Major factors driving California’s high and growing residential electricity rates include wildfire-related costs and “the state’s ambitious greenhouse gas (GHG) reduction programs and policies,” said the nonpartisan government agency.
About three-quarters of statewide electricity services in California are provided by three large investor-owned utilities (IOUs): namely Pacific Gas and Electric (PG&E), Southern California Edison (SCE), and San Diego Gas and Electric (SDG&E). Their rate increases significantly drive the state’s high prices.
Wildfire-Related Costs
The portion of wildfire-related costs in electricity rates has increased in recent years, making up between 7 to 13 percent of a regular electricity bill, LAO’s report said. California’s high wildfire risk and its wildfire-related policies are behind the increases.Utility service providers are liable for the costs of wildfires caused by their infrastructure regardless of whether they are found to have acted negligently. As California wildfire risks have increased in recent years, large IOU companies have “spent unprecedented amounts” on wildfire mitigation, said the report.
These wildfire liability and mitigation costs are often passed along to ratepayers.
In addition, IOUs and their ratepayers also pay for wildfire insurance that contributes to the California Wildfire Fund, which helps cover the costs of certain utility-sparked wildfire damages, LAO’s report noted.
Electricity Bills Pay for Climate Programs
The LAO’s report lists the state’s greenhouse emission reduction efforts as another major factor contributing to high and increasing electricity rates.“Ratepayers pay additional costs associated with transitioning to cleaner sources of electricity,” the report states, and implementing various climate-related polices are linked to rate increases.
One of the examples cited in the report is a state program that requires a certain percentage of a utility’s retail energy to come from renewable resources. LAO researchers found that the program added about a 5 percent increase in electricity rates.
Another example used in the report is the California Public Utility Commission—the state agency that sets rates for IOUs—authorizing utility companies to implement various ratepayer-funded programs to help support California’s zero-emission vehicle goals, including installing publicly available charging stations.
Ratepayers are required to pay for a variety of other programs aimed at helping the state meet its climate goals, and in 2023, an estimated 4 percent of average rates was used for supporting such programs, the report said.
Democratic Sen. Stephen Bradford, chair of the Senate’s Energy, Utilities, and Communications Committee, has said that the state’s desire to lower climate emissions is increasing electricity demand and causing prices to spike.
“I have no doubt that much of what we passed has good intentions, “Bradford said during an Aug. 6, 2024 hearing, but “we find ourselves here today, with these challenges, because our legislation has been more aspirational than practical.”
Republican Assemblyman Jim Patterson, vice chair of the Assembly’s Utility and Energy Committee, said the state’s clean energy goals are hurting Californians, and the state’s policies are too costly and need to be rethought.
“All of the goals that the state has set up are going to be very expensive, and somebody’s going to have to pay,” Mr. Patterson said at a hearing in March 2024. “The aspiration is misguided, and until we readjust the aspiration, we’re not going to be able to readjust the price tag and the burden that we’re asking our ratepayers to pay.”
Helen Kerstein, principal fiscal and policy analyst, and principal author of the LAO’s report, told The Epoch Times, “It is important to know that it can be a challenge for the state to try to meet its climate goals.”
Electricity Rates versus Electricity Bills
California’s electricity rates are the second highest in the nation, after Hawaii, and almost double the national average, according to U.S. Energy Information Administration.However, Terrie Prosper, director of strategic communications at California Public Utility Commission, told The Epoch Times in an email, “While [California’s] rates are higher than the national average due to cost drivers such as wildfire mitigation and net energy metering, residential electricity bills are lower on average than many investor-owned utilities nationwide.”
She said, “Note that an electricity rate is simply one of the mechanisms to allocate the costs of electricity services. To determine the cost of energy services borne by customers, the relevant metric is customer bills.”
She also said that energy efficiency incentives and time-of-use rate design can help reduce customer bills. For the latter, electricity usage at off-peak times can help reduce costs.
With customer satisfaction hitting low, utility companies say they are trying to stabilize the rates and electricity costs.
Jeff Monford, spokesperson of Southern California Edison told The Epoch Times, “SCE’s 2019-2024 rate increases began surpassing inflation for the first time in 30 years.”
Monford said that over the next five years, customers could expect “SCE rate changes to align with the local inflation rate, as they did for about 30 years through 2019.” He said that “SCE has the lowest System Average Rate among California’s three largest investor-owned utilities.”
PG&E spokesperson Mike Gazda told The Epoch Times in an email, “We are working to lower costs for customers, including reducing our operating expenses and seeking federal loans and grants to lower our borrowing costs.”
“We are delivering on our commitment to stabilize customer bills,” he wrote. “PG&E’s residential electric bills are about 4 percent lower today than they were in January 2024, assuming the same usage, and we are working to limit increases over the next two years.”
