Here’s Why Your Electricity Prices Are High and Still Soaring

California’s electricity prices are among the highest in the country, new research says, and those costs fall disproportionately on ratepayers already struggling to pay their bills.

PG&E customers pay about 80 percent more per kilowatt-hour than the national average, according to a study by the energy institute at UC Berkeley’s Haas Business School with the nonprofit think tank Next 10.

The study analyzed the rates of the state’s three largest investor-owned utilities and found that Southern California Edison charged 45 percent more than the national average, while San Diego Gas & Electric charged double.

Even low-income residents enrolled in the California Alternate Rates for Energy program paid more than the average American.

“California’s retail prices are out of line with utilities across the country,” said UC Berkeley assistant professor and study co-author Meredith Fowlie, citing Hawaii and some New England states among the outliers with even higher rates.

“And they’re increasing.”

So why are prices so high?

One reason is that California’s size and geography inflate the “fixed” costs of operating its electric system, which include maintenance, generation, transmission, and distribution as well as public programs like CARE and wildfire mitigation, according to the study.

Those costs don’t change based on how much electricity residents consume, yet between 66 percent and 77 percent of Californians’ electricity bills are used to offset the costs of those programs, the study found.

PG&E filed for bankruptcy protection in January 2019, after being held financially responsible for a series of deadly and destructive wildfires in 2017 and 2018.

These are legitimate expenses, Fowlie said. However, because lower-income residents use only moderately less electricity than higher income households, they end up with a disproportionate share of the burden, according to the study.

And while the bills of older, wealthier Californians continue to decrease as they adopt cost-efficient alternatives like the state’s Net Energy Metering solar program, costs will keep rising for a shrinking customer base composed mostly of low- and middle-income renters who still use electricity as their main energy source.

“When households adopt solar, they’re not paying their fair share,” Fowlie said. While solar users generate power that decreases their bills, they still rely on the state electric grid for much of their power consumption—without paying for fixed costs like others do.

At the same time, the state has set high goals toward decreasing reliance on fossil fuel, including by encouraging residents to switch to renewable energy like solar, which often bears a high cost of entry due to costly equipment and installation.

“As this continues it’s going to make electricity even more unaffordable,” said F. Noel Perry, of Next 10, which funds nonpartisan research on the economy and environment.

PG&E this month raised its electricity rates 3.7 percent, amounting to a $5.01 a month increase for the average residential customer, who now pays $138.85 a month for electricity. It was the second increase this year, said Mark Toney, executive director of The Utility Reform Network, who noted that higher rates are particularly difficult for those who have lost their jobs in the pandemic.

The California Public Utilities Commission (CPUC), the state regulatory agency that authorizes rate hikes for utility companies, last year approved a PG&E plan for more incremental increases through Dec. 31, 2022.

PG&E spokesperson Kristi Jourdan said in an email statement that the company was committed to keeping prices as low as possible and that although some programs are meant to be subsidized through rates, “in other cases, given that some customers have greater access to energy alternatives, the remaining customers—often those with limited means—are left paying unintended subsidies.”

The costs quickly became overwhelming for Fretea Sylver, who rents a small house in Castro Valley and lost much of her work as the owner of a small woodwork business early in the pandemic. “They’re little tiny changes but they accumulate. You turn around and you’re like wait a second, why is my bill $20 more?,” Sylver said.

“And you have to pay it, no matter what.”

Many more are unable to pay.

Between February and December of last year, Californians accumulated more than $650 million in late payments from their utility providers, according to an analysis by the CPUC. In 2019, utility debt fell $71,646,869 from the prior year.

Sylver, who was on unemployment for 10 months last year, accumulated over $600 in unpaid PG&E bills. “We sort of went into a bit of debt, having to use credit cards and loans to sustain what we had to pay for. We’re trying to catch up,” Sylver said. The family received some help from the federal Low-Income Home Energy Assistance Program, which provides up to $1,000 to those who are late on their utility bills.

The study identified improvements to make California’s power grid more equitable, such as a fixed charge for the grid’s cost that is based on income. Republican state senators this week called on the state to use federal relief money to forgive the billions Californians owe in utility debt.

Californians are currently protected by a statewide moratorium on disconnection for nonpayment of electricity bills through June 30.

The CPUC this month began taking public input on the issue of how to grant some relief to those who have fallen behind on their utility bills.

This article is part of the California Divide, a collaboration among newsrooms examining income inequality and economic survival in California.

11 Comments

  1. Really…..? It’s because of our Geography?
    Nothing to say about the mandated “Renewables”? Unions? Pensions? Tort Reform? Infrastructure? Nuclear? Give me a break……
    I guess all of us Californians really are idiots if we continue to let them feed us this BS.

  2. WORK90 above, I couldn’t have said it better. PG&E executives, officers and shareholders are nothing but a bunch of greedy whores!

  3. “because lower-income residents use only moderately less electricity than higher income households, they end up with a disproportionate share of the burden…” — Meredith Fowlie

    Notice how, by way of Ms. Fowlie’s progressive language transporter, the costs required to deliver products and services, a factor consumers have long accepted as the imprecise but politically neutral term, “production costs,” arrives in this study in the form of a “burden.” But does the price of electricity in California qualify as such? Does it cause hardship and distress to every consumer in the state?

    Clearly Ms. Fowlie doesn’t think it does, otherwise she wouldn’t have stooped to dividing the state’s consumers based on income, adoption of alternative energy, ages, and rent payers. Are we expected to be so ignorant as to not realize that in the states with substantially lower costs there are not those same divisions among rate payers, along with the same disproportion?

    If she truly believed the costs to be a burden she would’ve steered clear of the notion of “fair share,” knowing that in issues affecting large populations of free people fairness is an impossible standard.

    It seems the people attracting Ms. Fowlie’s real concern are those who pay a disproportionate percentage of their income for food, clothing, and gasoline — in addition to their electricity. Fair enough, but why scapegoat others and accuse some of not paying their fair share? Why is it that everything coming out of these secular institutions ends up creating another class of saints and sinners?

  4. A lot of entities, including local governments, would buy the city grid in a heartbeat if it didn’t have to contend with the fire prone rural areas.

  5. The author is a Report For America protege. I think that’s why her reporting seems rather one-sided.

    Who’s behind Report for America?

    Google.

    You don’t say!

  6. “Going Green”, is expensive!
    Who knew? Not our math and science challenged state legislature that’s for sure.
    I’m all for clean energy but I want the “underserved” to pay exactly as much as I do and let these greedy politicians explain it to their favorite constituents.

  7. I’m not so sure the author has the facts straight about Net Metering customers not paying their fair share of infrastructure costs. I’ve been Net Metering solar for 9 years and my PG&E annual bill is up 3.5 fold over that time. I checked the solar panel output and it’s the same. Enphase shows you lifetime power generation for each year. The house is the same and the people living there are the same. The only big difference is a much much larger electric bill. Since I generate most of what I use, it’s mostly to support the infrastructure.

  8. I thought this was the welfare for the rich solar panels’ regressive effect kicking in…

    You know the one the government pays rich people to generate surplus electricity all day on their subsidized solar panels, which is off-peak and even sometimes requires the state to pay other states to absorb excess. And those rich people then get free electricity in the evening during peak, that electricity which is produced on the backs (out of the wallets) of poor suckers who can’t afford the panels or are just renter?

    You mean that welfare for the rich scam?

    There’s a lot of them, like EV cars subsidies and bike lanes and open space…

    you people are such clowns, can’t think past the “green” label and see real systemic injustice

  9. I moved out of CA two years ago. Electricity prices where I moved to are ~8 cents per KW for winter, and ~8 cents/12 cents for summer. Lots of hydro and wind here.

    My thinking is that CA prices are more about forcing PGE to pay for green energy when it wasn’t cheap, because it is politically correct. When we left CA, there was a PGE High Usage Surcharge of about $.47 a KW for “excess usage” that was applied over 4x baseline usage.

    Not sure how this is all fair. All I know is that the lower income folks in CA are paying thru their noses for this whole progressive green energy dance.

    Cynthia

  10. Publicly-owned and operated enterprises provide excellent service at a low cost because profits and the profit imperative are removed from the equation. The City of Santa Clara’s publicly-owned electric utility–Silicon Valley Power–not only provides the lowest electric rates in California, but also low-cost fiber optic connectivity for businesses and a free city-wide outdoor wifi service for everyone. These services earn high levels of user satisfaction (https://en.wikipedia.org/wiki/Silicon_Valley_Power; https://www.siliconvalleypower.com/home; https://www.svpfiber.com/fiber-connect/fiber-connect/services-offered; http://santaclarafreewifi.com/). Silicon Valley Power’s chief executive officer is the mayor. The enterprise employs about 150 city employees, providing them with solid incomes (https://www.governmentjobs.com/careers/cityofsantaclaraca), while generating surplus revenues (not privately distributed profits) that allow Santa Clara to maintain superior infrastructure and city services.

    The City’s historically strong finances rest on the surpluses generated by its public enterprises, particularly Silicon Valley Power, that bring in more than twice the revenues collected by the City from taxes and fees. Publicly-owned enterprises allow the City to maintain superior infrastructure, facilities and services for its 130,000 residents at lower cost (see the June 2019 financial report https://www.santaclaraca.gov/home/showdocument? id=65838). In other words, mission-driven publicly-owned enterprises (not profit-driven businesses) make Santa Clara a more affordable place to live for its residents, not least because of their publicly-owned and operated electricity enterprise.

    Maybe its time to take the train wreck often referred to as Pacific Gas and Electric “public,” as in publicly-owned?

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