient Home Improvements While You Still Can