Skyrocketing Energy Rates Could Undermine California’s Climate Goals

In a pair of new reports, experts urge the state to shield low-income families from future rate increases as utilities prepare to spend billions prepping for wildfires and climate change.

Power lines against an azure sky in Los Angeles, December 2017. (Courthouse News photo / Chris Marshall)

SACRAMENTO, Calif. (CN) — In charge of masterminding California’s bold renewable goals and simultaneously wrangling in failing mega-utilities like Pacific Gas & Electric, the California Public Utilities Commission is fighting the unfair fight.  

As the state continues to move the goalposts when it comes to California’s energy future, the commission along with the state’s main utilities are facing an escalating dilemma: how to fight climate change without forcing struggling Californians further into debt.

“Providing safe, environmentally friendly, reliable and affordable electricity will get increasingly challenging over the next few years,” warned Edward Randolph, the commissioner’s executive director for energy and climate policy.

Randolph’s comments came Wednesday during a discussion on a new commission study that predicts household electricity rates charged by the California’s three major private utilities will grow 10-20% over the next decade as they fend off global warming and wildfires.

The study titled “Utility Costs and Affordability of the Grid of the Future”, found the commission “faces multiple intersecting policy mandates” that — if handled incorrectly — could result in untenable household bills. The utilities’ household rates have already been outpacing the rate of inflation for nearly 10 years with the study pegging most of the blame for the pricey electricity on expensive wildfire mitigation efforts and infrastructure upgrades.  

Residential customers should get used to paying more for electricity because, while expensive, prepping the grid for climate change must continue if the state is to avoid the largescale blackouts that struck last summer or the colossal outages experienced in Texas last week.

“Higher bills make meeting our policy goals much harder and the investments we must make to ensure safe, reliable electrical system will lead to cost increases,” Randolph said of the state’s challenge in balancing green policies with skyrocketing utility bills.   

Though the study’s authors urge the commission, utilities and lawmakers to keep affordability in mind going forward, millions of households are already falling behind.

According to a recent commission update, more than 3.3 million households have past-due utility bills. Combined, they owe PG&E, Southern California Edison, Southern California Gas and San Diego Gas & Electric $1.25 billion.

The late bills along with price increases that continue to outpace the rate of inflation prove high energy costs will continue to haunt Californians, says the commission’s electricity pricing and customer programs branch manager.  

“We’re standing right now on shaky ground from a ratepayer’s perspective,” said Mike Campbell.

Public policy groups like Oakland-based Greenlining Institute are also sounding the alarm about California’s energy future.

Mad Stano, the institute’s senior legal counsel, said rate decisions must be made with a focus on shielding the state’s poorest, most disadvantage communities from runaway energy prices. If not, Stano says the state’s myriad clean energy goals are doomed.

“We cannot and will not be able to decarbonize the grid and California’s economy if low-income people disproportionately impacted by fossil fuels are the ones required to pay for it,” Stano told the commission.

The focus of Wednesday’s seven-hour hearing, the new report pegs wildfire prevention efforts and insurance costs as the main driver of the ongoing and future rate increases.

In 2019, for example, all three major private utilities exceeded their allocated wildfire budgets and reported spending nearly $5 billion combined on wildfire-related costs. PG&E surpassed its mark by 19%, SoCal Edison by 132% and San Diego Gas & Electric reported a 40% increase.

Coming off a record-breaking 2020 wildfire season, the report predicts the three utilities will spend nearly $40 billion over the next decade on wildfires. Unfortunately, the recent and future grid hardening costs will be passed down by the utilities.

“While the utilities have made major financial commitments to wildfire mitigation and transportation electrification, these costs have not been fully reflected in rates so far,” the paper concludes. “Transportation electrification investments are not expected to contribute to significant rate growth in the near term, but that wildfire mitigation efforts will.”

Though over one-third of California’s electricity now comes from renewable generation and nearly two-thirds from carbon-free sources, Californians are paying more for electricity than ratepayers in most states.

A separate report released Wednesday by the University of California, Berkeley, and nonprofit group Next 10 found California’s major utilities charge 2-3 times more than it costs to produce and distribute the electricity to homes and businesses. Compared to the national average, the report found PG&E’s residential prices per kilowatt hour are 80% higher, SoCal Edison’s 45% and San Diego Gas & Electric’s nearly 50%.

The report attributed the difference to a variety of fixed costs including wildfire mitigation and rooftop solar subsidies, and echoed the commission’s affordability concerns.

“Electricity prices in California are high and rising,” the UC Berkeley report states. “This poses a heavy burden for many of the state’s most eco­nomically vulnerable households. It is also a headwind in the state’s efforts to combat climate change through electrifying transportation and buildings, which many see as critical steps to a low-carbon future.”

Throughout the discussion, representatives from the utilities and policy experts kicked around possibilities to make electricity more affordable.

PG&E said along with selling its San Francisco headquarters and moving across the San Francisco-Oakland Bay Bridge, it was mulling the possibility of renting electrical tower space to telecommunication companies.

Meanwhile, SoCal Edison gave a presentation on the possibility of saving money by creating its own self-insurance scheme for wildfires.

Other presenters mentioned the possibility of a fixed-rate system depending on household income.   

Assemblyman Chris Holden says going forward, the state will have to do a better job juggling both its climate and affordability crisis as either are showing signs of letting up.

“I reject the false choice that it’s either or; we must figure out how to get our costs under control while continuing to pursue our ambitious goals,” said Holden, D-Pasadena.

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